How much should BOOKKEEPING cost?

Summary

In this video, Hector Garcia, a CPA and accounting firm owner, discusses the cost of bookkeeping services from both the perspective of small business owners and accounting professionals. He covers the roles and costs of in-house bookkeepers, the value of outsourcing to accounting firms, and various pricing models including hourly rates, per transaction fees, flat fees, and subscription services. Garcia emphasizes the importance of value pricing and understanding the client's needs to determine fair compensation.

Takeaways

• 😀 Bookkeeping services can be viewed from both the perspective of a small business owner looking for services and an accountant or bookkeeper providing those services.
• 💼 The cost of a full-time in-house bookkeeper can range from $30,000 to $70,000 per year, depending on experience, responsibilities, and location.
• 🏢 Bookkeepers in accounting firms typically earn less than those in private industry due to less responsibility and the nature of handling multiple clients.
• 📈 Outsourcing bookkeeping to a firm can be more cost-effective than hiring a full-time bookkeeper, with firms charging a fraction of what a full-time bookkeeper would cost.
• 💡 Bookkeeping services are not one-size-fits-all; the complexity of transactions and the specific needs of the business can affect the pricing.
• 💰 Pricing for bookkeeping services can be based on total sales or expenses, with a range of 0.5% to 2% of annual sales being a common guideline.
• 📊 The complexity of the business, such as e-commerce with multiple sales channels or construction with job costing, can influence the cost of bookkeeping services.
• 🕒 Some accountants and bookkeepers charge by the hour, which can lead to uncertainty in costs, especially in the initial months as the bookkeeper becomes familiar with the business.
• 📋 Another pricing method is per task or transaction, which can provide a more tangible and predictable cost for the client.
• 💳 Value pricing, where the fee is determined by the value provided to the client, is recommended as it can be more fair and agreed upon in advance, avoiding penalties for efficiency.

Q & A

What are the two perspectives discussed in the video regarding the cost of bookkeeping services?

The video discusses the cost of bookkeeping services from the perspective of a small business owner looking to hire bookkeeping services and from the perspective of an accounting professional who will provide those services.

What is the estimated annual cost of hiring a full-time in-house bookkeeper based on the video?

The estimated annual cost of hiring a full-time in-house bookkeeper ranges from thirty to seventy thousand dollars, depending on the person's skill level, experience, company size, and transaction complexity.

Why might bookkeepers working in accounting firms earn less than those in private industry?

Bookkeepers in accounting firms may earn less because they have less responsibility as they deal with multiple clients and do not bear the full financial obligation that an internal bookkeeper with a controllership position would have.

What are the typical tasks that outsourced bookkeeping services might not perform compared to an internal bookkeeper?

Outsourced bookkeeping services typically do not perform tasks such as opening mail, paying bills, answering phones, talking to clients to collect invoices, or negotiating with vendors, which might be performed by an internal bookkeeper.

What factors influence the cost of outsourced bookkeeping services according to the video?

Factors influencing the cost of outsourced bookkeeping services include the total sales or expenses of the company, the complexity of transactions, the industry-specific needs, and the value provided to the client beyond basic bookkeeping tasks.

What is the suggested percentage range of total sales or expenses that could be used to estimate the cost of bookkeeping services?

The suggested percentage range to estimate the cost of bookkeeping services is from 0.5% to 2% of the company's total sales or expenses.

What is value pricing and why is it preferred by the speaker?

Value pricing is a method where the service provider charges based on the value they create for the customer rather than the workload or time spent. The speaker prefers it because it is fair and agreed upon by both parties, and it does not penalize the service provider for being efficient or the client for the provider's learning curve.

What are some traditional ways accountants and bookkeepers might charge for their services?

Some traditional ways include charging by the hour, charging per task or transaction, and charging a flat fee based on the perceived value or workload.

What is a subscription model for bookkeeping services and how does it differ from other pricing methods?

A subscription model for bookkeeping services is a fixed fee structure where the service is streamlined and easy to start or stop without penalties or long-term contracts. It differs from other methods as it resembles a service like an app, where the client knows the fee upfront and can manage the service with minimal commitment.

What challenges might a bookkeeper face when categorizing expenses for a client they are unfamiliar with?

A bookkeeper might face challenges such as needing extra time to research unfamiliar vendors or expenses, learn new terminologies related to foreign countries or industries, and adapt to unique client requirements, which can affect the efficiency and cost of their services.

Why might a flat fee structure be more beneficial for both the bookkeeper and the client according to the video?

A flat fee structure can be more beneficial because it provides clarity and predictability for the client, ensuring no surprises in billing. For the bookkeeper, it avoids the issue of tracking time accurately and fairly, and it can be more aligned with the value provided to the client rather than just the time spent.

Outlines

00:00

💼 Understanding Bookkeeping Costs from Multiple Perspectives

In this video, Hector Garcia, a CPA and owner of an accounting firm, discusses the cost of bookkeeping services from both the perspective of a small business owner looking for services and an accountant providing those services. He covers his own experience from entry-level bookkeeping to business advisor, emphasizing his diverse roles. Garcia explains that the cost of a full-time in-house bookkeeper can range from $30,000 to $70,000 per year, depending on their skill level, experience, and the company's size and complexity. He also notes that bookkeepers in accounting firms typically earn less than those in private industry due to less responsibility. The video aims to provide insights into how bookkeeping services are priced and what small business owners can expect.

05:01

💼 Outsourcing Bookkeeping Services vs. Hiring Full-Time

Garcia explores the concept of outsourcing bookkeeping services to a firm instead of hiring a full-time bookkeeper. He mentions that his firm charges a fraction of what a full-time experienced bookkeeper would cost, focusing on the work done by the business's internal staff. Outsourced bookkeepers handle the organization and presentation of financial data, but they do not perform tasks typically done by an in-house bookkeeper, such as opening mail or negotiating with vendors. Garcia suggests that the cost of outsourced bookkeeping services can be estimated as a percentage of a company's total sales or expenses, typically ranging from 0.5% to 2% of annual sales, translating to a monthly cost of $400 to $1,800.

10:02

💼 Pricing Bookkeeping Services: Factors and Methods

This paragraph delves into the nuances of pricing bookkeeping services, highlighting that the complexity of a business's transactions can affect the cost. Garcia discusses the use of value pricing, where the focus is on the value provided to the client rather than the workload. He contrasts this with traditional hourly rates, which can range from $50 to $200 per hour, and per-task pricing, which is based on the number of transactions or bank accounts. Garcia emphasizes the importance of understanding the value provided to the client and the need for a conversation about expectations and desired outcomes.

15:03

💼 Traditional Pricing Methods and Their Drawbacks

Garcia discusses traditional methods of pricing bookkeeping services, such as hourly rates and per-task charges. He explains that while hourly rates can be initially more valuable, they can penalize bookkeepers for becoming more efficient. Per-task pricing, on the other hand, provides a more tangible measure of work but can be influenced by the ability to automate certain tasks. Garcia also mentions the challenges of charging by the hour, especially when dealing with complex or unique transactions that require additional time and research.

20:04

💼 Value Pricing and Flat Fee Models

In this section, Garcia advocates for value pricing and flat fee models, explaining that these methods can be more fair and predictable for both the client and the service provider. He describes value pricing as a method where the price is determined by the value created for the customer, rather than the amount of work involved. Garcia also discusses the concept of flat fees, where a fixed price is agreed upon based on the perceived value of the service. He emphasizes the importance of having a clear understanding of what the client wants from the bookkeeping service and ensuring that the fee reflects the value provided.

25:05

💼 Subscription Model for Bookkeeping Services

Garcia introduces the subscription model as an alternative to traditional pricing methods. He describes it as a fixed fee service that should be easy for clients to start and stop without penalties. Garcia notes that this model requires a robust infrastructure to handle client onboarding and offboarding efficiently. He also discusses the challenges of offering subscription services in the accounting industry, particularly for firms that require more personalized attention and support for their clients.

30:06

💼 Conclusion: Choosing the Right Pricing Model

In the final paragraph, Garcia summarizes the various pricing models discussed in the video and emphasizes the importance of choosing the right one based on the client's needs and the service provider's capabilities. He reiterates his preference for value pricing and flat fees, providing a link to a spreadsheet tool he uses to present these pricing options to clients. Garcia encourages both accountants and small business owners to consider the value provided by bookkeeping services and to communicate clearly about expectations and desired outcomes.

💬 Inviting Feedback and Discussion

Garcia concludes the video by inviting feedback and discussion from both small business owners and bookkeepers or accountants. He asks viewers to share their experiences and thoughts on different pricing models for bookkeeping services, encouraging a dialogue on what works best for different parties involved. He also hopes that the video has been helpful and looks forward to continuing the conversation in future interactions.

Keywords

💡Bookkeeping Services

Bookkeeping services refer to the systematic recording of a business's financial transactions, including income and expenses. In the video, the speaker discusses the cost and value of these services from both the perspective of a small business owner seeking such services and an accounting professional providing them. The script mentions that the cost can vary widely based on the complexity of the business and the level of service required.

💡Small Business Owner

A small business owner is an individual who owns and operates a small-scale enterprise. In the context of the video, the speaker addresses the concerns and considerations of small business owners when shopping for bookkeeping services, such as understanding the range of services available and the associated costs.

💡Accountant

An accountant is a professional who manages financial records and provides advice on financial management. The video script discusses the role of an accountant in providing bookkeeping services, including the perspective of an accounting professional who may also be a small business owner hiring an accountant.

💡Bookkeeper

A bookkeeper is a professional responsible for recording and maintaining financial transactions. The script explains the role of a bookkeeper in an in-house capacity versus working in an accounting firm, and how their salary can vary based on experience, responsibility, and location.

💡Outsourcing

Outsourcing refers to the practice of contracting work to an external party rather than performing it in-house. In the video, the concept of outsourcing bookkeeping services to a firm or professional is presented as an alternative to hiring a full-time bookkeeper, with the cost being a fraction of what a full-time employee might earn.

💡Value Pricing

Value pricing is a pricing strategy where the cost of a service is determined by the value it provides to the customer, rather than the cost of providing the service or the time spent on it. The speaker advocates for value pricing, explaining that it can be more fair and beneficial for both the service provider and the client, as it focuses on the value derived from the bookkeeping services.

💡Hourly Rate

An hourly rate is a pricing structure where the service provider charges a set amount per hour of work performed. The script discusses the pros and cons of charging by the hour for bookkeeping services, noting that it can be unpredictable and may not accurately reflect the value provided to the client.

💡Flat Fee

A flat fee is a fixed amount charged for a service, regardless of the time taken to complete it. The video mentions flat fees as an alternative to hourly rates, where the fee is agreed upon in advance, providing certainty for both the client and the service provider.

💡Subscription Model

A subscription model is a business strategy where customers pay a recurring fee to receive ongoing access to a service. The script explores the idea of offering bookkeeping services on a subscription basis, comparing it to the experience of using an app or service with a set monthly fee.

💡Transaction

In the context of bookkeeping, a transaction refers to a financial event that affects a business's accounts, such as a sale or an expense. The video script mentions pricing bookkeeping services based on the number of transactions processed, which can be a more tangible way for clients to understand the cost of services.

💡Complexity

Complexity in bookkeeping refers to the level of detail and variety in a business's financial transactions, which can affect the time and effort required to maintain accurate records. The script uses the term to explain why the cost of bookkeeping services can vary, with more complex businesses potentially requiring higher fees.

Highlights

Bookkeeping services cost varies based on the perspective of a small business owner or an accounting professional.

An in-house bookkeeper's salary can range from $30,000 to $70,000 per year depending on skill level, experience, and company size.

Bookkeepers in accounting firms generally earn less than those in private industry due to less responsibility.

Outsourced bookkeeping services are typically less expensive than hiring a full-time experienced bookkeeper.

Bookkeeping services can be priced based on total sales or expenses, with a range of 0.5% to 2% of annual sales or expenses.

E-commerce businesses may require more complex bookkeeping due to multiple sales channels.

Construction industry bookkeepers may need to job cost, identifying expenses by project, which can increase complexity and cost.

Value pricing focuses on the value provided to the client rather than the workload, potentially leading to higher client satisfaction.

Hourly rates for bookkeepers can range from $50 to $200 per hour, with more experienced professionals charging higher rates.

Pricing by the hour can be unpredictable and may penalize efficiency, leading to dissatisfaction for both clients and professionals.

Task-based pricing, such as per transaction or per bank account, provides a more tangible and fair approach for some clients.

Flat fee pricing, or value pricing, involves a fixed fee determined by the value created for the client, ensuring a fair exchange.

Subscription model pricing is similar to value pricing but requires a streamlined service that can be easily started or stopped.

Productizing bookkeeping services involves designing services with a limited scope and explicit pricing, making it easier for clients to understand.

Subscription services may lead to less high-touch service due to the need for infrastructure to handle frequent client on-boarding and off-boarding.

For a half-million-dollar business, bookkeeping services might cost between $200 and $1,000 per month.

The value of bookkeeping services should exceed the cost paid by the client, ensuring a fair return on investment.

A spreadsheet tool is available for presenting value-priced services, providing clarity and transparency for clients.

Transcripts

how much should bookkeeping services

cost

in this video i'm going to answer that

question from two perspectives

the perspective of a small business

owner shopping for bookkeeping services

trying to understand what's out there

what kind of services they can get

and the price of those services and also

from the perspective

of an accountant the accounting

professional the bookkeeper

that is going to provide those services

hi

i'm hector garcia i am a cpa i own an

accounting firm

and in my career i've been a data

entry-level

bookkeeper all the way to a small

business advisor

dealing with clients directly talking

about high level strategy

the point i want to make is i've been in

many many roles

i've also been a small business owner

that wasn't an accountant

that hired an accountant so i will try

to bring all perspectives

in here and let you be the judge on

maybe which route

you would want to charge your clients if

you're an accounting professional

yourself

or if you're a small business owner what

kind of approach would you like

that accountant or bookkeeper to have

when presenting

your bookkeeping services so let's start

by defining

bookkeeping services now unfortunately

the word bookkeeper gets tossed around

a little bit loosely and it's not really

well defined what exactly is bookkeeper

or what is the role of a bookkeeper

generally if you have an in-house

bookkeeper

a full-time employee depending on that

person's skill level

amount of experience and level of

responsibility

together with obviously the size of the

company complexity of the transactions

a full-time internal bookkeeper will

cost anywhere between

thirty low thirty thousand dollars a

year all the way to maybe sixty

seventy 70 000 a year of course this

varies by state by city but just to give

you an idea

what it would cost to have a full-time

bookkeeper

of course in the lower end of the

experience you're going to have those

30s and 40s and maybe a little bit

higher in larger cities and on the

higher end you're going to be in that

50s

to 70s and again if that bookkeeper has

a more of a controllership

position and has a high level of

responsibility as a full-time employee

now i find that bookkeepers working in

accounting firms

they get paid a little bit less than

full-charged bookkeepers

in private industry and i think the

reason for that is because they have a

lot less

responsibility and i'll explain where

that nuance

comes along uh because they're dealing

with multiple clients so they don't have

as much weight on their shoulders from a

client to client perspective

as a full-time bookkeeper would have

with the full financial obligation

as a controller inside an internal

company

so long story short a bookkeeper someone

that serves

in a bookkeeping capacity as a full-time

employee

will be a 30 to 70 000

a year employee now you also have to

keep in mind that there are benefits

and that person gets training and all

that sort of thing

so you can't really translate that to an

hourly rate but i just want to give you

that perspective

in my accounting firm for example we do

have some bookkeepers

which are somewhere in the middle of

that range but they're not 100

autonomous they we do have

sort of senior accounting level staff

people that work alongside of me

that have accounting degrees and heavy

accounting experience

supervising that work and ultimately

responsible for delivering that work

and explaining the work and taking

responsibility over errors

with the small business owners so

generally you would have this sort of

two-person uh team up on an account

while you have the bookkeeper that makes

sure that they collect all the documents

does the data entry categorizes all the

transactions for the most part

does let's say 80 to 90 of the work but

then you have

one second set of eyes with a little bit

more experience

just kind of tidying things up making

adjustments and making sure that the

financial statements

presented from the bookkeeper are too

standard

right so when it comes to hiring a third

party service

whether it's a bookkeeping firm a firm

that only provides bookkeeping

or a full service accounting firm that

provides bookkeeping alongside

with some financial statement

preparation accounting and tax

preparation

you should keep in mind that generally

it won't be just one person

touching that account so i don't want

that perspective of how much potentially

the internal bookkeeper

gets paid to kind of determine what the

price should be or

or or whatever you might think i was

getting to when i was explaining

what the average salary of an ex skilled

bookkeeper would be

the perspective i want to give you if

you're a small business owner is

the alternative to hiring an experienced

full-time bookkeeper

in the higher end 50 or 70 000 a year

it's outsourcing to a bookkeeping firm

or an accounting firm

that is going to charge you a fraction

of that our firm doesn't have any

clients

that pay us five to six thousand dollars

a month

so we never we would never serve the

same capacity as a full-time

experienced bookkeeper full charge

controller

with responsibility so what we provide

essentially as a

as an accounting firm in the outsourced

bookkeeping service

is the work of getting all the

transactions

that are managed and controlled by the

internal staff

of the business not bookkeeper just

their employees

or the business owner and taking all

that information

and making sense of it by putting it

together a set of books

in quickbooks or another accounting

system and presenting

financial statements in which management

or the owners

can use to make better decisions about

their business

so generally outsourced bookkeepers

won't do something that an internal

employee could do stuff like opening the

mail and paying a bill or reminding you

to pay a bill

answering the phone talking to clients

to collect invoices

negotiating with vendors that would be

all the things an internal bookkeeper

would do

and you would not get that when you hire

an accounting firm

so when i answer the question how much

should bookkeeping services cost

i'm specifically talking about

outsourcing your bookkeeping services

to a professional bookkeeper an

accounting firm an

outsourced bookkeeping service now let's

talk about some numbers

so generally and this is just a really

really rough

rule of thumb you want to take a look at

your total sales

or your total expenses as a as a

determination of

potentially how complex or how many

transactions

you'll be dealing with to kind of figure

out what the workload would be

so generally accounting bookkeepers

they'll look at the total sales total

expenses

and they look at percent ranges so we

take

half a percent for example all the way

to two percent

so let's take a look at and this is uh

per year

so let's take a look at a company that

sells a million dollars for example

so generally depending on the complexity

we would be

somewhere between half a percent of a

million dollars

and two percent of a million dollars in

sales

so that's five thousand dollars a year

to

twenty thousand dollars a year that

roughly translates between four hundred

dollars a month

to about fifteen hundred eighteen

hundred dollars a month

that would be a pretty good range i

could use now i'll tell you

i have some clients and i've had some

clients that are in that

range in sales with a pay a little bit

less than the equivalent of five

thousand dollars a year and i do have

some clients in that same range in sales

that pay a lot more than twenty thousand

dollars a year not not

double but a little bit more above that

and the point well the reason why we use

that range is because

again we take a whole bunch of companies

and we try to figure out

kind of what's in the middle but certain

nuances and complexities

will cause that accountant or bookkeeper

to price

services different for example if you're

working with e-commerce

and you have multiple sales channels and

you need

the bookkeeper to keep track of all the

sales

per channel double keeper has to do a

little bit of extra work

it needs to pull reports from your

different e-commerce platforms or

whatever

and and make adjustments so that it so

you can have

sales by e-commerce channel presented

correctly

in addition to that uh you might need

more sophisticated

software so some of the basic i would

say

sub 50 a month uh cloud accounting

software that's out there

could not give you a profit and loss by

cost center for example

your um if you go with quickbooks for

example uh with quickbooks online

you'll be paying anywhere between 70 to

100

a month for an accounting package that

could do

multiple cost centers so you can have a

profit and loss by

channel or by whatever department or

whatever

category or classification you would

like to use

that's just one simple example in the

construction industry for example

uh bookkeepers sometimes are asked to

job cost that means

take every single expenditure that you

see on the banking credit card

and identify which cost it belongs to

now generally speaking

on the digital data or the bank

statements and credit card statements

that are given to us the information

about what job each of those expenses

are for is now there so we have to look

at spreadsheets or look at

other documentation even physical

receipts that have markings on them

and we're going to read through all that

to figure out how to assign those

expenses by job

so something like that would also be in

the

higher end in that pricing range

so again all sorts of different levels

of complexities

whether it's in the income level or in

the expense level

that's why we look at sometimes as their

revenue and sometimes we look at the

expenses

so we can try to find complexity and

figure out what the workload is

now i'm a big proponent of value pricing

and i'll explain

methods of pricing and methods of

pricing the job

but a proponent of value pricing

wouldn't look at the workload

and we'll look at the value we provide

for the client

so if we are specialists and we can do

something that other people

can't and we can deliver other services

around the bookkeeping

such as advisory training

fast response a unique system in place

for the client to

deliver documents or inquire the

information uh

special apps and platforms that we give

that we work

together with the client to uh move the

data around and that sort of thing

that's going to potentially be

a point where we can add more value and

we don't necessarily need to focus too

much on the workload

we focus too much on can we uh

give a client more value than what

they're paying us in return and that's

really the point

right when you're a small business owner

and you're going to pay whatever it is 2

000

a month or 500 a month for bookkeeping

in exchange your return investment

needs to be higher than that so taking

the work

load off to give it to a bookkeeper the

peace of mind of being compliant

or potentially not losing money because

you're making errors

and not catching things early enough all

that stuff needs to mathematically

economically be higher than what you're

paying for the bookkeeping services

so as a person that's as a proponent of

value pricing i

very much understand that concept and

i'm gonna develop

that concept a little bit later on so

whether you're a small business owner or

a bookkeeper

you understand where we're coming from

when it comes to that

let me backpedal a little bit and talk

about some of the traditional ways that

you wouldn't you will encounter

some accountants and bookkeepers pricing

your bookkeeping services

for example some accountants and

bookkeepers might charge

by the hour they might say look i'm

going to charge you 50

an hour 200 an hour whatever the number

is to do this work

so in some months it could be 10 hours

of work some months could be

30 hours of work you will have eso price

bill

at the end of the month now generally to

be fair and i've i've done hourly

before and i worked with accountants i

do hourly before

first couple of months are a lot more

valuable

afterwards the once the account of the

bookkeeper kind of gets on a rhythm

they do get better and better and they

get penalized

for for the lack of a better term for

being more efficient

and start lowering the amount of time

they actually spend

on the job so if you are a small

business owner and you are betting on

the fact that

your accountable bookkeeper will get

better over time

then the hourly rate might be something

that you like

but you're going to take the brump the

brunt of the

uncertainty at the beginning and yes

there might be a month or two where you

have a major change in your business

you bring a new platform you have a new

vendor you open your bank accounts

you add a new form for the clients to

pay you you have a new system in place

to upload

documents that you want the bookkeeper

accountant to use

all those variables could change the

amount of time they'll spend

because there will be a learning curve

now contents of bookkeepers

love to charge by the hour in my

experience as i mentioned before

for professionals people that do this

for a living you're going to be in that

50 dollar to closer to a 200

uh range the 200 are the most

experienced ones that charge tight but

typically you don't see a lot higher

than that

in an hourly rate even if it's a cpa

which we normally are above the 200

dollar range but uh typically

bookkeeping

most people wouldn't pay more than that

that's typically the range for someone

that's a pro

that knows what they're doing someone

that's just getting into this that's

kind of having a side hustle bookkeeping

services

business or just just started and

doesn't have the confidence

to charge more might be charging between

20 and 50

an hour and if you're a small business

owner and you find someone that can do

that

look if they are good that's a steal

it's a great

great price at the end if they don't

take

a surprisingly crazy amount of hours

there are going to be

less expensive than hiring a full-time

employee

the problem is in my experience that

that 20 to

30 an hour uh external bookkeeper

it's might not be experienced enough to

do the job right

and if your business is growing at a

pretty fast pace and you do need

those numbers to be accurate you need to

trust them that's when my confidence on

paying that little

per hour anyway starts eroding so what's

another alternative to paying by the

hour

a lot of accountants and bookkeepers

will charge per task and that's a little

bit more complex

or per or per outcome and the way that

translates it would be

per number of transactions or per bank

account so some accountants that

bookkeepers say

well i'll take a look at every single

debit and credit that goes through your

banks and credit cards

i'll count them at the end of the month

i'll give them a price per unit

and that would be what your bill looks

like now that's a little bit more

tangible

for a small business owner because you

can actually see and you can count them

and it shouldn't be it should be a

little bit less surprising and it'll

feel a little bit more

fair per se because it's not really

about how fast they go

or how low slow they go you pretty much

determine that because of the number of

transactions

they did more work or less work but

don't let that fool you

with quickbooks online with quickbooks

desktop even with many accounting

systems

you can program and automate the

accounting system

to enter 20 30 40 50 transactions all in

one shot

if they all follow the same pattern so

if you go to amazon

50 times a month and it's all office

supplies you don't have to look at any

of the details

that stuff will be categorized super

fast but if you go to

let's say home depot and you have to

categorize it per job or you write a

bunch of contractors checks

and i have to read your handwriting per

check to figure out

you know who are you paying and what the

check is for that's going to be a lot

different

so again those the number of

transactions are not always a perfect

indicator

but they they are more or less in a

macro level in a high level view

a good indicator of how much work it

will be so that's kind of the second

option

so we talked about roughly we talked

about

pricing based an hour and now we talked

about pricing based on unit

on the transaction on the task per se

the third way to do this and this is

what i talked about earlier is to charge

a flat

fee a flat fee where you the accounting

bookkeeper looks at the job

looks at best case scenario worst case

scenario

and tries to come up with a number

somewhere in the middle

but before they give that number they

try to determine

what does the customer get out of that

flat fee can the customer extract

double triple just an amount above what

they're paying

of value from the work and if they can

then that account or bookkeeper will

give you a flat fee

now how do they determine the flat fee

that's where value pricing

comes into play so value pricing means

they'll

figure out how much value they create

for the customer and charge

under that that way it's essentially

fair now

these are subjective topics so um what's

valuable to an accountant that was

valuable to a small business owner might

be different but that's why

you need to have a conversation a value

conversation

discuss what do you want to get out

of this bookkeeping services what are

the outputs

like the reports and what are the

outcomes what results

would you like these services to affect

positively

positively in your business so once we

have that conversation that we can

determine

okay let's come up with a price and a

lot of these prices are

pretty much made up i mean again they're

based on our perception

of the client's perception of value and

at the end of the day

value pricing is probably the most fair

because there's no such thing as fair

and and and i think it's the most fair

because they're agreed upon

ahead of time so when you're a small

business owner if you think

fair means a low hourly rate and don't

spend too much time please don't make

any mistakes

then you will be at odds with the

concept of value pricing

because with with value pricing it

it's fair because we agreed up front

bottom line

who cares if i worked extra or i didn't

i don't want to be penalized

for being good and being efficient and

the client

a small business owner doesn't want to

be penalized for the accountant

learning and making mistakes because

we're all learning all the time no

accountant is perfect

i learn things on the daily i admit them

so again

long story short that would be my

preferred method

to be able to talk to the small business

owner the business manager

and ask what do you want to get out of

this what kind of guarantees can i give

you

if i can guarantee that result what

would that be worth to you

and exchange if i can figure out what

the value is

as long as i come under that then we

have a fair

exchange now with value pricing with

flat fee price

and by the way accountants and people

in this business we call it value

pricing but

in the real world like uh uh small

business owners

buyers just call it flat fee right

so for from a buyer's perspective they

know what the fee is

the the monthly fee whatever it is they

they know what it is is agreed upon they

pay it

no surprises from the accountant's

perspective because we want to

maximize our earnings while we also

maximize

the effort and attention and love we

give to our clients so we can deliver

those guaranteed results so those

results that we talked about

that were basically table stakes that we

needed to deliver

um you know so in order to be able to do

all that we need to

understand more or less what's the value

to the client and again

those numbers are never mathematical the

way an hourly rate would be

or a per transaction uh rate would be or

something

based on complexity right there's a

fourth way

of charging which is an interesting one

and it's one of the things that you're

seeing more and more which is a

subscription

model and subscription it's a little bit

similar

to value pricing in in the perspective

that it

is a fixed fee it's not a variable

rate but with subscription

the service will need to feel more

streamlined like

turn on turn off type of thing so it

should be

relatively easy for the client to stop

and start the service

to not get charged a cancellation fee

not get charged

a year upfront not force someone to set

up a one-year contract a lot of

accountants do that they set up

contracts

of some sort it just feels like buying

an app

now as an accounting firm subscription

services are a little bit harder for me

to offer just because i have to build an

infrastructure

that means people and systems and

technology

so i could take the let's call it the

losses

per se of those start and stop easyget

onboard and off board type of type of

deals

and in our business the beginning of the

engagement is typically

the most expensive part because that's

where we're number one

organizing the client cleaning the

client up and also

understanding the account in the first

place

so if we have a client start stop or

only stay with us two three months

on the toughest months then it becomes

kind of difficult

now with subscription services if you're

an accounting professional

you could productize it productizing

means that you price it up front

before you talk to the customer that

means that

you design a service with a limited

scope that's very explicit if we do this

but we don't do this

and we do for this type of client only

with the circumstances

and for the client this is awesome

because they don't have to work very

hard to come

to look at a price they look at the

website and they see a price

and they say one of these options are

for me

but again i think that in order to get

to offering a subscription service and

i'm talking to

my bookkeeping and accounting friends

it's you gotta kind of have the

infrastructure to be able to get

clients on board and off board quite a

bit

if you're to work with the type of

recommendation to account as a

bookkeepers

if you're going to work be working with

the type of clients that require some

handholding at the beginning some clean

up some organization

at the beginning i think you should go

with value pricing just because it would

be a little bit less

unpredictable per se of having a

productized

subscription service up front that

clients kind of fit into

right so one of the examples i can give

you of a

productized subscription service would

be like your internet service right

internet service gives you a thousand

megabits

500 megabits whatever the speed is and

regardless of how much bandwidth you use

you're picking it based on speed

per se right so so the cable company

builds

infrastructure around those services up

front

and gives you the ability to connect and

disconnect the service

that experience when there's no

contracts or no special pricing

when it's just you know cancel any time

type of thing it's very

pleasant for the customer right like

netflix you

turn it on pay the 10 to 20 a month turn

it off whenever you want

and that's kind of what subscription

services are it's being able to deliver

professional services

in a way that it feels like an app and i

think that subscription services

sometimes because of the infrastructure

that you need to build around that

will turn a firm into a sort of

less high-touch service

just so they can build limited scope

services to

to to serve multiple clients but it

might not be necessarily true

if if you're an accounting firm and you

create subscription services of a

minimum of let's say

three thousand dollars a month then

based on the original

um kind of formula percentage i gave you

you're going to have

some of the higher size clients in the

small business

world and therefore you're going to have

less number of clients

and then you can give them more

attention so those are kind of

the concepts that are out there so again

let's say you are a

half a million dollar business that

means you your sales are

half a million dollars you don't have

high levels of complexity in terms of

uh recording income by a particular

category or expense by a particular

project

straightforward service-based business

no inventory

you can expect that half percent to two

percent rule

to be there so that means that you could

you could essentially

find a bookkeeping service for anywhere

between two hundred dollars

and say a thousand dollars a month

and of course if that accounting or

bookkeeping service those

clean up-to-date dependable

accurate financial statements allow you

to make better business decisions

and you can get in exchange more value

than what you pay for

that you should have no issue pay for it

so that was

just again a very long-winded way to

kind of go through and explain that

but i hope that whether you're a small

business owner or a bookkeeper an

accountant

that you can see all perspectives and

see which one is going to work

best for you i really recommended value

pricing

i actually sell a spreadsheet for

presentation

i'll put the link in the bottom below

it's what i've been using

to present value price services to my

clients and my clients love it they love

the clarity of having a spreadsheet with

different columns

with the price with the features and you

can use this spreadsheet

for um either the subscription method

or the value pricing method anything

that's flat fee and

because if you're gonna charge an hourly

rate of course you're gonna have

you don't need a sheet like this you

just have a

a rate right this per hour and then you

trust that

your time keeping system is fairly

counting the time

the amount of time you're spending and

the client needs to trust that whatever

you're charging them

is correct again because there's just so

much

potential um uh room for error

on tracking somebody's time um i find

hourly

willing to just be to just be against

what the customer wants and against what

the accountant and bookkeeper wants

and and the reason why i'll say that is

let's say for example you're

categorizing

um some expenses for some client and

then you start seeing a client

that traveled to some country that

you've never been to

and you see a bunch of vendors that you

never

heard of before so the bookkeeper is

actually googling all these things

and it's learning that these are

restaurants or this is how you say

restaurant in french

or whatever and then they start learning

the pattern

so when you when i'm dealing with that

particular client i went to this

country that i've never been there

before with happy to speak

french whatever it is i'm taking an

extra 30 minutes or 45 minutes

to learn this so if i were to include

that

in my billing that's technically almost

kind of unfair

because of my next client that has a

similar transaction

i already have that knowledge i already

know what to do

i can do the same time the exact

same output of work in a quarter of the

time

because i charged it to the other client

that i learned there for the first time

so for that reason

there's just no true true fairness

when it comes to charging by the hour

and while

it feels to the accountant bookkeeper

that that's a fair

play a way to charge and i feel some

small business owners ask me

for an hourly rate and i and they think

that's fair

it's not so i'm a big proponent of

charging a

flat fee i give you those percentage

arranges

just as a as a guide but just keep in

mind

your particular needs how how fast you

want to work

how much response time you want how

quick response time you want

what other services around just

bookkeeping is there advisories or

training

is there support for other activities

included all those things will affect

ultimately the price

because bookkeeping is not the same

thing for everybody

unfortunately unfortunately bookkeeping

is a

subjective term so fortunately for me as

an accountant

and bookkeeper i can educate my client

and tell them

what i perceive bookkeeping services to

be and then after that

is transparent and well explained then

the small business owner can explain

what they

expect the bookkeeping services to be

and then you bridge that gap

negotiate and come up with a flat fee

that you both

will be happy with so anyway if you're

an accountant bookkeeper check out the

link

in the description you will love you're

going to love my spreadsheet guaranteed

if you're a small business owner or if

you're anyone and you like this video

go into the comment section and ask

questions let's get

conversation going what do you think

about all this you know how do you want

to be charged

as a small business owner how do you

want to charge as an accountant or

bookkeeper

what challenges do you have charging

flat fees

value pricing subscription whatever it

is and as a small business owner what

kind of

good experiences or bad experiences have

you had with paying

for bookkeeping services so i hope that

was helpful that came from

from the heart from experience and i

hope that you get value

out of this video thanks and i'll see

you on the next one