How to handle Xero's 2026 price increase without losing margin

Every year it arrives like clockwork. Around the start of May, the email lands. Xero is increasing its prices, effective 1 July. And every year, the same quiet hum of anxiety moves through accounting and bookkeeping firms across the country. 

How do we tell clients? What if they push back? Do we absorb it, pass it on, or add a margin? 

T​his was the focus of a recent panel hosted by Rechargly, where Trent McLaren sat down with two pragmatic voices in the industry: Cassandra Scott of Cass Scott Business Services, and Chris Wheatley of Scope Accounting. The session set the increase itself to one side. The real question, and the one that matters for your margin, is how your firm is set up to handle it. 

And with the new financial year in action, there is no better time to get it sorted. 

Absorb, pass on, or margin 

There are really only three things you can do with a software price increase. 

You can absorb it, which feels generous but quietly erodes your margin every year as prices keep climbing. 

You can pass it on, the cleanest option. It restores your margin and keeps things simple, but only works if your recurring invoices and engagement letters are set up to support it. 

Or you can margin it, passing the cost on with a markup. This adds revenue, but it needs to be handled transparently. As Cassandra pointed out, retail software prices are visible on vendor websites, so a markup can create distrust if a client goes looking. 

When the panel polled the audience, close to 70 percent planned to pass the increase straight through to clients. A fifth still had not decided. 

Stop discounting your subscriptions 

This is where Cassandra, with more than 20 years in bookkeeping practice, was bluntest. 

The commission a partner earns on a Xero subscription is not a discount to hand back to the client. It is the firm's wholesale margin, covering the admin and processing of managing that subscription on the client's behalf. 

"You go to Woolies and buy their chips, you can't buy them at the wholesale rate," she said. "So why on earth would it be the same here?" 

Chris agreed, and suggested the whole industry needs to change the language it uses. It is not a commission or a discount to be passed on. It is a wholesale rate. As Cassandra framed it, if a client bought the software at retail off the website, that is what they would pay. Through your firm, it should be no different. 

The practical takeaway is simple. If you are still passing your partner discount through to clients, stop. It only hurts more when prices rise. 

You probably do not need to send the email 

Most firms tie themselves in knots over how to communicate a price increase. In many cases, you do not need to communicate it at all. 

The panel's take was that clients tend to hear about an increase from Xero anyway. As Chris put it, they are more likely to read Xero's emails than yours. So the vendor often ends up being the one breaking the news, which means your firm does not have to be. 

Better still, handle it once and never again. Cassandra builds a clause into every letter of engagement stating that if a software vendor raises its prices, those increases are passed on automatically. No permission. No back and forth. The next invoice simply reflects the new amount. 

Will every client read their engagement letter? Probably not. But they signed it. As Cassandra put it, a client cannot come back in six months and say they did not read the terms they agreed to. 

Let your team carry the conversation 

For Chris, who now runs a team of 13, the real risk is becoming the single mouthpiece for every client query. His focus over the past year has been empowering his team to handle these conversations, so a fee question can be answered by anyone in the firm rather than landing on his desk and swallowing a week. 

Both panellists made the same point. We tend to assume clients will react badly, then wind ourselves up over a conversation that usually never happens. Most clients simply accept it. And the few who make a fuss over a few dollars a month are often telling you something useful about whether they are the right fit. 

Unbundle your subscriptions from your fees 

Underneath all of this sits one structural fix: separate your subscription costs from your service fees. 

If software is bundled into a single fixed monthly fee, a price rise quietly chips away at your margin and is hard to track. Split it out, and the subscription becomes its own clean line item, billed monthly. 

It also protects you. If your work billing is irregular, you are not carrying subscription costs for months while you wait to invoice. And if a client closes their doors, you are not left chasing months of costs you have already paid the vendor. 

Chris described his tech stack as a staff member, a direct job cost rather than an optional extra. Cassandra makes the same case to clients. The software saves them money compared to doing the work manually, which makes the cost easy to defend. 

The price increase is not going away. But with the right systems in place, it stops being something you dread and becomes something that quietly takes care of itself. 

The insights in this article were provided by Rechargly, with thanks to panellists Cassandra Scott and Chris Wheatley for sharing their experience. To learn more, reach out to the team at Rechargly.