Creative Pricing Issues in CPA Firm Practice for Ethical and Profitable Activity

17 Pages Posted: 9 Aug 2016

See all articles by Gregory Kordecki

Gregory Kordecki

Clayton State University

Maria Bullen

San Jose State University

Elizabeth Capener

San Jose State University

Date Written: July 27, 2016

Abstract

The CPA office of “yesterday” was comparatively devoid of technology, relying on extensive labor, pencil pushing, manual spreadsheets, and green-bar printouts. A few adjusting journal entries could have taken several days to apply. The office of “today” still carries the traditional breakdown of total cost into raw materials, direct labor, and overhead. Significantly different, however, is the emergence of a swing in relative percentages of each cost to the firm. Client services are frequently spelled out in engagement letters, but some CPA firms are witnessing an increasing disadvantage of retaining the generally accepted approach of billing their work performed as a function of direct labor hours at the rate of the individual(s) performing the services. With increased emphasis on technology applications in processing client needs for financial statement services, income tax returns, management consulting, and other work, overhead costs balloon over the labor costs. Accordingly, incremental true costs tend to avoid capture in the pricing formula for client work. This paper offers a creative value pricing approach as superior to any method relying on cost drivers, one which CPA firms may apply to either public or private clients.

Keywords: Creative Pricing, Fixed Fee, Hourly Billing, Value Pricing

JEL Classification: M40, M41, M42, M49, M52

Suggested Citation

Kordecki, Gregory and Bullen, Maria and Capener, Elizabeth, Creative Pricing Issues in CPA Firm Practice for Ethical and Profitable Activity (July 27, 2016). Journal of Accounting, Ethics and Public Policy, Vol. 17, No. 3, 2016, Available at SSRN: https://ssrn.com/abstract=2815249

Gregory Kordecki (Contact Author)

Clayton State University

3239 North Embry Circle
Atlanta, GA 30341-4207
United States

Maria Bullen

San Jose State University ( email )

San Jose, CA 95192-0066
United States
(408) 924-3433 (Phone)

Elizabeth Capener

San Jose State University ( email )

1 Washington Square
San Jose, CA 95192-0066
United States
(408) 924-3433 (Phone)

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