New to the accounting business?

Then you’re probably not sure how much to charge for your services. This is business advice for accountants and other consultants as well.

When I started my bookkeeping business in 1999, so was I. Here are some tips on how much to charge.

One lesson I quickly learned is that EVERYONE wants a deal and thinks you should give them one, but the moment you do, they will underestimate your services and consider it a permanent discount.

Don’t make the mistake of charging too little – use reward incentives and bonuses for new customer referrals instead of lowering your price for any customer. Even once can be the “Kiss of Death” to your rate sheet.

Don’t guess how much to charge either. When you start out, you should search for other professionals in your field and simply ask them what the fees are that they charge in that area. Ask them if there is a sliding scale and, if so, what criteria they use to determine those variables.

This is what I imagine –

Small business clients prefer to pay a flat fee rather than an hourly rate. Most bookkeepers charge an hourly rate, but will charge a flat fee based on the number of transactions that need to be entered, plus $5-10 (if they don’t know the client beforehand). You should also include these costs in your calculations: Worker’s Compensation, Self-Employment Tax (10% for US), and Business Insurance.

For a basic bank and credit card reconciliation, data entry, and set of monthly financial statements, you’ll work approximately 2.5 minutes per entry. Each data entry transaction counts as “2.5”. So if you have an average small business with 200 tickets per month, you should charge a minimum of 2.5 minutes per ticket.

Experience tells me that some entries will take longer and others less time, but from start to finish, all entries made will balance out at 2.5 minutes each. Based on the rate I charge, that means a monthly flat rate for this client equals 2.5 times the number of tickets divided by 60 total minutes times the hourly rate (2.5 x 200 / 60 x $45 = $360 flat rate per month).

Not all bookkeepers are willing to share their fee structure with others, so don’t be afraid to ask multiple bookkeepers how much they charge for an initial benchmark. You will find that there are rate ranges from $16-60+ per hour. Pick one of those rates that seems like it covers your costs and still holds you accountable as an expert in your field. If you charge $16 an hour then you really need to get more experience and/or education to be taken seriously. Bookkeeping accreditation is one way to do this. Check with your local chapter of the American Institute of Professional Accountants for accreditation.

If your client seems concerned about their rate, ask if they would envision a set of records submitted to their accountant at the end of the year without a problem, and if that would be a fair way to think about their rate. If they still hesitate, it is better to help you find someone else.

The benefits of hiring a bookkeeper also include the fact that payroll costs are eliminated and a full-time employee, computer hardware and software, and additional office space and storage for accounting purposes are not required.

$25-45 is the average cost per hour for a good bookkeeper who knows the business. For higher hourly rates, you are paying for a bookkeeper working with an accountant. Those fees reflect the fact that they work with professionals who oversee their work and the higher fee is symbolic of a tax professional’s review of a business’s records before going to the IRS or CRA. It is worth the extra cost for many customers. For others it is not and those people are probably not the best clients for experienced accountants.

When you are creating your invoices to bill your own clients, briefly rewrite the work you did for them (client) in the body of your invoice for them. There’s really no need to add all the items on your list to the services you provided them. You only want to include a 2-5 sentence summary for your customer so they understand what they are paying for.

TIPS: If you have a large amount on your bill to present to them, try splitting it up into 2-3 separate bills over the course of a month. Your clients may need you to do their job, but no one appreciates a big bill at the end of the month without notice. Those situations lead to bad will and short-term clients. Longevity is the key to owning and operating a reputable and enduring accounting business.

Invoice descriptions include:

“Accounting services provided for November included, but were not limited to, the following: Bank and credit card reconciliation and reporting for October account statements, cash receipts journal, cash disbursements journal, general journal entries (for those with an accrual method of accounting).

The big picture and some details help your customer understand why you bill the way you do. And why are you worth it!

If you performed additional services that you choose to leave as unbilled, please go ahead and add it to your bill as a note in the list below for that service. For example: IRS phone calls for payroll issuance 3 hours free of charge. ALWAYS say, “Thank you.” NEVER ask a customer to call with questions about their bill.

Charging for phone consultations and training sessions at discounted rates – Unless you want to train your clients for free and that just takes away valuable time you can spend getting other jobs and clients. Time is money – use yours wisely to grow your business. Don’t give customers pennies – Faxing and copying should not be billed unless they exceed $20.00 in your time and costs.

Always invoice your clients regularly, at the same time every month. Create professional invoices even if it’s in an Excel spreadsheet. Use the last day of the month as a guide for billing dates.

Are you still looking for clients?

– Look through the search ads for people who are interested in hiring someone for 10-15 hours a week. Generally these people are less interested in hiring an employee. Call them or send your business card and resume and cover letter explaining why your service is good for them; describe the benefits to them and request a phone call to discuss it.

– Join a local networking group. I found that Business Networking International (BNI) not only helped me professionally with public speaking and self-confidence, but also gave me a steady and solid stream of referrals every week that grew my business and kept me busy. The cost of the membership was paid only in a week.

Good luck!