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Fixed Price Agreements
“Any professional who can’t determine the price up front has no business doing the work.”
–Ronald Baker, CPA –
The Big Question:
“Would you want Pinnacle PAC (or any professional) to bill you by the hour for service and support regardless of the outcome?”
Our pricing commitment to Pinnacle PAC clients
- Pinnacle PAC clients will always know the price of a project or suite of services prior to commencement of the work.
- Pinnacle PAC will never ‘bill and duck’ based on ambiguous hourly WIP.
- Pinnacle PAC clients will not be exposed to the risk of undefined scope.
- No Pinnacle PAC client will ever feel hesitant to contact us for assistance because they want to avoid being billed for seeking the help they need.
Frequently Asked Questions
1. How do FPA’s align interests?
As you know, minimal billable hours are the client’s best interest; whereas maximum billable hours are the Practitioner’s best interest. This notion can create skepticism on the client’s part, and can create worry of an untrustworthy relationship. Fixed Price Agreements do not leave any room for ‘surprise’ billing or services rendered. The scope of work is predetermined and thoroughly explained ensuring both parties are clear on the price.
2. Do FPA’s put focus on efforts or results?
Pinnacle PAC’s hours are the inputs, not the output. The output is the solution to the client’s “problem”. Focusing on hours would be like counting the number of swings a batter takes in baseball and ignoring the hits or lack thereof. FPA’s focus solely on results.
3. Will an FPA increase or decrease my pricing risk?
You are paying Pinnacle PAC to reduce your risk. Billing by the hour transfers this risk back to you; you may be forced to face the possibility of surprise billing, or having the scope of work that was originally promised stretched to include unforeseen services. With a FPA, the price is ‘fixed’—therefore you can trust that that price will not fluctuate and that you will be billed according to the initial agreement.
4. Would you prefer to pay for a scope of work or for alleged hours?
Hourly billing allows the Practitioner to not scope the work properly in the first place, and/or assume every change requested by the customer to be in the “new” scope. There is risk on the client’s part when the scope of work is ambiguous and not completely defined; this allows the Practitioner to bill additional services rendered, although they may not have been agreed upon.
5. Are hourly rates and ‘range-of-hours proposals’ accurate?
An hourly rate is not a price unless you are only selling one hour. A range-of-hours proposal is a guess. This is simply an estimate that the Practitioner bases on the amount of time he expects to work on your file.
6. Are FPA’s ethical?
FPA’s are more upright and honest than hourly billing. The client is given the full scope of work and is therefore aware of the price, and what work will be done on his/her file from the beginning. Using this more ethical billing system helps us maintain Pinnacle PAC’s promise to our clients to operate with integrity.
7. Why don’t other Accountants use FPA’s?
Traditional accounting firms believe that price should be a function of the cost of delivery. Accordingly, they use the billable hour, which is an estimate of their internal costs marked by their expected profit per hour. This is a deeply entrenched paradigm in the professional services business. Unfortunately, it ignores the economic fact that only the consumer can determine the value of services received and the consumer is indifferent to the hours required to provide that value. The client is buying an outcome, not hours.
8. Will I pay more under an FPA?
No. When entering an FPA, you are simply required to pay a specific rate that is agreed upon between yourself and the Practitioner; you will be aware of all of the work that will be performed on your file. Paying more than you expect is more likely when engaging in hourly billing as the scope of services is not clearly defined and is therefore able to stretch.