The move from an hourly rate, which solely charges from your time, to a fixed fee feels risky at first. Value pricing, unlike fixed fee, prices the client instead of the service. Your self-esteem influences what you charge for your bookkeeping services. Remember the upper limit challenge I mentioned earlier?
Well, I encourage you to challenge your limits. Basically, your self-esteem influences what you charge for your bookkeeping services. Your rates ought to reflect the value of your service. Prioritize outcome and benefits instead of tasks and time. Understanding value is a game-changer. If that interests you, then grab the FREE resource to package and price your bookkeeping services. Reanna initially worked with any client who was willing to pay her fees. Because she was service-oriented and wanted to please her clients, she let them dictate the processes.
Saying no to special requests challenged her limits. As you can imagine, her business was running her instead of her running her business. Some of the processes include pre-screening clients to ensure they valued her services. And, offering packages to avoid giving away work for free or under-charging for her bookkeeping services.
With the additional cash flow, she hired a bookkeeping assistant. By doing so, she now focuses her time primarily on business development and advisory services. Are you ready to package your bookkeeping services? And, the benefits which occur. Follow the steps to confidently charge for your bookkeeping services. You end up with clients who respect and value your services. Your bank account grows while lightening your workload. And, you run your business instead of having your business run you.
How to Charge for Your Bookkeeping Services. Pricing Bookkeeping Services Do you wonder what to charge for your bookkeeping services? No matter which option you choose, your prices ought to meet these criteria: Your services are profitable.
Clients recognize your value and are willing to pay your fees. Hourly rate. An hourly rate connects your fees to time. This is the most common way to charge for your bookkeeping services, especially when you first start out. Fixed fee. You charge a set rate for the service. You estimate time and cost to establish your set fee. Some bookkeepers add in profit margin as a buffer for the unexpected. Value price. With this price strategy; however, you price the client rather than your time and costs.
As a result, you enjoy a higher profit margin for your bookkeeping services without working any additional hours. Some research answers your questions about what to charge for your bookkeeping services: How much do other bookkeepers charge for their services? How much are clients willing to pay? Do I offer lower rates when first starting out? Charge rates which reflect your value.
It requires courage to do this. Stop offering an hourly rate. Start to separate your fees from time. Charge fixed fees for all of your services. Confidence grows over time. I recommend value pricing instead of the fixed fee model. The study "focused on bookkeepers and their salaries, education and training levels, accreditation. The first IPBC benchmark study was done in There are better methods of billing bookkeeping services than by the hour. As a small business owner, I would request one of the other billing methods I'm about to discuss.
IF the bookkeeper looks at you like you are nuts I'd walk. The second method that bookkeepers charge is by an agreed upon, in advance, fixed monthly charge. This charge is usually based on a combination of so much per number of transactions plus a fixed amount to cover preparation of financial statements and a monthly or quarterly meeting with you to discuss your financial results.
But the advice they can provide, if you let them, by having an ongoing relationship with them, usually repays your fee in actual money savings and use of your time that is only if you feel your time is actually valuable and worthy of placing a dollar value on.
Intuit's rate survey had fictional scenarios to get a better feel for flat fee pricing:. Scenario One Service Business - sole proprietor business was service oriented with cutover handling data entry for sales and customer payments.
One checking account which you reconcile with an average transactions per month which you enter. Most purchases were made by debit card or online. No third party reporting was required, just "internal use" financial statements and the owner did NOT run any personal expenses through the business checking account. They handle the daily sales data entry and bank deposits using the Undeposited Funds account.
There are about 50 transactions a month with half of them related to inventory purchases. The bookkeeper would also reconcile the bank account.
No third party reporting was required, just "internal use" financial statements and accruals only occur at yearend. Scenario Three Business With Payroll - Payroll services were required for 5 employees one scenario was 5 hourly employees and another scenario was 2 full time staff and 3 hourly employees.
Time sheet data entry is performed by the business owner. The business owner requires you to process the pay cheques, handle the remittance of source deductions to the government, file the appropriate payroll compliance reports including income tax related slips i. T4 or W2 slips. This just gives a feel for what to look for if you want fixed fee pricing rather than hourly billing. In my opinion the advice a flat fee bookkeeper can provide if you let them by having an ongoing relationship with them not based on the time clock running, usually repays your fee in actual money savings and use of your time that is only if you feel your time is actually valuable and worthy of placing a dollar value on.
Flat fees are the way to go for "backwork" I would not accept an hourly quote from a bookkeeper for backwork I've also noticed some bookkeepers charge "by the page" There will usually also be other "a la carte" items you can request. Often times, a bookkeeper will charge a one-time administration fee to set up the books. This fee covers setting up your chart of accounts after discussions with you and inputting your opening balances on the balance sheet and if applicable, payroll.
It is well worth it to forgo a DIY setup and have your bookkeeper set things up. You get this wrong and everything you do after is just garbage. I had one client who setup their own chart of accounts and opening balances. The balance sheet from day one was never in balance. This forces bookkeepers and accountants to start a new, clean set of books and enter data to it in summary form based on data extracts from your records. They may not tell you they've done this and let you continue on your merry way.
Then one day you decide for whatever reason to change your bookkeeper. Turns out your "books" are a mess and you had NO idea. The bookkeeping industry has slowly been moving toward some form of payment before service It is now normal practice to request a deposit up front and in advance of processing.
The worse you are at paying your outstanding bill, the higher the deposit requirement. If you have a flat fee or fixed price agreement, expect to pay in advance of service. If you would like to pay your bookkeeper by credit card and they don't offer that service yet, help move them into the 21st century and ask them if they would consider using PayPal.
It is an affordable way for a small business to accept credit cards without all the merchant fees. All they need to do is sign up and send you an e-mail.
Instructions on how to pay are provided. The small fees they pay are offset by the reduction in time spent on Accounts Receivable collections. Ask your bookkeeper for a fixed price agreement. This requires your bookkeeper to look at your business, your problems and give you a customized annual quote specific to your business and its challenges. It will require your bookkeeper interview you prior to presenting the agreement. The quote should include consulting time so you have somewhere to go to ask your questions without the "meter" running.
Normally when the bookkeeper presents the fixed pricing agreement, you will have your choice of three service levels to help you find a service package that you can afford or service at a level YOU want. Think of it this way Just a caution for startup business owners while I firmly believe you should have a bookkeeper during your first two years of business to ensure you are handling everything correctly, be aware that bookkeepers who have moved to fixed price agreements will try to up-sell you services you don't need at this time.
Most startups don't require this service to get their business up and running. Having your accountant book ALL your accruals at year-end is sufficient. One feature you NEED to insist on receiving is a management reporting package - quarterly is the minimum. You need to learn how to read and use this package at the beginning while everything is still relatively simple so that you can be a wizard at it as your company grows.
For bookkeepers interested in offering fixed price agreements to your customers, please read the book " Pricing on Purpose: Creating and Capturing Value " by Ron Baker or download a copy of Mark Wickersham's Effective Pricing for Accountants.
Intuit also has a website called Firm of the Future devoted to this. If a bookkeeper didn't offer a fixed price agreement The reason You can help keep your bookke eping fees reasonable by asking your bookkeeper how they would like the information presented. The more organized you are , the less it costs you. The bookkeeper does not have to spend time organizing your receipts or following up on missing information or Picture a lot of head scratching, and hearing the word "hmmmm"!
If a bookkeeper insists on charging hourly bookkeeping rates I'd find another bookkeeper. If they are any good at what they do, there shouldn't be a lot of risk to them to quote a flat fee or offer a fixed pricing agreement If they don't quote properly and lose money on your file, then it's a learning experience for them. The experience will help them to quote more accurately the next time Most bookkeepers don't mind sorting "shoebox" type filing paper or electronic Hiring an in-house bookkeeper means bringing in a full-time employee to handle your books.
The most obvious cost for this option is salary, which can vary a lot by location. Keep in mind that these are averages , for the entire state — in large, diverse states, local salaries might vary a lot from the statewide average. Rural bookkeepers can sometimes charge a premium, because there are fewer local providers with their skills and expertise.
For the same reason, if you need a bookkeeper with very specific industry knowledge or experience, costs may be higher than for a bookkeeper with a more general background. When considering hiring an employee, remember to also take into account the cost of benefits such as health insurance or other perks, increased admin costs that come with higher payroll, and the recruiting costs of sourcing, interviewing and onboarding. A common rule of thumb is that the real cost of an employee is 1.
Is hiring in-house right for you? If you want a high degree of control and direct oversight over how your books are done, hiring an in-house bookkeeper might be the way to go. Traditional bookkeeping firms are located all over the US. A traditional bookkeeper will usually charge you an hourly rate to do your books each month. The total cost will depend on how long it takes them to do the work. For this reason your costs with a traditional firm can vary a lot, even between months.
Keep in mind that this is often not binding — meaning it might take a lot longer than they think it will, which means your costs would be a lot higher than the quote.
If your books are more complex than initially estimated, or if unexpected issues arise in your books that need extra attention, your monthly bookkeeping cost might spike considerably. The level of review and interaction with your bookkeeping team can also vary by provider.
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