Fixed Fees, a Trap for Some Practices
The profession, for some time now, has been espousing the benefits of fixed fees. Firms across the country have implemented their use to varying degrees, with some taking an ‘across the board’ approach to implementation. Others remain dedicated to predominately time based charges limiting the use of fixed fees to perhaps large clients and/or specialist services.

Whilst no doubt this approach to charging can be beneficial, we are not necessarily in complete support of such policies. Importantly, it’s also imperative to appreciate that fixed fees differ to the payment terms used to pay fees. For example, a client’s fix fee for the year may be $5K. The firm may decide to charge this fee at the end of the year or at the completion of the client’s work for the year. They may also decide to charge this fee in monthly or quarterly instalments which we favour. However, the fee itself and the period across which it is paid is two separate items.

The main reason we see firms fail at fixed fee billing falls within the following three areas:

1. Firms fail to regularly review fixed fees, finding that static fees will probably have an impact upon revenue and profitability as the cost of operating a practice increases but fees remain the same

2. Firms sometimes don’t record time taken to perform the work or fail to compare time recorded against the actual fee charged. This is to ensure the cost of performing the work is recouped within the fee and the work is indeed profitable for the firm

3. Firms fail to define the exact services that will be provided as part of that fixed fee resulting in the performance of additional services which are not charged. It’s imperative to be structured and clear around what that fee does and doesn’t include and communicate that additional charges will arise should a client’s work move outside the scope of the fee.

Recently, I have seen some great websites of firms who clearly work on the basis of fixed fees. The explanation of the fees and their inclusions are really clear, even to the point of identifying which package is most popular and the type of business, in terms of development and growth, each package may suit. So it can be done. It’s just about the structuring of the fee, its inclusion and exclusions, communication and then sticking to the fee versus provided services.

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