Bookkeeping Fees: 5 Ways to Charge for Bookkeeping Services

Bookkeeping fees are a hot topic. And why not? The #1 reason (usually) for running a freelance bookkeeping business is to make money. Being in business for yourself is, unlike an employer-employee situation, where we get to decide how much we should get paid… in theory, anyway.

But working for yourself comes with a stumbling block. Knowing how much we can, or even SHOULD, charge for our services can be a mystery. Often the only reference we have is what we were getting paid as an employee. But that's not a good comparison for the value we provide our clients as independent professionals.

A better starting point is to see what other professionals — those who've been in business for years — are charging, and getting, for their services. Very helpful in this regard is the Intuit® Rate Survey that comes out every few years. From it you can get at least a “ball park” range of what professional fees typically look like.

Next comes the question of whether you should simply charge by the hour, or use fixed fees, or even value pricing. There is no “perfect” way to arrive at your fees. As a business owner, you signed up to be the boss and make those kinds of decisions for yourself. But here's a quick rundown of 5 of the most popular methods for coming up with your fees…

1. By the hour – this is the most common way to charge for bookkeeping services

Pros: Simplest way to quote, and possibly what most clients expect to hear.

Cons: Can have you and your clients falling into the employer-employee mindset, and turn your services into a commodity. Hourly rates give the impression that one hour of your time is of equal value to one hour of any other bookkeeper's time, which can turn on the “shopping” response for the client. The client doesn't know how many hours are needed to get the results they're after. Additionally, working hourly, the more efficient you get (especially if you start adding automation to your workflow, and you should), the less you make, since you're selling time, rather than results.

2. Prepaid time blocks – an hourly / flat rate hybrid

Pros: The simplicity of hourly, with the benefit of working off of a retainer, which also allows clients to budget your fees more easily. You also have no A/R issues with this method.

Cons: Can be hard to estimate how many hours are needed to get the results a client wants, and you may need to refund some of the amounts paid if you get the work done more quickly. It's still the same problem of selling time rather than results.

3. Value Pricing – setting your rates based on how the client values the result you provide

Pros: Can be much more profitable than other forms of pricing. It can also help you screen for high quality clients, since this method does not seek to compete on price.

Cons: Can be difficult to acquire the mindset needed to use it effectively. It also slows down the sales cycle drastically, since you need to quantify the value of services from your client's standpoint in order to arrive at a win-win price offering.

4. Customized flat fees – coming up with a flat fee that fits your client's specific needs

Pros: Simpler to use than Value Pricing, since YOU set the value of your services required to meet the client's needs; can be more profitable than charging by the hour, if your estimates are on the mark.

Cons: Easy to underestimate how much work is involved to get the desired result, and effectively lose money due to misquoting.

5. Packaged Pricing – productizing of services so they're sold in bundled packages at a fixed fee

Pros: Generally more profitable than hourly and easy to adjust. Easy for clients to accept and budget. Clients choose a level of services based on parameters you set and know exactly what they are buying; focuses on results rather than hours. Helps you forecast your own revenue more easily.

Cons: After engagement, clients may ask for additional services not included in the chosen package, and the tendency is to provide those services at no additional cost – known as scope creep – which erodes your profits.

We have many choices when it comes to setting fees, each with their own advantages and disadvantages. How you set your fees should be well thought out, instead of just choosing the default, hourly method.

Why?

Because pricing is one of the biggest reasons the majority of freelance bookkeepers struggle and work far harder than necessary. Don't be one of them. Choose how you will set your fees. Watch how it affects your cash flow and profit margin. Then make adjustments until you find your pricing sweet spot.

If you'd like a deeper dive into how to go about switching to flat fees or packaging your services, join me for the new training program I've just released, The Freelance Bookkeeper Packaging & Pricing program. We cover the mindset, action steps and tools needed to set your fees using my signature win-win methods.

How about you? Have you experimented with different fee setting methods? What are the advantages… or pitfalls… you've discovered?

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About Gabrielle

Freelance bookkeeper, trainer and consultant who works with internet savvy business owners and bookkeeping professionals to maximize cash flow and support true win-win business success.
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10 Responses to Bookkeeping Fees: 5 Ways to Charge for Bookkeeping Services

  1. kathleen says:

    How well does it work to use different fee methods dependent upon the client, the services requested, the length of the job, etc.?

    • Gabrielle says:

      While it’s possible to vary your pricing method based on each client, I wouldn’t recommend that. It would make it more difficult for tracking and billing, since you would be treating each client by an individual set of rules. And from a mindset standpoint, you would be giving your power of choice to clients as to how you would charge for your services… that’s more of an employee way of thinking that sets you up to feel resentment and victimized by your clients (not uncommon for many bookkeepers). It should be your decision on how you charge for your services, not your client’s, since it’s your business.

      My recommendation would be to consciously pick a method to charge for your services (or possibly a combination of a couple ways depending on the type of work – such as one method for monthly bookkeeping and a different method for after-the-fact catch-up bookkeeping projects) and see how it works for you. Track results to make sure it’s profitable. If it doesn’t work the way you want, then adjust your pricing policies. Being a business owner is a bit like being a scientist running experiments until we find the best solution. 🙂

      Thanks for your question, Kathleen.

  2. Mindy King says:

    Thanks for including the Intuit Rate Survey in your article, Gabrielle. I wanted to let everyone know that Michelle Long has helped us compose our newest rate survey, and it’s now live at http://intuit.me/1Q2Xv93. The survey should only take about 10 minutes to complete and the new results will be shared publicly. We hope everyone will go fill it out! Thank you! Mindy (Intuit)

    • Gabrielle says:

      Thanks Mindy. I filled it out and suggest everyone reading this does. It’s a way we can all help one another.

      Mindy, please let us know when it has been posted!

  3. Shelly Phillips says:

    Is there a formula for charging a flat rate? For example, $x.xx per transaction per account? I am trying to come up with a systematic approach for charging a flat rate. Thanks in advance!

    • Gabrielle says:

      Shelly,

      To approach flat rates the way you are thinking works well if you have a specialty (type of client / industry) so that you can create standard pricing and have it fit well with what you provide each client.

      If, however, you are serving a variety of clients and provide varied services, a standard formula won’t work as well. I personally don’t recommend using the $X per transaction approach, since it doesn’t communicate the true value you provide clients. It still positions what you do as a commodity.

  4. Michele says:

    How do you handle charging a client a flat monthly rate if one month they close down for 2 weeks or you go on vacation? I have a client that closes for the holidays in December. Do you still charge the full fee or cut it in half?

    • Gabrielle says:

      Great question, Michele. Of course, it’s your business so you can choose how it works. That being said, you can use as a model what the utility companies do when they provide the “budgeting” plans in cold climates for heating bills. They annualize the utility costs so that no matter how much fuel you use, you pay the same amount each month… that includes if you go away on vacation and don’t use any of it at all. Same for other contracted services you might pay on a flat rate, such as your cable bill. Therefore, you can still charge your regular, agreed upon monthly rate irregardless of whether services are heavy or light. This moves the client more toward recognizing the overall big picture value you provide, and not the time-for-money route.

      In my own business, my flat rate clients are billed and pay the full monthly amount whether I go away on vacation or they do, without a problem. 🙂

  5. Drew says:

    I love the pros and cons included with these tips. It gives a realistic view of what’s involved with the charging. Thanks for sharing!

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