How firms should respond to software price increases

When an accounting software price increase lands, a firm has five choices: absorb it, pass it through, move clients to wholesale billing, consolidate the stack, or replatform. The right one differs by client, and the way to decide is to size the increase at firm scale first, then sort the client list by which option each client's margin can carry.

We run an accounting firm, and we've been through every one of these on our own client list. The mistake we made early was treating a price increase as a single decision for the whole firm. It's a per-client decision with a firm-wide letter.

Sizing the increase at firm scale

Start with the arithmetic most firms skip. Take the number of client subscriptions the firm pays for or manages, the old monthly price, and the new one. Multiply. A firm with 60 clients on a mid-tier plan that moved from $60 to $85 a month has a $1,500-a-month problem, $18,000 a year. That's most of a part-time bookkeeper. A firm with 200 clients has an $60,000 problem, which is a full hire.

Then add the tools around the ledger, because they rarely stand still either: the receipt capture tool, the practice management portal, the reporting add-on, the bill pay app, the cash flow forecasting tool. Each one at $20 to $50 per client per month adds up to a stack that often costs more than the ledger itself, and each one raises prices on its own schedule. A firm that only sizes the QuickBooks increase is sizing a third of the problem.

The number to carry into the decision is total software cost per client per month, before and after. Then look at the fee each client pays. A client paying $450 a month for a close, with $140 of software behind them, has a different answer than a client paying $1,800 with the same $140.

What should an accounting firm do when QuickBooks raises prices?

Five options, and the firm's client list will end up spread across three or four of them.

Absorb. For high-fee clients where the increase is a rounding error against the engagement, eat it. Passing a $25 monthly increase to a client paying $2,000 a month buys a conversation that costs more than $25. Absorb it and revisit at the next annual pricing review.

Pass through. For clients where the software is a visible line on the invoice, pass the increase through at cost with a one-paragraph note. Clients who already see "QuickBooks Online: $X" on their bill accept the new $X, because it isn't the firm's increase. This works only if the software was itemized to begin with.

Wholesale billing. Most vendors (Intuit's ProAdvisor program, Xero's partner pricing) let the firm hold the subscription at a discount and bill the client. Moving clients to wholesale gives the firm three things: a margin on the software, a single price the firm controls, and the ability to change platforms without asking each client to cancel a subscription they own. The discount narrows on the more expensive plans and can change with the vendor's own terms, so it's a partial answer, but for firms still letting clients own their subscriptions it's the first move.

Consolidate the stack. This is where the real money usually is. If the firm pays for a ledger, a receipt tool, a portal, a reporting app, and a forecasting tool per client, the question isn't whether the ledger went up 20 percent. It's whether the firm needs five vendors. Dropping two add-ons because the ledger, or a different platform, now covers what they did often saves more than the entire increase.

Replatform. Move the ledger. The biggest saving and the biggest effort, and the only option where the effort scales with the number of clients moved. It makes sense when the per-client saving across the firm exceeds the migration cost, and it only makes sense at all if the new platform imports the chart of accounts, customers, vendors, opening balances, and transaction history, so a migration is hours per client and not days. A firm we know moved a block of small clients over one quarter, kept the larger ones where they were, and reviewed the rest at renewal. That split is the normal outcome, not a failure to decide.

For the specifics of what to look at when the ledger itself is in play, see what firms can do about the QuickBooks price increase.

How do accounting firms pass software costs to clients?

The letter that clients accept has four properties. It names the cause plainly ("our accounting platform vendor raised prices on the plan your books run on"), states the new amount and the date, gives the client a choice where one exists ("we can move you to the wholesale plan we manage, or you can keep your own subscription at the vendor's new rate"), and arrives with the new-year engagement letter rather than as a surprise in March.

What it doesn't do is apologize, over-explain, or hide the increase inside a fee bump the client will find later. Clients forgive a vendor's price increase. They don't forgive discovering it on a statement.

A version that works, in one paragraph: the vendor's price for your plan is changing from $X to $Y effective January 1; we've reviewed whether a lower plan fits your books and it doesn't, or it does and here's what changes; the software line on your invoice will reflect the new rate; nothing else in the engagement changes. Sign the engagement letter and you're done.

Is it worth switching accounting software to save money?

The honest answer is: only if the math works after counting the migration, and only if the migration is real. Two numbers decide it.

The saving is per-client software cost, old stack minus new, times clients moved, times twelve. Include the add-ons the new platform makes unnecessary, not only the ledger.

The cost is staff hours to migrate one client, times the hourly cost of the person doing it, times clients moved, plus the retraining time for the team and the client-facing time explaining the change. A migration that imports the chart, customers, vendors, balances, and history is a few hours per client. One that requires rebuilding the chart and re-entering opening balances by hand is a day or two, and at that price only the largest savings justify it.

Two more factors that aren't in the spreadsheet. The tax preparer's workflow: if the firm's returns are built from the ledger, the new platform has to produce the same trial balance and fixed-asset detail. And the client's own use: a client who runs invoicing and bill pay in the ledger every day needs a platform that does those things, not one that only closes books.

Timing it with the January engagement letters

Whatever mix the firm picks, it lands on January 1 with the engagement letters. That's when clients expect pricing to change, when the firm is already sending a document they have to sign, and when a move to a new platform can start on a clean year. A price change in April is a second conversation; a platform change in July means a split year in two systems.

That means the decision happens in October and November: size the increase, sort the client list, write the letter, and, for any clients being moved, plan the migration so it runs in December and January while the prior year closes in the old system. For firms that also raise their own fees in the new year, the software pass-through and the firm's increase go in the same letter, itemized separately, so the client can see which is which.

Where the platform comes in

Disclosure: Woven is our product, and this is the problem it was built for: one platform for the ledger, bank feeds, statement import, client portal, close board, and reporting, so a firm consolidates rather than adds a vendor. Firm pricing is per client at $39, $32, or $25 a month by volume, bank connections are free, and the importer brings in the chart, customers, vendors, balances, and history from QuickBooks Online or Xero so a migration is hours per client. To see a client imported and closing on live books, book a demo.