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.