Does Scope Creep Eat Away at Your Profit?
You’ve probably been in this situation before: A regular monthly client asks you to complete one small task. They tell you it should “just take a second.” You do it because you like to please your clients (and you don’t like saying “no”).
Next month, the client asks for it again, and then again the month after that. Eventually you find yourself completing this extra task every month without being paid for it.
This scenario – and many others like it – is scope creep. It’s a common problem for accounting firms, especially if you use a fixed fee pricing model. If you allow scope creep to take hold, your revenue will suffer and you’ll struggle to negotiate contract renewals (because those “little tasks” seem like part of the engagement).
In this article, we explain the concept of scope creep and show you how to avoid it.Scope creep is a common problem for accounting firms, especially if you use a fixed fee pricing model. Click To Tweet
What is Scope Creep?
The scope of work includes all of the tasks and services that your team must complete to fulfill the contracts with your clients. Scope creep refers to when the services you perform expand beyond your agreement.
These extra tasks are unpaid. Sometimes the client makes a request that you choose to fulfill. Other times you might volunteer a little extra work.
In many cases, scope creep is harmless. These little tasks don’t ever seem much like. You think, “This won’t hurt and the client will be pleased.”
For instance, if a client only needs tax preparation, you might decide to quickly reconcile an account to get the expenses you need to finish their return, rather than waiting around for the client to do it. This can be good customer service. It may make your job easier, as well.
But in some cases, extra tasks can add up and start to chip away at your revenue. Suddenly you find yourself performing a lot more work than you bill for. This is especially painful if clients begin to expect those extra tasks going forward.
Why Does Scope Creep Happen?
There are three typical reasons for scope creep:
1. There’s little clarity regarding the service scope
This is the most common cause of scope creep. It happens when there is a vague understanding of what the agreed-upon service entails. Perhaps you failed to clearly define what you would do each month, or failed to add language that defines what counts as “extra” and how much it will cost. Or perhaps the client failed to anticipate their actual needs or assumed you are more flexible.
2. You don’t take time to reflect on your work
After completing a unit of work (like a monthly service or tax prep), it’s important to quickly review how you spent your time. Ask yourself if you completed any tasks that don’t fall within the client’s scope of work. Sadly, few firms bother because they don’t have the right data to review. Time tracking is important here because it creates the data you need to reflect on your service.
3. Overdelivering too often
Like all accounting firms, you want to deliver phenomenal service, so you do a little extra here and a little extra there to really delight your clients. But those “little extra” bits can add up to serious revenue loss.
If you’re married to the practice of overdelivering, set some internal standards that you don’t disclose with the client. For instance, if you offer five hours per month of technology consulting, set an internal limit of seven hours before you start charging. Then adjust your monthly pricing to reflect the true seven hour limit.
How to Stop Scope Creep
If scope creep is unchecked, it will inevitably sneak its way inside, so you have to be vigilant and responsive. Protect your firm and your revenue by following these steps to prevent scope creep.
1. Define your engagements
It’s important to define the specific scope of work for each client. This should be a written agreement, signed by you and the client, and kept somewhere you both can access (such as your client portal). Depending on the size of this agreement, it may be smart to have it drafted by an attorney.
In your agreement, use outcome-based language so it’s easier to measure whether you completed your obligations for not. For instance, instead of saying “Sheffield Accounting will be responsible for reconciliations,” say “Sheffield Accounting will code transactions weekly and reconcile all bank and credit accounts by the last day of month.”
Your agreement should also mention any additional fees for “non-contract work,” typically in the form of an hourly rate. Make this number high enough to make the client think carefully before dropping extra work in your lap. It should be more economical to increase their monthly package price.
2. Communicate the scope with staff
It’s important that your team understands the proper scope of engagement for each client. Document the scope somewhere that everyone can access. Formalize your policies as best you can, but there will be some differences between clients.
Instruct your staff not to assume that every client request falls within that scope. If a client requests something extra, they should clear it with you (or their supervisor) or follow the process you lay out for these circumstances.
3. Create a script to decline scope creep
It’s hard to tell a client “no” or “yes, but it will cost extra.” A lot of accounting firms simply grant their clients’ requests because they don’t like confrontation. You can make this a little easier by having a script ready. It doesn’t have to be complicated, but it should be clear.
Feel free to use this copy or edit it to suit your needs:
We would love to help you with XXX, but it is beyond the scope of our contract. I will attach our agreement to this email for you to verify.
If you want us to help with this, it will incur an additional fee of $XXX. Please confirm that you accept this charge.
If you’d like to add this service to your monthly package, we would be happy to discuss it with you. Please select a time on my calendar: [link here]
Keep this script somewhere accessible in case you need to access it while you are on the phone with one of your clients. If you really struggle with confrontation, roleplay this scenario with someone on your team a few times to make you more comfortable.
4. Watch your consultation hours
Scope creep often sneaks in without anyone noticing when clients ask for your feedback or advice. On one hand, you want to be a helpful resource for your clients so they value your service. On the other hand, you should be compensated for your time and expertise.
A simple solution is to add some consultation hours into your monthly package. Add the cost of these hours into the package’s cost. Perhaps the client will be entitled to five hours of phone or emailing that isn’t related to other tasks in the agreement. This way they can ask you questions whenever they need help and you will be compensated.
5. Encourage the client to revise the scope
If a client repeatedly asks for extra services, even if he or she is willing to pay for them, have a conversation where you explain why it’s smarter to add those tasks to their usual package. If possible, show them the cost benefit. It’s easy to upsell a client who is already paying a premium for the work.
6. Diversify your revenue
If a small number of clients represent a majority of your revenue, you’re actually in a dangerous position. Losing just one of them could devastate your business. It may seem simple to have a small clientele, but it forces you to walk on eggshells with all of them. You might be pressured to agree to anything to avoid losing them.
How do you gain the confidence to say “no” to scope creep? Get more clients. If each client represents a tiny portion of your overall revenue, losing one won’t damage your business irrevocably. This will make it easier to have scope creep conversations with your clients.
Growth is a healthy part of your clients’ business. Their needs will mature and expand over time, so it shouldn’t be surprising when they come to you asking for more service. But that doesn’t mean you should work for free. Be mindful of scope creep to protect your revenue.
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