When you’re planning a road trip, there are plenty of ways to get from your starting point to your desired destination. You could take backcountry roads, bustling interstates, or just kind of chart your course as you go. In other words, there’s really no right or wrong; it just depends on your goals, time, resources, and a handful of other factors.
That premise isn’t dissimilar from hiring a consultant to guide you to a specific future state. Depending on that future state – maybe you have a particular project or transaction to tackle, want to clean up your reporting or refine your controls, or just need some general guidance – there are a few different routes to choose from:
- Big 4 firms
- Other public accounting firms
- Financial advisory consulting firms
- Freelance/Independent CPAs
- Tax firms
- Staffing Firms/Temp Agencies
Of course, one of the most significant differences between those solutions is their fees and hourly rates. And while we’re not here to tell you that one is better than the other, just a straightforward discussion of costs will go a long way in helping you decide which suits you best.
Accounting Consulting Pricing Structures & Factors
A consulting firm is a business, just like your organization. They have revenues, costs, and will disappear sooner rather than later if they don’t mind their own bottom line. The point, naturally, is that they don’t work for free. But that doesn’t mean that you have to sell the farm to hire them, though. Let’s take a look at some of the most common pricing structures for a bit more clarity.
With the exception of audits, flat fees are relatively uncommon. You’ll mostly see them in recurring or predictable projects – hence, their use with audits – where the consultants revisit something they’ve either worked on in the past or are at least familiar with. Obviously, the fee itself is going to depend on the scope and nature of the work.
While a flat fee structure sounds relatively straightforward, pay close attention to the fine print in the contract. If the project runs over the allocated time and resources, the consulting firm will most likely bill you for the overruns. In fact, you should probably assume there are going to be overruns whenever you use a flat fee structure. Unfortunately, it doesn’t work in the other direction, so if they finish the project early, don’t expect a refund.
Daily, Weekly, or Monthly Fees
Although we see these types of fees on occasion, they’re quite rare and also a bit of a misnomer. A firm might present its fees as a daily, weekly, or monthly rate but, chances are, they’re basing those fees on an underlying hourly rate. In other words, they’re projecting the cost from an assumed number of hours required. Depending on the accuracy of that estimate, the amount you actually pay could be quite different.
This is the bread and butter pricing structure for the industry, including everyone from Big 4 and regional consulting firms to independent CPAs and bookkeepers. As you’ll see, there’s quite a range of hourly rates in each category, most of which stem from seniority. Put another way, the more senior the consultants working on the project, the higher the rate is going to be.
Some firms also charge ancillary fees on top of their hourly rates. For example, a firm might quote you $200/hr, but if they also charge an 8% administrative fee, then you’re actually paying $216/hr.
Likewise, even if your project only requires one consultant, we’ve seen firms include a minimum engagement team size, basically adding extra people – usually a manager, supervisor, or partner – even if the project doesn’t call for it. Unfortunately, these extra bodies will add to the billable hours. Therefore, always read the fine print and look for these types of inclusions before signing that engagement letter, just to make sure you fully understand what you’re paying for.
Other Pricing Considerations
Aside from those possible extra fees, we recommend paying particular attention to a couple of other points as well. First, as we said, you’re paying for seniority and experience. The more seasoned a consultant, the higher their hourly fees. Thus, it just makes sense to align seniority with the project. If it’s relatively straightforward, then an associate-level consultant might suffice, also keeping the costs down. However, price is only a single consideration, so if the project or transaction is unusually complex or nuanced, don’t sacrifice quality for cost.
Employees vs. Contractors
Also, understand if the consultants are employees of the firm or contractors. While there are plenty of very skilled and experienced contract consultants out there, they can bring a few negative dynamics with them as well. We’ve seen instances where consultants work via 1099 rather than W2 because they cannot stay consistently employed with a single firm. Maybe that’s a personal decision on their part, but it could also speak to their quality of work.
For example, a contractor that never progressed past a local or regional accounting firm could have some issues that might affect your project. Simply put, the contractor model is usually less expensive for the client, but that doesn’t necessarily mean it’s the best choice.
Minimum Engagement Length
Remember when we mentioned minimum engagement team size? Well, some firms will require a minimum engagement length as well. For instance, a firm could say they’ll bill for no less than six weeks for a project. If the engagement goes longer, they’ll charge you more. However, if the job only takes three weeks, that clause means you’ll still pay for the six weeks of work, even though the consultants will already be heading off to their next engagement.
Lastly, reimbursable expenses like travel can significantly impact your costs, making a highly qualified and experienced regional firm especially appealing. However, not all regional firms are created equally, so just because a firm is local doesn’t mean they won’t try to charge you for things like travel. Case in point, charging mileage fees for driving 25 minutes down the interstate might seem inconsequential, but those fees can really add up. Our advice is to be extremely aware of all sources of fees, not just the most obvious ones.
Types of Accounting Firms
Now that we’ve discussed the different sources of fees, let’s get down to the nitty-gritty and talk some actual numbers, shall we? Remember, these are general figures and could vary according to any number of variables. Also, previously discussed factors – seniority, in particular – account for the large range of fees in each category.
Big 4 Firms
This is an obvious one. Everyone knows who the Big 4 is, what they do, and where they operate – everywhere. These are gigantic firms that have deep knowledge and skillsets, global footprints, and charge accordingly.
Big 4 fees: $300 to $1,200/hr
Although Big 4 fees in the $90 to $160/hr range aren’t unheard of, it’s important to proceed with caution and be aware of the circumstances. Such appealing price points usually mean the firm has assigned off-shore consultants to your project. So while you’re technically still hiring Big 4 consultants, you’re probably not receiving the high-level of service and interaction that typically accompanies a Big 4 engagement. In fact, you shouldn’t even expect to see the consultants in-person. We’re not saying this is necessarily bad for you or your organization, just something you should be aware of before proceeding.
Other Public Accounting Firms
These firms are at a tier below Big 4 firms, not necessarily in terms of knowledge base, but certainly in prestige, resources, and size. They range from international companies (like BDO or Grant Thorton) to national (like Crowe or BKD) or regional footprints (like Whitley Penn or Weaver).
Global firm fees: $200 to $1,000/hr
National firm fees: $150 to $350/hr
Regional firm fees: $150 to $350/hr
Financial Advisory Consulting Firms
Firms in this category (like Opportune, Riveron, the Conner Group, Siegfried Group), including your friends here at Embark, are not accounting firms. They do not provide traditional accounting work like audits, taxes, or bookkeeping, and don’t sign off on opinions or certifications. However, they basically handle anything else a client may need, including everything from transaction preparation to technology with plenty of points in between.
Advisory firm fees: $250 to $550/hr
At Embark, our fees range from $150 to $300/hr, moving upward in $20/hr increments as you climb the seniority tree – associates, seniors, managers, senior managers, directors, senior directors. It’s also important to note that Embark doesn’t use contract consultants. An engagement with Embark means you’re dealing exclusively with full-time Embark employees.
What About Hiring Internally?
Naturally, the consulting route isn’t the only way to get to your destination. You can always hire internally for whatever project is at hand, but there are a few other considerations to keep in mind that often make consultants a very appealing option.
Hiring quality people takes time. You need to find and recruit them, conduct interviews, onboard, and then ramp them up. None of that happens overnight. In fact, that process often takes months. If a six-week project pops up on your radar, do you have the time needed to go through that exhaustive process? And even if you do, you’re left with the higher overhead once you complete the project.
Working with consultants doesn’t require that lengthy ramp up. They’re ready to go when you are, and once the job is complete, you’re not stuck with ongoing costs. Consulting firms, for the most part, have the agility that client companies lack, especially larger corporations.
We’re not going to paint with an enormously broad brush and say that every consulting firm is brimming with amazing talent. However, the good ones absolutely possess levels of expertise and experience that are extremely difficult to replicate with an in-house team.
Also, since consultants work with a variety of companies, often from an array of industries, they have a wide range of knowledge and skills that they bring to every project. In that sense, they can rely on a group of best practices collected from a diverse set of engagements. Consulting firms know that clients hire them because of their expertise, amongst other things.
Lastly, consultants bring a fresh perspective to a project, one that can work outside of office politics and sluggish bureaucracy that plagues many organizations, larger ones in particular. You hire a consulting firm to complete a job, not to placate to office dynamics. That’s not to say that a consultant comes in to ruffle feathers, of course, but their priority is the project, not appeasing the office curmudgeon.
So that’s quite a bit to think about, huh? The good news is that you have several different options to choose from to help you reach your goals. The bad news is the same as the good – you have many solutions to choose from. Start by understanding your budget constraints, ask questions before you sign that engagement letter, and read the fine print. At Embark, we don’t have a problem being so open about fees, contracts, or anything else for that matter. Yes, we’re that confident in what we bring to the table and know that you’ll appreciate everything that makes us, well, Embark.