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Stop Scope Stretch!

I’m redefining ‘Scope Creep’ as ‘Scope Stretch’, and for good reason. 

We often lose money on client jobs because we voluntarily stretch the parameters of our agreement for service with clients, not because clients ask us to do work for free.  In other words, Scope Stretch can be successfully managed, but only if we put in place some simple processes and support our team to change behaviours that have become entrenched.

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The three causes of Scope Stretch

  1. Your client has not met your minimum standards of client work presentation, resulting in further work being required; or
  2. Your client requests further work which is not within the scope of your services agreement; or
  3. You need to perform an additional service for your client, the work is a must, and is not within the scope of your services agreement.

Without some basic systems and team training, Scope Stretch will continue to be a significant cost to many firms.  Over time, Scope Stretch becomes endemic, expected even.  We need to change this mindset.

 

Let’s go below the line for a moment.

  1. We sometimes blame a cost blowout on the client: Messy records, missing information, coding errors.  We absorb the extra cost of production and don’t even tell the client about that cost.  We provide no incentive for them to change.  An incentive to change is presented when we bill our clients for the extra time the job took, AND we explain why.
  2. We make excuses that we’re too busy to stop: We think we’re too busy to stop the job and contact the client to get conceptual agreement on a price for additional services.  That’s the lazy approach and frankly it isn’t commercial.  When you engage an electrician to wire your house, you don’t expect them not to charge for additional work lighting up your garden.
  3. We deny that clients will pay for the extras if we carefully explain them.  That’s not the advice we’d give our clients.  It’s also the lazy approach, in that we can’t be bothered stopping, putting down the file, and sending the client a simple ‘out of scope’ email requesting electronic acceptance for the additional work.  With a good system in place, that could take as little as 15 minutes.

Now let’s be above the line. 

We need to take ownership of a problem we’ve created by being passive.  We need to be accountable for letting the firm’s hard earned revenue slip through the cracks, and the person doing the job needs to be the one that takes responsibility for sending the ‘out of scope’ email, not the Finance department.

We must make it easy for our team to change the habits of a lifetime! 

 

Let’s look at the three causes of scope stretch again.

1.  The client causes additional work or re-work

For example, your client didn’t follow your prescribed process for presenting their Xero files.  Yes, you should have a minimum standard of presentation, and your Terms of Engagement is a great place to insert this.  Or, the client prepared their own GST / VAT Returns and the GST / VAT doesn’t reconcile by a significant amount.

In this situation, what’s needed is a simple script to tackle the problem head-on, before you get deeper into the work.  The best approach here is to give your client options.  They can either fix the issue themselves, or they can invest in some training so they get better at filing their own GST / VAT Returns, or they can simply agree that you do the additional work for an additional fee.

2.  You recognise the need to provide an additional service beyond your service agreement.

This situation is not always as obvious as it sounds.

A great example: You decide that you need to declare a dividend from your client’s company to its shareholders.  This is important, and might save the client tax, either now or in the future.  This isn’t a piece of work that happens every year.  You need to calculate the dividend, prepare dividend statements, reflect the dividend in the Annual Accounts and Tax Returns, prepare company resolutions, and even a solvency certificate.  That’s a fair amount of work and it’s likely saving your client tax, so why do you keep stretching the scope of your work and including it in your standard agreed fee?  You need a system for this.

Once again, have an internal price guide for add-on services and a simple ‘Proposal for Additional Services’ template.  But also develop a clear script for your team to tackle these scenarios head on!

3.  The client requests additional services.

An obvious example is a client asking for a Cashflow Forecast because the bank has requested one.  In this case, we should know whether or not the work is within the scope of the client’s service plan.

A less obvious example is where a client wants to talk about whether they should lease or outright purchase a vehicle.  Sounds like a small job, but these add up, and across a year they create a lot of Scope Stretch.

 

There are three systems you need to implement to ensure you don’t absorb the cost of producing these unanticipated jobs:

Firstly, provide a ‘Quick Queries’ service for all clients free of charge.

Include this service in your proposal and define it as: "Phone calls or email queries that can be raised and resolved within 10 minutes".

The advantages of offering this service:

  • You’re removing the barrier of a fee for a quick question
  • You’re encouraging clients to involve you in their decision making, which builds trust and rapport
  • You aren’t perceived as being ‘mean’ or ‘scrooge-like’; people like getting free stuff
  • You’re educating your clients as to what is free and what isn’t
  • You may be able to identify opportunities where clients can make more money or save tax
  • The contact may prevent clients making mistakes with costly implications down the line
  • You’re marketing - marketing is always on!

You’ll need to train your team on how to stop giving services away when they get queries! 

Give them scripts to use for your most common scenarios!  Consider these simple statements:

  • “This is a technical issue and needs to be looked into further.  If we don’t address the issue now, your business will be negatively impacted (explain how and quantify if possible).  We’ll need to charge a fee of around (state price).  Are you happy to proceed?”
  • “To ensure we give you the best advice, we need to review the situation.  Would you like us to put this in writing and base our fee on the time it takes?”
  • “As we aren’t sure how long this job may take, we think the fairest way to charge you is to base our fee on the time it takes.  Are you happy with that?”
  • “This is rather a complex matter.  To ensure we give you the right advice, we’ll need to spend adequate time reviewing this, and naturally there will be a fee, which we will calculate based on our time.  We think the fee will be between (price) and (price).  Are you happy for us to go ahead on this basis?”
  • “Our policy is not to charge for 10 minute phone calls and emails, however as there’s a fair bit involved, our advice will take longer to complete than 10 minutes.  The cost will be (provide fixed fee or a fee range).  Is this OK with you?”
  • “Your issue is very complex, and we’ll need to review the situation thoroughly.  The potential tax savings are significant (quantify - under promise and over deliver).  Our policy is always to provide a fee quote before we start work for you.  I suggest a fee of (price).  Can we get started on this now?”
  • “Can I just stop you there for a minute?  It sounds as though this is much bigger than a quick query.  How about you send me an email with all the facts, I’ll review it and send you some suggestions on next steps and pricing, ahead of getting started.  Is that OK with you?”

Secondly, get clearer on how you define and price your typical add-on services!

Create an internal services and pricing guide for add-on services and get your team clear on the how-to and the expectation to Stop, Drop and Re-engage!

Thirdly, create clear scripts and a simple ‘Proposal for Additional Services’ template.

Give the answers and the how to on a plate for your team.  Create a script for each of the three scenarios:

  • Additional Service Recommended Scope Stretch Script
  • Additional Service Requested Scope Stretch Script
  • Rework Scope Stretch Script

This will help your team gain conceptual agreement from your clients as to the add-on services and the fees attached.  Then they can swiftly prepare and send the proposal for additional services!

You’ll be amazed at the revenue you achieve each month by implementing these simple systems!

Want to know more?  Download our free report, Scope Stretch and the Accounting Industry!

SCOPE STRETCH AND THE ACCOUNTING INDUSTRY

About the author

Viv Brownrigg, FCA

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