By Lyndsey Hall
Scope creep (also called requirement creep) is an issue that plagues most service based businesses, and it can have a hugely negative impact when managed incorrectly. With the right systems and processes in place, you can avoid the risks and maintain a successful and profitable business, whilst keeping your clients happy. Here’s how:
What is ‘scope creep’?
Have you ever found yourself taking a call from a client who wants a small job doing in addition to your normal agreement, and you know it’ll only take a minute and might engender some goodwill, so you agree to do it free of charge?
Before long, you’re doing extra pieces of work for several clients with no additional fees coming in, and the scope of each job is gradually increasing, but you feel unable to bring up the subject of payment.
This is scope creep – when the scope of work that has been agreed with a client increases or changes. Typically, this means your clients are asking for more, and getting it, but they aren’t paying for it.
Is it really so bad?
In a word, yes. Not only can this have a serious impact on your bottom line, but it can put a strain on your client relationships.
If you have a fixed fee agreement with a client, including a set amount of work and advice, and you do one extra piece of work for no additional fee, the client may assume that this will continue to be the case, unless you express to them that it is a one-off deal. If it goes on for a while, and then you decide to broach the subject of increasing the fixed fee, or charging a one-off amount, the client may be surprised and unhappy. They may threaten to leave you for another accountant.
Your other clients may hear about the free extra work you have been doing and assume you’ll offer them the same deal. When you don’t, they may become disgruntled and threaten to leave. It can cause a plethora of avoidable issues and eat into your hard-earned profits.
How do you pre-empt scope creep?
- Create a comprehensive engagement letter which sets out exactly how much your clients will be paying and what their fee includes and excludes.
- Educate your team so every accountant knows what the new agreement entails and when to discuss additional fees with clients.
- Explain to clients that you will advise them in advance if a piece of work falls outside of your fee agreement, with the option to pay for a one off job or increase the fee to accommodate the additional work.
- Review your agreements regularly. This could be annually for smaller clients, and quarterly for larger businesses.
It’s not possible to completely avoid scope creep, but as long as you have measures in place to deal with it, you can mitigate the impact on your business. When a client’s requirements begin to exceed your original agreement, contact them immediately to let them know the scope of work has changed and their fees need to be reviewed. If you’ve made them aware in advance with the engagement letter, it shouldn’t be a difficult conversation. You may face some push back, but coming to an agreement that is mutually beneficial, rather than giving in to your client’s demands, will ensure you are both happy, and profitable!
Implementing a system for regular client contact can also help you to avoid scope creep, as well as giving you the opportunity to up-sell additional paid work and add value to your clients.
Communication is key. Your clients want to be kept abreast of the work you are doing for them and how much their next bill will be. If they argue over every additional charge and expect frequent pieces of work to be done free of charge, they are probably not the type of clients you want and you may be best parting ways.
Have you battled scope creep in your business? How did you resolve the situation? We’d love to hear your tips for keeping profits and client satisfaction at a high! Join the conversation on Twitter or leave a comment below.