CPA Firm Change Orders: The New Staff Bonus Incentive

Client work that goes beyond the original scope of the engagement – we’ve all done it.

Sometimes it’s work that the client can and should do.  Sometimes the extra work results from sloppy records that need to be straightened out.

Whatever the reason, virtually every firm performs work that was not included in the original fee quotation and which never gets billed because the firm failed to get approval to bill for the extra work.

Where does this familiar scenario lead?  To a big fat WIP write-off.

To avoid these situations, the CPA industry has adopted a practice from the construction trade:  Change Orders.  Contractors have gotten very good at getting their customers to sign off on these written quotes for additional work.

CPA firms need to get good at this too.

I recently spoke at a conference and listened to a MP describe a marvelous practice at his firm for improving realization.  He offers his staff a bonus for every change order they get from the client.  His thinking went something like this:  “Our staff are in the trenches, doing the work and interacting with client personnel.  They are in the best position to identify change order situations.”  At this firm, staff are encouraged to go directly to the client with the request for the change order or check with a manager or partner first if they feel more comfortable doing it this way.

Checks are written to the staff every time they get a change order signed (in other words, it’s not part of a general bonus paid at the end of the year; it’s paid as soon as the client pays the bill).

What a great idea!  In fact, it sounded so good that I asked all the people at this session why they wouldn’t do it.   Not one hand was raised.