Many small firms don’t realize they’re underbilling because the warning signs rarely show up as obvious red flags. You may be underbilling if you recognize any of these issues:
Revenue grows slowly, despite a full client list and long hours.
Cash flow is tight, and there is persistent pressure to take on more work.
Staff routinely spend more time than expected on engagements.
Providing advisory work is not built into pricing.
If any of these sound familiar, your pricing is probably misaligned with effort and value. Pricing should reflect that the work of a CPA firm has become more complex, technology costs have risen, and client expectations have grown. To overcome underbilling, firms should consider how they got here and what best practices can help address the problem.
What’s stopping us?
The first step is to do a reality check on fees by asking these questions:
What fee did we charge last year?
How much partner and staff time did this work take?
What additional work was completed that wasn’t included in the original scope?
What write-offs were involved, and how much time wasn’t captured?
The next step is to address the reasons a firm may be reluctant to raise fees. Firms often don’t take this step because of discomfort with pricing conversations. Many small firm owners entered the profession when technical skill and hard work were expected to speak for themselves, not when value needed to be explicitly articulated.
Concern about losing clients is another common roadblock. It can be a very real concern, especially when client relationships are personal and long‑standing. However, most firms that raise fees thoughtfully and communicate the increase clearly find that the majority of their clients stay. The PCPS Overcoming Pricing Objections Tool can help firms anticipate and address any potential pushback.
Many firms believe that charging less than the competition gives them an advantage, but this is rarely a sound long-term strategy for a small firm. It tends to attract price-sensitive clients, who are often the most demanding and the least loyal. These clients frequently push back on scope, question invoices, and resist necessary fee increases ¾ regardless of the quality of the work provided.
Underbilling is also closely tied to client mix. Firms often price thoughtfully for some clients or services, while continuing to undercharge for others out of habit or loyalty. Over time, this creates an imbalance where a small percentage of engagements consume a disproportionate amount of firm capacity. Addressing underbilling sometimes means reassessing whether all services ¾ and all clients ¾ still align with the firm’s goals and capacity.
What billing strategies should we consider?
In addition to simply increasing fees, firms should consider new approaches to billing, such as subscription and value billing, which give firms greater control over their time and business. Here’s why:
Subscription and value billing shift the focus to outcomes, consistency, and impact. The firm is paid for being available, proactive, and trusted.
Predictable revenue allows firms to plan, invest, and breathe. When fees are collected regularly and tied to an agreed‑upon scope, cash flow stabilizes and surprises are reduced. That stability makes it easier to hire and retain staff, invest in technology, and say no to work that doesn’t fit.
They force clarity. Value‑based pricing requires firms to define what they do, who they do it for, and what problems they are actually solving. That clarity is uncomfortable at first, but it’s powerful. Firms become better at setting boundaries, managing scope, and communicating expectations. Clients benefit as well because they know exactly what they’re paying for and what support they can expect. In many cases, trust increases, because billing no longer feels like a mystery or a negotiation after the work is done.
How can we get started?
Start small and intentional, rather than trying to convert every client or every service at once. Pilot a new billing approach in a limited area, such as with new clients or with a clearly defined service like advisory or CAS. This gives partners and staff time to adjust how they think about scope, pricing, and client communication.
To address client concerns, communicate clearly about what you’re planning. Emphasize the predictability, transparency, and improved service clients can expect. Firms that take the time to reset expectations upfront tend to see far less pushback than those that try to layer a new billing model on top of old habits and vague engagement terms.
Be intentional, not reactive
Pricing is not just an administrative decision; it’s a strategic step that shapes the type of firm you build and the clients you serve. When firms don’t adjust pricing, they often absorb rising costs themselves rather than delivering additional value to the client. Over time, this shows up as stress, burnout, and an inability to invest in staff or systems.
Early signs that a new pricing approach is working include fewer write-offs, more predictable cash flow, and clearer conversations about scope. Over time, firms may also notice less pressure to add new clients just to maintain revenue and greater flexibility to invest in staff and technology.
Firms that make the best pricing decisions step back and ask whether their fees truly reflect the work being done, the expertise being applied, and the outcomes clients rely on. For more information on getting started in your firm, turn to the PCPS Pricing Tool.
Stephanie Otero, CPA, is the Association’s Vice President—Small Firm Advocate. Have questions for Stephanie? Contact her directly at stephanie.otero@aicpa-cima.com. To stay ahead on issues affecting CPA firms, the PCPS Small Firm Success Series offers strategies on staffing, technology, compliance, and practice management. The series is free to AICPA members and provides CPE.
We welcome your suggestions and feedback on how the AICPA can better support small firms.