How much should BOOKKEEPING cost?
Summary
TLDRIn 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
💼 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.
💼 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.
💼 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.
💼 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.
💼 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.
💼 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.
💼 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.
Mindmap
Keywords
💡Bookkeeping Services
💡Small Business Owner
💡Accountant
💡Bookkeeper
💡Outsourcing
💡Value Pricing
💡Hourly Rate
💡Flat Fee
💡Subscription Model
💡Transaction
💡Complexity
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
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