How Low Can Compliance Fees Go?

Compliance services are now completely commoditised. The commoditising of compliance services was inevitable really, and the only surprising thing is how long it’s taken. The numbers speak for themselves, with the average business client’s accounting fee falling 30% over the last three years.

Commoditisation was due to the following three main factors:

• A repetitive task – Preparing financial statements and tax returns certainly tick that box. The repetitive nature of the work has previously been a positive and made accounting practices so profitable. Of course, times have now changed and it’s a practice’s Achilles heel.
• Systemisation – For the last twenty years, practices have worked hard to systemise each workflow and process. This improved the quality of the accounts or tax returns produced, whilst increasing speed and efficiency.
• Lower cost new competitors – Cloud-based software plus outsourcing overseas have dramatically reduced the cost of providing compliance services. Some new accounting practices are marketing their compliance services for only 20% of ‘standard’ rates. In other cases, accounting practices are bundling the compliance services with high-cost value-added services and providing the compliance services as a free giveaway.

So, the answer to how low compliance fees can go, is zero. Of course, the majority of compliance fees probably won’t go to zero, but they may only be 20-30% of today’s prices. Where would that leave a compliance-based accounting practice? Either in the poor house or out of business.