The Freelance Bookkeeper

Have you wondered about this question? Right after being asked about how much to charge for bookkeeping services, usually I hear this one. And of course, the short answer is, it depends.

It depends on which method you are most comfortable with. It also depends on whether you can run your business more profitably charging one way or the other. And finally, it depends on what your clients will accept.

Which method do clients want?

There is a reason prospective clients ask, “How much do your charge?” But it isn’t really because they are price shopping. (Though, admittedly, some are.) They are more interested in value….and how much it will cost them bottom line to get their books done, or to get the help they need with QuickBooks.

If you quote them a simple per hour rate, say, $40 an hour, the very next question you will most often hear is, “How many hours will it take you to get the work done?”

So the question they are really asking is, “How much is this going to cost me and is it worth it?” For that reason, you will often hear a sigh of relief from prospective new clients when you quote them a fixed fee. Now that they know what it costs, they’ll want to see what they will get for their money (value).

We’ll talk about how you can demonstrate the value of your services BEFORE the engagement ever starts in a future article. For now, let’s stick with the flat rate vs. hourly fee question.

Which method is better for you?

Hands down, most bookkeepers and QuickBooks consultants prefer to charge by the hour. And it’s true. You run a very real risk of underestimating the amount of work needed for a new client. And if you do, you’ll have to eat the difference. Ouch! No one likes working without fair compensation.

So charging fixed fees do put more risk on your shoulders. Of course, that’s part of the reason clients generally like fixed rates better.

But estimating is an art and can actually turn out to be more profitable, when done right. To make that happen, you must learn how to estimate in such a way that you will be well compensated. That skill usually comes with experience. So if you want to build this skill, start slowly with small projects only.

To come up with an estimate, plan out the project as completely as possible BEFORE giving your client a firm estimate. That means gathering as much information as possible. You may also want to stress that it is ONLY an estimate, subject to revision. If the project turn out to require  more work than anticipated, agree ahead of time how that will be handled.

The key is to define all the parameters and expectations BEFORE you start work for the client. You will also want the agreement in writing.

Which is best for you? If you just want to keep it simple (and safer), charge by the hour. If you want to make it easier for the client to say yes, as well as build a skill that can dramatically boost your bottom line in the long run, try your hand at flat fees. Just remember that it takes some practice to get it right.

Making it Work for Both You and Your Client?

As I’ve suggested before, using a win-win approach will usually yield the best results. So if your clients prefer fixed fees, but you prefer charging by the hour, why not strike a compromise?

You can quote your hourly rate and estimate how many hours it will take, and then sell your client a prepaid block of time to get the job done. That way, it feels like a fixed rate to the client, while you get your hourly rate AND you get your money right away. (No risk of A/R woes after the fact!) You may even wish to give your clients an incentive to work with you on this basis by giving a discount, say 10%, for buying 10 or more hours at a time.

Whenever estimating for a job, though, ALWAYS include extra padding to cover any unexpected work that may be necessary. If you don’t end up using all the time when the job is complete, you can always use it against future services.

Ultimately, you will need to find the combination that works best for you. Know how much you NEED to make and then match that with the method that will give you what you need, while still making your clients feel comfortable working with you and getting good value for their money. Think win-win or no deal.

What methods have you found that work in your business? Let’s compare notes! Leave your comment just  below the Resource links.

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Gabrielle
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RESOURCES

Intuit Rates Survey 2007 (The 2008 survey has not yet been published)

NACPB 2008 Survey

How Much Do You Charge? [related article]

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