Earlier, I have written various articles relating to students. This is my first article keeping in mind Chartered Accountants in Practice. This article also applies to any professional providing services in the form of practice. However, I am writing this article for Chartered Accountants only. This article is regarding the value of services given by CA’s in Practice.
Ours is not a business industry whereby we can estimate the cost of goods manufactured or cost of goods traded. If we consider the expenditure we incur on providing our services, it is very negligible. Being a professional we spend our time or rather we invest our time. So the value of services cannot be measured as easily as compared to products. So how should the services be valued?
There may be different perceptions about how to value the services and charge accordingly. But by any means or methods, the crucial factor on which the calculation should be done is time. We provide our time to clients. Time is the most important factor of our services. Here the question arises is how should we charge on timely basis. Calculating the value of time is not so easy task. There are certain criteria on which it is based. Two of these are estimated time of work expressed in terms of hours and remuneration expected from practice expressed in terms of money.
First we need to calculate how much time we are going to work effectively during a given period of time, say one year. This time should be expressed in terms of hours. Second, we need to calculate what our expected remuneration from practice is. This should also include the overheads we incur for maintaining our professional office. On the basis of these two criteria, we can estimate the expected earnings per hour. Here I am not giving any demonstrations for this. This thing is simple to understand. My purpose is to make the readers understand the need of calculating the expected remuneration per hour and charge accordingly.
However, in practical, this thing does not happen. Especially in non-metro cities, the members don’t charge or at least don’t calculate their expected remuneration per hour. This leads to under valuation of their services. In most of the cases, fees are not charged in proportion of the time devoted for the respective work. Our prime investment in services is time. So while charging the fees, due respect should be given to time also.
Apart from calculating the hour rates of partners / proprietor in the firm, similar calculations should also be made for the qualified and semi-qualified staff members, audit and articled assistants, support staff, etc. This calculation not only makes us realize the value of time, but also results in improved efficiency of partners and staff in the office.
There are certain tasks for which the time involved and fees charged cannot be exactly correlated, because of which such assignments cannot be charged on hour-rate basis. Examples are audits of small traders, tax advisory services, etc. However, in such cases we should estimate time involved for each of such service and derive the fees to be charged.
I would like to make it clear that time is not the only factor on which the fees should be decided. There are various other factors on which the charging of fees can depend. Some of them are the nature and volume of work, scope of work, the needs of the client, priority of the work, etc. These factors affect on the charging of fees from time to time and case to case.
This was regarding how to value our service. But now the prime reason why there should not be undervaluation of our services. I repeat again, we are not selling any product in the market, but we are providing services. But as like product, clients expect quality services from professionals. If we compare among products in the market, the better the quality the higher is the price and vice-versa. Similar is the case for services. But here fees are not based on quality, but quality is based on fees.
If we try to charge less to clients, initially we may attract some clients but we cannot assure quality services to them, because if the remuneration is less, the dedication is also less. On the contrary, if the remuneration is more, the dedication is also more. This results in providing of qualitative services which in turn results building the goodwill of the professional as well as the profession. If a person is charging less just to sustain in competition, he will sustain the price competition but he won’t sustain the competition of quality and enrichment of services.
The race of service industry cannot be won on the basis on reduced prices but on the basis of improved quality. And for providing improved quality services, the right price is also to be charged. So, all the members of the fraternity, please value you services properly, and the services will value you in return.
CA Amol Gopal Kabra
Blog: http://blog.amolgkabra.com
Mail to: amolgkabra@gmail.com
Follow on twitter: @amolgkabra
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