Is AI Changing How Accounting Firms Should Price Their Work?

What happens to hourly billing when AI allows you to complete work in a fraction of the time?

That’s the question at the center of Part 2 of my conversation with tax consulting veteran Les Bryson.

In Part 1, we discussed IRS guidance around using AI responsibly, including verifying AI-assisted work and protecting client information. Now we’re looking at another important issue: how increased efficiency affects the way tax and accounting professionals charge for their services.

Les believes this creates an opportunity to reconsider the traditional hourly model and move toward pricing that reflects the work’s value while giving clients greater predictability.

What Happens to Hourly Billing When AI Saves Time?

AI and automation are allowing accounting professionals to complete some tasks much faster than they could before.

That’s great for efficiency. But it creates an interesting problem if your business model depends primarily on selling hours.

Les explains that you can’t simply treat an AI tool like another employee generating billable hours. If technology reduces the amount of time required to perform certain work, the traditional relationship between hours worked and fees charged starts to change.

Less Time Doesn’t Mean Less Value

Here’s where the conversation gets especially interesting.

AI may reduce the time required to complete a task, but that doesn’t mean the work suddenly has no value.

You still need experienced professionals who understand the subject matter. You still need someone to review the work, identify mistakes and make sure the final result is correct.

The question becomes whether hours are still the best way to measure and price that value.

Is It Time to Consider Fixed Fee Pricing?

Les believes firms can use this transition as an opportunity to consider fixed fee pricing.

Experienced firms already have something valuable to work with: historical data.

You know what you’ve charged for certain types of work. You know approximately how much effort those engagements require. You understand the value you’re providing to the client.

That information can help you establish a predictable price for the work rather than simply multiplying hours by an hourly rate.

If technology allows you to complete the work more efficiently while maintaining quality, your firm benefits from that efficiency. If the engagement takes longer than expected, the client still knows what the agreed fee will be.

You Can Still Track Time

Moving away from hourly billing doesn’t necessarily mean you should stop tracking time internally.

Time data can still help you understand profitability and identify changes in an engagement.

If a client’s situation becomes more complicated and consistently requires more work, your internal data gives you a factual basis for adjusting the fixed fee in the future.

The difference is that time becomes a management tool rather than simply the basis for the client’s invoice.

Predictable Pricing Can Improve the Client Relationship

There’s another benefit that I see firsthand: clients don’t like billing surprises.

When clients know what they’re going to pay, they’re often more comfortable asking questions and calling when they need advice. They don’t have to wonder whether every phone call is going to result in another 15-minute charge.

That communication can help you become a more valuable advisor.

Predictable pricing also makes budgeting easier for the small and midsize businesses you serve. They know what the service will cost and can plan accordingly.

Use AI Efficiency as a Competitive Advantage

The opportunity isn’t simply to use AI to do the same work faster.

Think about what that efficiency allows you to do differently.

Can you spend more time helping clients understand their financial information? Can you provide more advisory support? Can you strengthen the relationship instead of simply completing another compliance task?

If you’re able to deliver high-quality work more efficiently while giving your clients predictable pricing, both sides can benefit.

Pricing Should Reflect the Relationship You’re Building

There isn’t one pricing model that’s right for every accounting firm or every engagement.

But AI and automation are giving firms another reason to examine whether the way they’ve always billed still makes sense.

Look at your historical data. Understand your costs. Know the value you’re providing. Then determine whether a fixed, predictable fee can work for both your firm and your clients.

Listen to Part 2 of my conversation with Les Bryson for more about AI, pricing and turning increased efficiency into a competitive advantage.

Questions Accounting Firms Are Asking About Pricing and AI

How is AI affecting hourly billing for accounting firms?

AI and automation can reduce the amount of human time required for certain accounting and tax tasks. That creates pressure on a pricing model based primarily on billable hours and gives firms another reason to consider how they price the value of their work.

Does using AI mean accounting firms should charge less?

AI can reduce the time and cost associated with some tasks, but qualified professionals still need to review the work and make sure it’s correct. The discussion in this episode focuses on separating the value of the finished work from simply counting the hours required to produce it.

What’s the advantage of fixed fee pricing for accounting clients?

Fixed fees give clients greater predictability. They know what they’re expected to pay before the work is completed, which can make budgeting easier and reduce concerns about unexpected invoices.

Should firms still track time when using fixed fees?

Les recommends continuing to track time internally. That information can help you understand profitability, identify changes in the scope of an engagement and make data-based decisions when setting future fees.

Can fixed pricing improve the CPA-client relationship?

It can change the way clients communicate with their advisors. When clients aren’t concerned about being charged for every phone call or conversation, they may be more comfortable asking questions and getting advice before making a decision.

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