Bookkeeping Services Fees
Rate per hour vs fixed
You have to decide whether you will charge rate per hour or fixed bookkeeping services fees. Sometimes it will be apparent. For example, if you are just preparing one tax return that you are familiar with, then you might know exactly the amount of time it will take to prepare. In this case, it will be easy to use a fixed fee.
Rate per hour
What should your rate per hour bookkeeping service fee be? There are multiple factors to consider when coming up with your rate per hour.
1. First is how much money would you like to make per year.
2. What are your expenses
3. What will you make on a net basis
4. Is that rate competitive
Let’s go through a couple examples. What if you only wanted to gross $50,000 per year. Assume that you work 1,500 hours a year which is possible. This would come out to be about $33 an hour. I think that $33 an hour is a pretty competitive bookkeeping rate. However it doesn’t add up to that much money each year especially if you have expenses on top of that. You need to either increase the amount of hours worked or your fee.
How to increase your bookkeeping services fees
You can increase you bookkeeping rate per hour by
- Getting a certification like a CPA
- Receiving great client testimonials online
- Providing great services so that you can develop word of mouth credibility
- Network with local accountants, lawyers and other professionals so that you get recommendations and referrals
- Having a great helpful website to build credibility
Coming up with your fixed fee would be similar to coming up with your rate per hour. The only thing is that it is easier to mess up on scope when you create a fixed fee engagement. You need to make sure you have a clear picture of what the client wants and has before you quote a fixed fee. What are all the devlierables that the client is expecting. If you didn’t quote for payroll but the client expects it, then you just created a ton more work for yourself that you aren’t going to be paid for. Try to estimate how many hours it would take you to complete a project before you quote a price to the client.
Common bookkeeping expenses
Dues & Subscriptions
Licenses & permits
Advertising & marketing
You need to make sure you budget out all your expenses.
What is your competition charging for their bookkeeping services
One way to price your service fees is to look at what your competition is charging. You need to see what people are charging in your area, but you also need to look at online competition as well since most people are more comfortable with cloud software solutions.
Fiverr and Upwork
You have to look at upwork and fiverr as competition. You can also use them to price your rates. This should show you that you should not charge less than $20 for your services. Many people on fiverr charge this amount, and they don’t even provide quality service. You shouldn’t be charging too much, but you should also not charge the same rates as people that have subpar service.
Bench.co is an online bookkeeper. They have plans that go from $139 to $299 a month if it is billed on an annual basis. They go from 159 per month to 349 per month if you decide to pay monthly. They charge based on the amount of expenses that you have. The lowest rate is based on $1k of expenses for a business. The top rate is based on $1 million of expenses for a business.
I would compare your rates to the monthly billed services. If you charged $30 per hour, that means that you could estimate working about 5 hours for a small client in order to charge similar rates.
Bench.co also has tax filing services. They charge $600 for a sole propietor filing, $900 for a business filing and $1,320 for personal and business together.
Bench.co partners with bookkeeping softwares like freshbooks.
Ledgers online charges based on transactions. They charge $250 for their lowest plan which includes 25 transactions, 2 employees and 2 bank accounts. They charge $1,450 for their highest plan. This is for a client with 300 transactions and 25+ employees.
They include payroll and bank reconciliations with their plans as well.
They offer package from $125 to $500 a month. They also have setup pricing as well. There setup packages range from $325 to over $1,200.This is good information on how to charge for setting up your clients.
Quickbooks live bookkeeping
200 per month – low volume up to $25,000 in expenses
$400 per month – medium volume up to 150,000 in expesnses
Things to think about when pricing out an engagement
You have to think of all the work that you will have to do for your bookkeeping clients. You shouldn’t just think about a regular day-to-day engagement. If you are engaging a new client, you will have to either set up their books or transfer work from a different bookkeeper. You need to make sure that you have this priced into your engagement.
There is no exact template or science to this as clients differ based on their needs. It is ok to ask questions though about what their current situation is. Once you have come up with your budget, you should put your assumptions in the engagement letter. You should also make sure to limit your scope. You don’t want your client to think that you will be cleaning up years of data and tax audits.
As you can see most of the online bookkeeping services charge by
The amount of expenses a business has
The volume of transactions they have
The number of employees
The reason they price this way is because this shows how much bookkeeping work needs to be performed. The more transactions means the more potential entries that you have to prepare. It also means the harder the reconciliations will be if something is out of balance.
The number of employees will typically dictate how difficult the payroll is to prepare and file.
Pricing your bookkeeping set up costs
In order to price your setup costs you need to think of the bookkeeping services that you will be offering. You should consider
Assessment of existing quickbooks or bookkeeping software setup
Writiing up recommendations
Bookkeeping software customization and setup
Meetings to review the information
Setting up bank feeds
Other consulting projects
You can also charge your client for teaching them or their staff quickbooks. You should charge based on the amount of time and the number of people you plan on teaching. You can charge this hourly or estimate a fixed fee engagement.
You should set up the billing terms with your client in the engagement letter. You should also discuss the billing terms with your client beforehand as they might have some custom billing terms that they want.
If you bill by the hour, you might want to send your client invoices bi-monthly.
If you have a fixed fee engagement, it might be easier to bill your client monthly.
Try to use software that sends bills electronically like freshbooks, quickbooks or xero. Just because you send your client an invoice doesn’t mean that they will automatically pay it. Collections are one of the hardest things to do for bookkeepers. Actually its a problem with any professional service firms. Many people don’t like dealing with money and expenses, so they don’t like paying promptly. In order to have a successful business, you will need to get comfortable with collecting on your invoices. Don’t get in the habit of providing your services for free. That is what you are doing when you don’t collect on your invoices.
If your client can’t pay for a variety of reasons, try to work on a payment arrangement. If that doesn’t work, then you can work with a collection agency. A collection agency will most likely charge 40% of whatever they collect. You can also go to small claims court.