Accounting Guru Michael Ford on Controlling Scope Creep in Accounting

Accounting Guru Michael Ford on Controlling Scope Creep in Accounting

Scope creep is a surprisingly common occurrence, if the right processes and expectations aren’t laid out in advance. It starts with taking on a project for a new client, and before you know it, the project has ballooned into a lot of unexpected work.

Nip the issue in the bud with these tips, offered by accounting guru and Intuit Partner, Michael Ford, president and CEO of The Ford Group Professional Corporation, an accounting and bookkeeping firm aimed at helping small- and medium-sized businesses. Ford is a CMA and CPA, and practices out of Ontario.

Research Your Clients

The first step to preventing a bad situation is researching your clients, says Ford. For example, any of his potential T1 clients fill out a questionnaire that offers more details about the client, such as their bookkeeping and accounting history, and the current state of the situation and the work that will be required.

Two areas that show potential for scope creep are: whether someone owns a small business, or whether they have had their bookkeeping done before. Based on these responses, Ford’s quote will change accordingly.

Some small businesses have never had their taxes done professionally. This usually requires a fair bit of his team’s time to set things up correctly. If they have had their taxes done professionally in the past, Ford looks into why they want to switch to his firm. Sometimes (not always), there are issues with their books that will take extra time, which will increase the scope accordingly.

After receiving the business’ documents, nine times out of 10, Ford can do the work for a lower cost, in which he notifies the business during those situations. Sometimes, it becomes more than he has expected, which usually happens when documents aren’t kept in an organized fashion.

For those who need a T2 done, he utilizes a similar tactic and asks potential clients whether they have their trial balances complete. If they have no idea about what he’s talking about or can’t respond to his questions in a sensible manner, it’s a sign of a larger job, says Ford.

“I’ve already been burned like a lot of bookkeepers and accounting firms,” he says. “One of the big tips is to overprice yourself, but not overprice yourself too much. If the hourly rate is $50 an hour, shoot it up to $60 or $70 and see how, or if, they’re going to flinch.”

Based on their reactions to his quote, Ford will see if they exhibit any red flags and why that might be the case. He’ll ask for more details on the business’ bookkeeping workflow, and based on their response, he may or may not lower his pricing. Most accountants have a flat rate, and if the client is unwilling to pay that, then it might be best to walk away, he says.

Proposals and Expectations

Another way to avoid scope creep is by ensuring your written proposal is specific, including details on the tasks you or your company will complete, the tasks the client will complete for you, and even a section of what is considered outside the project’s scope.

“You spell it out in pretty black and white,” says Ford. “The engagement is very popular for accountants because we need that for our liability insurance.”

For those with little experience in creating engagement letters, ProFile® offers template letters that can be easily modified.

In the unfortunate case that you find yourself faced with scope creep, it’s best to refer to the defined scope agreement. “Say scope is the bad guy, not the person,” says Ford.

For Ford, if the scope creep isn’t too big, he’s usually fine to complete the task, but he will warn clients that he is going above and beyond their previous agreement, and if it happens again, the agreement will need to be modified. If the scope creep is another assignment in itself, Ford will say that the task is not a part of the project scope.

Sometimes, however, clients still aren’t satisfied. In all his engagements, Ford includes a clause that allows both parties to cancel the agreement for any reason and at any time.

One situation that may arise is who owns the work, whether the clients’ business owns it or the accounting firm, he adds. Depending on the work that is done, such as who purchased the software or whether it’s bookkeeping or tax work, there are laws defining proprietary of the work. It’s best for accountants to consult a lawyer if an issue comes up.

“You can stop the process at any time. You don’t need to feel that you’re being pressured into it by the client,” says Ford. “Be upfront with the information and it can always be stopped. If they don’t like it, guess what … they’ll find someone else.”

Also, if you don’t stop the scope creep, clients may expect you to handle the task again and again. So, nip it in the bud on the get go so that you and your firm can experience smooth sailing and, hopefully, more client referrals.

Share with us any other tips and tricks you use to handle scope creep?