Time-Based Billing vs Fixed Fees for Accounting Firms

Time-Based Billing vs Fixed Fees for Accounting Firms: Which Model Works Better in Singapore?

Time-based billing vs fixed fees is one of the most important pricing decisions for accounting firms in Singapore. While both models remain widely used, they produce very different outcomes for profitability, client satisfaction, staff behaviour, and compliance risk.

In recent years, many firms have questioned traditional hourly billing. At the same time, fixed fees are not always suitable for complex or unpredictable engagements. Therefore, the real question is not which model is “better,” but which model works better in specific situations.

This article explains how time-based billing vs fixed fees works in practice for Singapore accounting firms and how firms can choose the right approach.

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Why Pricing Models Matter More Than Ever

Accounting firms in Singapore operate in a demanding environment. On one hand, clients expect fee certainty, faster turnaround, and clearer value. On the other hand, firms face rising regulatory standards, talent shortages, and margin pressure.

As a result, pricing models now directly affect sustainability. When pricing is poorly aligned with risk or scope, firms experience scope creep, staff burnout, or under-recovery of effort.

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What Is Time-Based Billing?

Time-based billing charges clients based on hours worked, usually at different rates by staff level.

In Singapore, firms commonly apply this model to:

• Statutory audits

• Special investigations

• Tax disputes

• Complex advisory or restructuring work

These engagements often involve uncertainty, changing scope, or regulatory exposure.

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Advantages of Time-Based Billing

To begin with, time-based billing protects firms from underpricing complex work. In addition, it aligns fees with actual effort, which is important when scope cannot be predicted accurately.

Moreover, this model supports detailed documentation. For regulated services such as audits, time records often form part of quality control and review requirements.

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Limitations of Time-Based Billing

However, time-based billing also has clear drawbacks.

First, clients often dislike unpredictable fees. Second, efficiency is not rewarded — completing work faster may reduce revenue. Finally, staff may focus more on hours recorded than outcomes delivered.

Over time, these issues can strain client relationships, especially with small and medium-sized enterprises.

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What Are Fixed Fees?

Fixed fees involve agreeing on a set price for a clearly defined scope of work, regardless of time spent.

In practice, Singapore firms commonly use fixed fees for:

• Monthly bookkeeping

• Payroll services

• Corporate secretarial work

• Routine tax filing

These services are usually repeatable and predictable.

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Advantages of Fixed Fees

Most importantly, fixed fees provide certainty. Clients know exactly what they will pay, which improves budgeting and trust.

At the same time, firms benefit from efficiency. When processes improve or automation is introduced, margins increase. Consequently, discussions shift away from hours and toward deliverables and outcomes.

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Limitations of Fixed Fees

Despite these benefits, fixed fees are not risk-free.

If scope is unclear, firms absorb extra work without additional compensation. Similarly, weak onboarding or poor client records can quickly erode margins. Inexperienced pricing may also lead firms to undercharge complex clients.

For this reason, fixed fees require discipline, clear engagement terms, and strong internal processes.

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Time-Based Billing vs Fixed Fees: Side-by-Side Comparison

This comparison highlights why neither model works in all situations.

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Which Model Works Better for Singapore Accounting Firms?

In reality, the answer depends on service type and risk profile.

When Time-Based Billing Works Better

Time-based billing is more suitable when:

• Scope is unclear or evolving

• Work involves investigation or judgment

• Regulatory exposure is high

Examples include audits, tax investigations, and restructuring engagements. In these cases, fixed fees often fail to reflect true risk.

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When Fixed Fees Work Better

By contrast, fixed fees work well when:

• Work is standardised

• Processes are repeatable

• Data quality is consistent

Bookkeeping, payroll, and standard compliance services fall into this category. Here, clients value certainty and firms benefit from scale.

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The Hybrid Pricing Model: A Practical Reality

In practice, many Singapore accounting firms adopt a hybrid pricing model.

Typically, firms apply:

• Fixed fees for recurring compliance work

• Time-based billing for advisory or exceptional matters

This approach balances client expectations with firm risk management. However, it only works when engagement letters clearly define scope and boundaries.

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Pricing Models and Compliance Risk

Pricing is not just a commercial decision. It also affects compliance quality.

When work is underpriced, firms may rush reviews, reduce documentation, or stretch staff capacity. Conversely, transparent and realistic pricing allows firms to allocate sufficient resources and maintain professional standards.

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Staff Behaviour and Pricing Models

Pricing models also influence internal behaviour.

With time-based billing, staff naturally focus on hours recorded. With fixed fees, attention shifts toward process improvement and efficiency. Therefore, firms that want to encourage innovation often favour fixed or hybrid models.

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Choosing the Right Model: Key Questions

Before deciding, firms should ask:

• Is the scope predictable?

• How much regulatory risk exists?

• How mature are our systems and workflows?

• How price-sensitive are our clients?

Ultimately, the right pricing model should support both profitability and professionalism.

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Final Thoughts

The debate over time-based billing vs fixed fees should be practical, not ideological.

For Singapore accounting firms, the most effective approach is often a thoughtful mix of both models. By aligning pricing with service type, risk, and client expectations, firms can remain profitable while delivering consistent value.

Sources: https://productive.io/blog/professional-services-pricing-models/