Sorry that I didn’t answer your questions long ago! Not sure how it slipped through without me seeing it. (Just saw it when updating the pricing reference link on this post)

If it’s still helpful, here are my quick answers to your questions (which are great ones that I’m sure others would like to know more about as well):

Regarding not scaring potential clients off with your rates (and your rate sounds fine to me, but it may depend a bit on your area and the specific services you provide – but if it is in line with your experience working with independent bookkeepers from the accounting firm) the problem is not your rate, but the clients! Not all clients are created equal. The ones who want to pay the same for their bookkeeping as they would pay a baby-sitter clearly are not the right clients for you! So, that begs the question, WHO are your clients? You should define specifically the type of clients who will gladly pay your rate. (Again, you have a real advantage in answering that question based on real world experience at the accounting firm). Put another way, what type of business owner recognizes the value that you provide? That’s the type of potential client you target in your marketing efforts. All others don’t “qualify” as your clients.

As far as using engagement letters, YES! I definitely recommend that you use an engagement letter with EVERY client you work with – clearly defining expectations on both sides, as well as your rates and terms of payment BEFORE you do any work. One practice that helps weed out non-serious clients, if you are afraid of doing work and the client not paying after the fact, is to charge a retainer up front. This too should be defined in the engagement letter, stating work will not begin until the retainer has been received.

I do cover this topic in more depth, and provide templates in the Virtual Bookkeepers Guide, if you need more guidance.

First of all – great website!!
I’m a Chartered Accountant who is looking to get their own book-keeping business off the ground in my spare time – and it’s tough!! I have applied for an ABN and got a website sorted and am fairly confident on the rest (I’m an accountant so not fazed by Quickbooks/MYOB etc) – but I’m having a few problems with setting my fees! Coming from an accounting firm, I know the “value” of what we do and I know how much book-keepers charge my firm – but it doesn’t seem to work the same way when you’re pitching to your own potential clients. I’ve had a few potential interested clients, but as soon as I tell them the hourly rate – poof! They’re gone!
I saw your comment about not under-selling ourselves and I agree 100%. I’m not going to be giving up my weekends for money I can make watching a friend’s kids (no offence to nannies!). But….how do I sell my services without scaring off would-be clients?
Just today I had a follow-up response from a client who said he was happy with my quoted hourly rate ($50 an hour). But I’m not counting my chickens before they hatch and I see money in the bank.

Also, what are your thoughts on engagement letters? I’m just starting out and not sure how to “make it official” with a client….as in, if I was to start doing the work and then they refused to pay….I’m just worried I’ll be left high and dry. Would you recommend some kind of engagement letter outlining the provision of services for a fee, the agreed hourly rate, scope of the work to be performed, etc? Or is that over-kill?

Any feedback or thoughts appreciated!

Thanks,
Eva

The eternal question that gets asked over and over again.

The short answer (certainly not the only answer nor necessarily the “best” answer, but it’s the quickest way) on the hourly rate is to find out what others are charging for comparable services and place yours somewhere in the middle. You can use the 2009 QuickBooks Rates Survey as a starting point.

Another “fast and dirty” method for hourly rate is to find out what a full charge bookkeeper would get paid in your area on average and then multiply that amount by 2 or 3 times. That would be a minimum that you could charge and afford to stay in business.

I personally don’t like these methods because they come from a “commodity mindset” – meaning that the services you provide are assumed to be the same as everyone else who provides bookkeeping services, and that should NOT be the case. But at least it provides a starting point.

For the fixed price calculations, you can use the method described in the last few paragraphs of the article above. Again, a quick way to do it. Ultimately you have to come up with your own formula that fits yours and your clients’ objectives.

I have several years consulting with small business owners. I have many years sexerience in the client w/u for CPA firms.

Yes, this is an unique way to bill your client. You may be able to use the price level function in QuickBooks if you are using the Accountant’s or Professional Services version of Premier. But this is rather unique. Otherwise (if you’re using Pro), you will likely still need to have a flat rate item to cover the first 3.125 minimum, and then straight time thereafter.

Probably not what you wanted to hear, but as you said, this is a unique way to bill.

Gabrielle

I have a unique situation. I have a weekend gig whereby I do a minimum of two hours of work, but depending on the situation I could end up working for, say, ten.

Now to make this worth my while, I charge roughly 3.125 hours in advance, so that if it’s only a two hour gig I make more than my hourly rate. If I spend more than 3.125 hours on the job, I switch to my hourly rate.

I’ve been using a very simple invoicing system and manually entering my line items, so it hasn’t been a problem. Now I’m using Quickbooks, and I’m wondering if I can reduce the time I spend on billing by using the timesheet function. Can I make it smart enough that it knows to charge per-hour if I’m over 3.125 hours on a service call, and a flat rate if I’m under?

Thanks.

Great to hear from you!!

Sure, let’s connect and see if we can’t brainstorm a “formula” that works for you.

Being able to estimate for fixed rate purposes is ultimately an acquired skill that comes with experience. But working out a repeatable system that works for you in your business saves lots of time and lost revenue.

Yes, let’s talk soon, and then we can see what we can share of value for everyone here on the blog!

Gabrielle

I had to just laugh. I’ve been working on developing flat rates and really struggling to find the right balance. I went out to lunch with a bookkeeper friend yesterday to compare notes, but she’s struggling a bit too. So, off to the internet to google fix rates for bookkeepers and start reading your posting. Great posting and thought to myself I would love to talk with the author more about how to estimate this…then found I know you. LOL.

I have a spreadsheet worked out with my thougths…I’d be willing to share with you to get your thoughts and see if I’m going the right direction.

Talk soon

Donna Sooter
Sooter Consulting & Admin Services