Virtual Bookkeeping Technology: Is It Bleeding Your Profits?

virtual-bookkeeping-technologyVirtual bookkeeping technology is one of the most popular topics on this blog. Most of us want to use it to become more efficient and serve clients from almost anywhere. But there is a dangerous side to using online solutions to run your freelance bookkeeping business.

As with most technological advancements, it’s often a package deal of both advantages and disadvantage. There is definitely a dark side to working in the cloud. On the positive side, we can provide services from anywhere there’s a high-speed Internet connection using cloud-based software, making it super convenient for both our clients and ourselves. We also reap significant gains in efficiency due to automation, and therefore have the capacity to take on more clients.

In theory, this sounds like a fantastic way to easily grow your practice. But actual results from the trenches are proving otherwise. I’ve seen this to some extent in my own practice as well. And it’s not just affecting us virtual bookkeepers either. Accounting firms worldwide are facing the same challenge of doing more, but somehow making less as they embrace cloud technology.

In New Zealand where around 40% of small businesses have their accounting system online, leading the world for cloud accounting services, accountants are, as a result, seeing significant business growth. But this is not adding up to greater profits. In fact, their profits are decreasing!

How is this possible?

Part of the problem is the way we typically price our services. The most common way that bookkeeping services are provided is by the hour. you’d expect that if we’re able to provide client services more efficiently, then increasing the volume of clients we can serve is the best road to take. But it’s apparently not working out that way. If we bill by the hour and increase efficiency with automation, your billable time is decreasing. The clients are getting smaller invoices. Yet, much of the administrative or incidental work we typically do is falling through the cracks and not getting billed. Take on more and more clients, and that amount of non-billable time grows exponentially, while the billable time continues to decrease. (By the way, there are other ways to take advantage of the efficiencies of technology without increasing the number of clients you serve.)

In this volume-based scenario, the real problem is that we’ve changed the model for how we get bookkeeping work done, but have not changed the model for how we’re charging for those services. Clients aren’t really buying our hours anyway. They want results, and that’s the model we should be using to price our services in a win-win way.

Packaging the whole of what we do, including the admin time involved, is one solution. There are a variety of ways for coming up with packaged bookkeeping services. And supposedly one of the most profitable trends in our industry is to move toward Value Pricing.

If you’ve looked into the idea of basing your fees on the value to the client, you may find yourself scratching your head. I know I sure did when I first heard about it. And while it has received a lot of lip service at accounting conferences, most bookkeepers, in actuality, are still use the hourly fee model because at least they can understand it. Most clients follow suit and understand hourly rates, albeit feeling risky to them, since they don’t understand how long it “should” take to get their books done.

If you’re determined to find a better way and dig into value pricing (which isn’t quite the same as fixed fees) you discover the problem. The concepts involved use a very subjective premise: “price the client, not the service.” This of course also begs the question, ‘How do you know what value a client places on your bookkeeping services?’ And is it really a fair way to price what we do?

But falling back and implementing simple flat fees and cookie-cutter packages are also scary for bookkeepers. How can we quote a fee up front before we start working for a client? Every business situation is different after all. There’s a very real danger of losing your shirt by quoting too low. But if you quote too high, you’ll lose the client! It’s a real dilemma that can make your head spin.

How to Break Out of the Pricing Maze

As bookkeepers (and accountants) we’re used to following formulas and standardized methods to produce results. Hey, following the rules is what we do! Setting our rates seems like it should follow that same kind of protocol. Until now, hourly felt like the only reliable way to get paid fairly for the actual work involved. But technology has thrown a wrench in that with automation and online efficiencies. Charing by the hour now means we’re getting paid less to provide high quality service. So what’s the new approach to a win-win pricing model?

A two-step approach:

  1. Package your services for high value – this should be focused on what you do best and gets clients the results that they want most
  2. Customizing your service packages with each client using a collaborative method that is standardized – this is about using a system that is reliable and easy to understand, removing the risk to both you and the client in a totally transparent way (this is what I’ve seen lacking in most value pricing models)

Until just a couple months ago, I’ve found the implementation of value pricing difficult and highly subjective. But there’s a way to do it that actually serves the client (instead of fleecing them) and serves you at the same time. Yes, I’m always looking for true win-win solutions. And I honestly believe that Mark Wickersham has invented it.

Mark is an accountant from the UK who has developed a method where you can build service packages and work with your clients collaboratively to offer customized fees that they will gratefully pay. I heard Mark explain his methods at QuickBooks Connect 2015, and he has agreed to share it with us on a live webinar I’m hosting this coming Tuesday, January 26.

If you’d like to learn the elegant understandable way to actually implement value pricing and drastically improve your bottom line and serve your clients at the same time, please join us.

UPDATE:  The webinar replay (if you missed the live event) is available as part of the TFB Packaging & Pricing program, and includes access to software Mark has developed to make value pricing so much easier.

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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 Virtual Bookkeeping Technology: Is It Bleeding Your Profits?

  1. Really looking forward to the webinar and hearing the details of Mark’s approach to value pricing. So glad you connected with him and are willing to share this important info with us all!

    “See” you tomorrow.

    • Gabrielle says:

      So, what’d you think about it, Sheryl? I always love to hear your straight-shooting thoughts on matters!

      • I’ve been on board with the concept of value pricing for a very long time, having read Ron Baker’s first book on the topic shortly after it was published. However, I’ve struggled with the tactics to implement the strategy.

        I’ve made progress, but have mostly wound up with fixed priced packages, so I was extremely interested to see what insights Mark had.

        I was pleased to see that he had a well-defined tactical approach to determining the client’s perception of value AND I came away with the following two major observations…..

        First—I’m pretty sure I heard him say there was no such thing as “a market price,” so there was no need on our part (the freelance bookkeepers and accountants) to consider what others in our field were charging. Yet when he explained how he determined his “base” price for the algorithm used in his software, he explained it (without using the words “market price”) as based on extensive data analysis of what other UK practitioners were charging.

        Second—I thought it was quite interesting that even though we’re talking about advances in technology that allow us to work so much more efficiently than ever before and to do ALL of our work virtually if we choose, he seemed pretty adamant that the value pricing conversation/presentation depended on a printed brochure and a face-to-face meeting with our prospects.

        I wasn’t able to attend the follow up training session, so maybe I missed some important additional details and clarifications from him. I’d be interested to hear your thoughts and perceptions.

        Also looking forward to diving in to the newest training material in your TFB Premium program and encourage any of your blog readers who haven’t joined yet to give it serious consideration!

        • Gabrielle says:

          Thanks so much for your comments and recommendation, Sheryl! Much appreciated. Sounds like you’re a seasoned veteran of value pricing as far as really understanding the concepts.

          You’re keen eye on the two points you bring up are excellent insights which I too had noticed, but here’s what I suspect are the reason for them…

          1. As far as Mark’s claim that there are no standard prices for bookkeeping services, that is so true, but I think mostly because the rates charged are all over the map. But I agree that knowing at least what is considered average is helpful. Which is why the Intuit Rates Survey every few years is so helpful by comparison. I suspect it’s the same reason why Mark used the UK averages as a starting point in the Cloud Pricing software. (Though honestly, whenever I hear the UK prices quoted, even after conversion to USD, their average rates sound quite low to me)

          2. I too noted how Mark touts the value of printed brochures and in-person meetings… and I resisted the idea initially myself, since I work 100% virtually and don’t even use printed business cards with potential clients since everything is done via the Internet.

          However, I now agree (and have found personally with new clients) that having a professional quality document (in PDF form) to use as a basis for the value conversation is extremely useful. I believe there is no contradiction with Mark’s recommendation to meet in person with clients, since most bookkeepers in the UK (as well as here in the US as far as I can tell) still primarily serve clients locally. Many here do also seem to have long-distant clients, but near or far they are using the online technology.

          So it would seem that using cloud-based tools and your service area are mutually exclusive.

          Mark does now acknowledge that having meetings via Skype or GoToMeeting (and using the web cam) are nearly as effective as in-person meetings. I think his point is to build the bond and relationship in person or live as possible, since that helps with the value conversation. And I agree whole-heartedly.

          As much as I’m not a big fan of being on camera, I find myself doing it more and more in business meetings… with great results. I feel closer to the people I’m speaking with as a result. We don’t always use the web cams, but I’m making a point to do it more often, and definitely when having a value conversation.

          Hope that helps clear up these wrinkles in the reasoning.

        • Gabrielle,

          Thanks for the additional clarifications. Everything you said makes sense to me.

          I understand the reasoning for the pdf and going through it with the prospect, and am curious how that worked out when you tried it.

          Thinking out loud here, wondering if turning it into a Powerpoint presentation with lots of slides and less info per slide (“chunking it down”) would make it more visually appealing than full-size pages of pdf with lots of text?

          Though I haven’t tried it yet, I think there are tools available to automate all or most of the process.

  2. I am really looking forward to an informative webinar. Thanks for setting this up. This is definitely a subject worth diving deeper into and getting some direction from Mark will be very helpful.

  3. John says:

    Hello Gabrielle,

    A google search brought me to your site and in one day I feel like I have absorb so much knowledge. I am an accountant, and looking to just start my own small bookkeeping business. I just brought you audiobook. In doing my research on starting this business. I know one of the most important items to look at or the accounting software out in the market. I just wanted to know what are your recommendation?

  4. Gabrielle says:

    Hi John – Glad you are finding the blog so helpful. 🙂

    The best answer to which accounting software is, the one that best serves the clients that you want to work with. If you’re in the US, the most popular is QuickBooks (desktop or Online versions), but that doesn’t necessarily mean the most popular is the best fit.

    But when you’re first starting out and you’re not sure who your best clients will be, going with what’s most popular will make it easier to find clients you can serve. If you are planning to work virtually (recommended), I’d say QuickBooks Online or Xero would likely be your best choices. You can always change your mind later as your business grows. Wishing you great success in your new practice!

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