Let's Talk Dollars and Sense: Pricing + Carbon Accounting
October 6, 2023
How do you charge when it comes to carbon accounting?
We get this question all the time. While some advisors charge fixed fees and some hourly rates - the more helpful thing we can share is the steps involved in a common engagement and what information may help inform your pricing.
Sumday’s pricing + your pricing
Sumday was built with advisors in mind, most software in this space is expensive, which means it becomes a little out of reach for many companies if they have to pay for the carbon accounting software and your fees too. Sure, some firms have been referring clients to a software platform for carbon accounting. Starting as an accounting firm ourselves, we didn’t want to do that. We wanted to maintain the client relationship, do the work we were best placed to do, and do it efficiently - that’s how Sumday was born. We believe advisor involvement is essential in democratising carbon accounting for every business, so Sumday’s pricing is designed to leave room for your fees.
For example, if your client is doing less than $20M in operating revenue a year, their subscription would be $79 a month. What if your client has operating revenue in the billions? You’re still looking at subscription fees far more affordable than nearly every other carbon accounting software on the market. You already create the true value for your clients, we’re here to help you do that with non-financial accounting too.
If it’s not profitable, you won’t do it
Back to your fees. If it’s not profitable you won’t do it, so we’re here to help ensure it is. In many ways, it’s very similar to pricing any other new accounting or advisory engagement. It ultimately depends on the complexity of the engagement and time involved. For a carbon accounting engagement, indicators of complexity include things like number of transactions, tidiness of accounting records and availability of other information, operating revenue, FTEs and industry.
Here’s a breakdown of a common scope for the initial piece of work:
Complete a baseline emissions assessment for the client in line with the GHG Protocol.
Prepare a summary report (subscribers, you can see template proposals in the partner toolkit and examples of what your report may look like in the Academy).
Some clients might also be interested in additional advisory services on top of this.
What to consider when it comes to your fees?
Categorising transactions in the carbon ledger
You’re essentially categorising transactions in the same way as you’d assign them to a general ledger account or tracking category, but for carbon purposes. You select the most relevant emissions source category and the software turns that into an equivalent amount of carbon for you (or Co2-e - read more here). This categorisation also allows the software to identify where more accurate ‘activity-based’ calculation options might be available.
What to consider for pricing:
How many transactions are you coding for the reporting period?
Will you do this line by line for a certain number or all of them?
Will you bulk multi-select and categorise at the general ledger account or supplier level in the first instance, beyond the top transactions?
Consider the purpose of the first assessment to guide your approach. Is it to give the internal team more context and identify opportunities to improve, or is it being sent to a third party? If it’s the former, your report may explain that you have taken a bulk coding approach to X accounts for the purposes of this initial internal report and would recommend improving this before it is used by other parties or big decisions are made on the basis of those numbers. That can help make it financially accessible but also provides transparency about increasing the uncertainty. This transparency is important as it allows the client to understand how their assessment uncertainty can be improved.
Collecting and inputting activity data
You’re going to want to replace spend data with activity data where possible (not $10k coffee beans, 100kg of coffee beans). In Sumday, we have a worksheet process where you select the spend transaction you coded (so no double counting but it can be reconciled back to the financial transactions) and replace them with the relevant unit of measurement to improve the quality.
What to consider for pricing:
Is the data easy to find or are you going on a wild goose chase to get it, including:
Litres of fuel consumed
kWh of electricity for each relevant metre
Business travel records
Units of measurement on invoices for key goods and service
You can obviously streamline this by putting in the data requests up front and picking up the file when the majority is there. If it’s not all available (and in many cases, it won’t be), your first assessment is a good opportunity to proceed with assumptions (disclose them) and identify ways the client can streamline the collection of this data to improve the quality over time. That in itself is highly valuable for most companies. So much of this is a data problem, so turn the leaky pipe on and go from there.
Understanding how employees get to work and work from home (scope 3 category)
Sumday is working on features to help you streamline the collection of this data (we’re excited by what’s to come) but for now, advisors use our templates to send a questionnaire to employees.
What to consider for pricing:
Number of employees
Are you looking to quantify emissions associated with goods after they leave your client’s door (for many clients you may not be doing this in the first assessment).
What to consider for pricing:
Do you have details around freight?
Do you know who's buying it and how they’re using it? For a mine for example, how does the material leave the site and get freighted to say an overseas buyer and what’s that buyer doing with it? Sales and freight contracts likely have that data. But if it’s all in a shoe box, like anything there will be some piecing together to do and the methods for calculating this will probably be new.
Industry specific considerations
Some industries will have additional guidance and standards to get relevant intensity metrics. These include areas like banking and finance (financed emissions) and agriculture.
What to consider for pricing:
If this is the first time, you might allow an additional few days to go through the relevant standards and get your head around the excel based work paper templates.
For agriculture - do you have access to quantities of inputs like say fertiliser already? Do you have livestock numbers and feed information?
For finance - do you already have details of the loans and investments?
Preparing the report
What kind of report are you preparing? For a small business client a two page summary might be fit for purpose - highlighting the findings, disclosures, explanation on data quality and opportunities for improvement, with some high level recommendations on where to focus attention for emission reduction.
For larger organisations where the assessment is forming part of a larger report, the level of detail you need to provide may increase. However, even at this larger scale you might be surprised how accessible this is when you step through the carbon assessment in a methodical and structured manner.
In Sumday you can see working reports (including the carbon general ledger report and carbon trial balance) as well as various dashboards. You can export these reports and use them in programs like powerBi (and we’re actively working on more integrations for preparing reports). We also have template reports you can download and modify, taking the outputs from Sumday and inserting them, so you can really make the report your own. Take a look at the examples which will help you with pricing too.
Other general things to consider
Sumday’s accounting support team has your back.
Your subscription includes access to the help desk to answer queries as you go. Many firms rely on this heavily for their first few engagements. If you have a question on whether the standards cover X - we can help. Or if it’s a grey area (just like financial accounting, carbon accounting needs some professional judgement at times too) you can see whether we have examples of how it’s been dealt with before. You can ask anything and we’re pretty proud of our speed and quality of service from our team of CAs and CPAs.
Training - you can walk through a practice engagement
If you’ve got some juniors or bookkeepers in the team who can support the categorization of transactions in the carbon ledger, that can impact pricing. Has the team been through the practical Introduction to Carbon Accounting course and completed a worked example assessment in the demo file? That can help identify how long some things may take too.
For SMEs in particular, if you’re proposing new fees for something they don’t understand yet, it’s not surprising they may say “let’s wait and see thanks”. But if you’re explaining the benefits of getting on the front foot and how this may actually be beneficial, it can also help to consider ways in which you might structure the pricing. For example, you could take a fixed fee for the assessment and charge monthly, quarterly or 50% up front, 50% on delivery of the report.
Have a go and learn from your pricing ‘mistakes’
Sumday started as an accounting firm and to be honest, those first few baseline emission assessments lost money (Lindsay was twitching…but he does that if you overspend on a packet of pens so…)
The team was learning and there was no Sumday (those early spreadsheets and training materials were a work of art - if you’re talking to Toby from the accounting support team and you’ve got a spare hour or ten, ask him about his favourite formulas).
After we busted through the myths around this space and worked out what was really going on and our role in that, processes were streamlined, data requests were sent to the client up front (you can see template questions in the requests section of Sumday to help you), staff were assigned to the right levels and firm templates had been developed out.
So just start and take it as a good learning exercise.
The actual fees you charge will be based on your own approach, but you’re likely considering:
Number of transactions
Tidiness of accounting systems
Availability of other information
Number of employees
Level of detail in your report
Give me at least some indication of fees, I hear you say.
Look, take this with a grain of salt but what we have seen is really small businesses bundling this in with their normal accounting for a few hundred a year (the new tax return if you will). Between $1M and $50M in revenue a year, we’ve seen below $5,000. In the hundreds of millions in revenue we’ve seen between $10k - $50k and a few cracking a billion at the $80k - $100k mark. But again, all that varies based on scope, of course.
What’s the worst that can happen?
Your first carbon accounting engagement loses money…iterate and improve on your process just like anything. But if you just can’t see it working, simply don’t take on another one. There’s honestly not much to lose here and a lot to gain. The barrier to having a go at this new high impact work has never been lower. Create a new revenue stream and bring additional purpose to the work your firm does.
Short staffed? Simply do not have the capacity?
We get it, everyone is at the moment. There’s clear challenges in attracting great talent to the accounting profession. Wouldn’t it be great if there was a whole other dimension to the work they could do? Like saving the world and such…
But of course, we do understand reality. It’s a big ask to learn a new area and take on engagements if the team is already trying to keep their head above water. If you don’t have the capacity and can’t make it work, consider setting up a referral arrangement with advisors who are focusing on this, you can find them in the Sumday partner directory.
What’s unhelpful is advocating for the fact ‘nobody has time” as a blanket statement for the profession, or claiming “we’ll care when our client’s care” because this stuff will become (and is) essential for many businesses now, and this is the opportunity to claim the space as one in which advisors add significant value. Even if you don’t have the time, consider advocating for this opportunity for your profession.
If clients aren’t exactly knocking down your door for this, first ask, why would they if you’ve never raised the fact this is even on your radar?
We learnt this the hard way very early on when a long-term client (of which we were the outsourced CFO) engaged someone else to do this carbon accounting work. They then requested nearly all the data required from us anyway.
So even if clients aren’t screaming for the support, use the templates to introduce the concept and have a confident conversation. You can add value to clients before they even realise how significant getting on the front foot can be. They’ll certainly thank you later.
And finally, if you’re still in the camp that thinks this is all fluff…
...that no client in their right mind will pay for this unless they’re sporting a hemp jumper and a fluro keep cup, then don’t take out word for it, just skim a few articles here:
…there’s plenty more happening in light of standards applying from 2024 for the top end of town. There’s literally no way to track progress towards net zero if companies don’t have access to emissions data from suppliers. So you either have to believe companies and governments will walk all this back and go nowhere fast, or it becomes standard practice as consumers and markets demand it…I know what bet we’re placing.
Use the Sumday resources available to you in a free trial to go deeper on potential pricing
a course on how to do the carbon accounting in line with the standards (it’s very good).
a demo file so you can step through an example for the summer days cafe (have a play around)
template excel based workpapers
template GHG emissions reports
example proposal letter for your engagement
template emails on introducing carbon accounting to clients
more support than you can poke a stick at through the accounting support team