How Profitable is Project Pricing
Among many other tools for income that an accounting practice can use, project pricing has become a topic of discussion with many questions and concerns from firms big and small alike.
Although this particular task is regarded as a rather straightforward one because it’s seen as the bread and butter of any firm’s operations, it’s still nuanced with factors that make it a bit difficult to deal with. Over time, you’ve probably grown acquainted with the fact that project pricing itself can prove to be quite tricky to work out, even if you’ve been in business for many years!
What makes the process so difficult?
Even if you’re familiar with the importance of getting your pricing-related tasks right, getting an accurate figure that will do your work justice can be difficult because of how much information consolidation takes place.
When you go over the mechanics of coming up with a final price to work with, you’ll essentially need to gather various accurate data to measure and use as reference points for your next project. However, it’s worth noting that matters can become even more complicated as you tread down the accounting firm management line and start shifting your focus to raking even more profit.
After all, it makes sense to increase your profits as you pack on years of experience and accumulate great reviews from serving client financial needs.
You may also be interested in: Project Management for Accountants: A Definitive Guide.
Project Pricing: The profitability factor (and how you can ensure the right place)
Pricing your services to generate a balanced amount of profit is actually much easier said than done because measuring profitability is a subjective and detail-intensive task. Considering that profitability is about getting familiar with different efforts being put into a specific project, it can be easy to get caught up in everything and make major oversights, resulting in an unrealized profit.
Thankfully, you’ll be able to strike the right balance between affordability and returns to avoid compromising your profits or customer base by keeping an eye on these key points along the way:
1. Mapping out your project effort
At this point, one of the most vital tasks that you’ll need to take care of as you ensure profitability in your project pricing is the task of mapping out your project efforts.
Mapping things out always precedes drafting a figure to pitch because the information that is gathered from this specific process helps establish a proper understanding of your limitations for maximum and minimum prices. Through an in-depth analysis of what a potential project entails, you’ll be able to look deeper into the different details that can pad your ideal price up (and your profit margins), such as:
- The list of tasks that need to be handled
- The range of billable services and hours that a client must budget for
- The number of resources—corresponding to people, time, and fees—that are required to complete all tasks in the project timeline
Once you map out every one of your project efforts, you’ll have a blueprint that will allow you to reap as much profit as possible and quote accurately for your work while making your price competitive!
2. Factoring non-billable tasks
One of the most critical mistakes that any accounting firm can make when it comes to billing their clients for requested services is overlooking the need to include financial legroom for non-billable costs.
When an accounting firm fails to account for non-billable matters like internal meetings, training, research, project management, and organization, having even the most detailed project pricing won’t suffice. This is why many end up incurring losses. Thankfully, learning to track non-billable costs will allow you to keep an eye on which opportunities are more profitable than others (especially when you start using Financial Cents’ practice management software for data)!
Although a profitable approach to project pricing may seem like an effort that is easier said than done, it’s worth noting that accounting for the right factors will help make a world of difference and ease things up. Through this guide’s help and the key pointers mentioned above, you’ll be able to increase your returns and maximize the profitability of your efforts with each client in no time!
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