Introduction to Pricing Bookkeeping Services
- Pricing bookkeeping services requires expertise and market knowledge.
- Bookkeepers can set their packages for their bookkeeping services based on various factors like their own work experience, scope involved, number of transactions and the size of the client.
- There are several ways to charge clients for your bookkeeping services - you can charge them on a project-to-project basis, a fixed fee or an hourly rate.
- We explore a model of 3-tier pricing to help charge your clients based on their needs and the type of services you are offering.
Many business owners find themselves overwhelmed by the “money” side or financial side of their operations. Invoices, receipts, and understanding bank statements can often be confusing and for some, it may simply be the boring and mundane part of their job that they are avoiding to look at.
As a bookkeeper, you can step in and help clients such as these improve their financial management by converting their chaos into clarity. You can keep accounts up-to-date, accurate and make sense of their finances. Bookkeeping services can be the hero that many businesses are seeking. Apart from the quality of services that you provide, the right pricing for bookkeeping services can make or break your business.
The right pricing strategy is pivotal for your business, especially if you are just starting out. It is important to understand how to charge for bookkeeping services as it can bring you profitability and help you in offering your client work satisfaction. If this balance is askew, it may cause your services to be undervalued due to lower charges and you will be underpaid, eventually hitting your bottom line and your morale. Charging too high can make it difficult to find and keep the right clientele due to the competitive market. What you need is Goldilocks pricing: not too low, not too high.
To help you navigate bookkeeping pricing and save you the hassle of incorrect rates, we have created this guide on how to price your bookkeeping services to make this process simple for you. We will walk you through the key factors for setting your rates, from understanding the industry standards to how to set pricing and evaluating the specific needs of your clients.
Pro Tip: Read this ultimate guide on writing effective bookkeeping engagement letters to increase your chances of bagging that client. Also, you might want to read more about how to onboard bookkeeping clients using new client checklist.
Pricing Models and Strategies for Bookkeeping Services
As a bookkeeper, your job can involve a host of roles. Paying bills, data entry, invoicing, inventory management, and collecting due payments may just be some of your regular roles. Deciding how to charge for bookkeeping services or how to create bookkeeping packages can be essential here, as your work will determine how much you should be paid.
There are several methods one can use to set a bookkeeping price list. Here are the most common pricing strategies:
Hourly Rates: This is the most traditional billing method which is dying and isn’t ideal for most bookkeeping services. You bill your clients per hour, based on your fixed costs and desired profit margin. You start the job, track the hours it took you, and bill the client based on how many hours it took you to finish the job. That is the fee. While this method proved to be effective for a very long time, the hourly rate pricing has its restrictions and can also lead to exploitation in some instances.
Fixed Rate Pricing: Another name for fixed rate pricing is “flat fee,” which usually means there is a consistent monthly fee for your service. In this method, you can create a stable monthly income, and your client is aware of the amount they have to pay you. This method allows you to increase profit as you increase efficiency—the more efficiently you work, the greater the profit margin.
Project-based Fees: For one-time projects, your bookkeeping fee structure can be very specific, so you can decide on a flat fee with your client based on the nature and scope of the work. This requires the clients to be upfront about what work there is an estimation from your end to avoid overworking.
Value-Based Pricing: This is a future-proof pricing system. It involves setting prices based on the value you provide to the client rather than the time spent on that project. It is important to be able to correctly determine the value of the work, as some hours of work may be more valuable than others. Such pricing requires a deep understanding of the client's business and the impact of your services on their operations.
Various bookkeeping pricing calculators are available on the internet to help you charge fairly.
Pro Tip: Many websites, like Cone, offer free bookkeeping pricing templates to simplify the process. Also, learn how to write a bookkeeping proposal.
Factors Influencing Pricing Bookkeeping Services
How much you charge for bookkeeping can vary widely based on several factors. The industry that you are catering to, the workload from that particular client, their location, etc For small, medium, and large clients, the rates would vary. Here are a few things to consider when determining your bookkeeping packages.
- Experience and Skills: As a beginner, you can charge less than other bookkeepers to get your first few clients. As your level of certification goes up (for example, being a Certified Public Bookkeeper) you can justify higher rates. Experienced bookkeepers with a proven track record can charge premium prices.
- Industry Standards: Research what other bookkeepers in your area charge for their clients. This can offer you a solid sense of what is reasonable and competitive. If you hold certifications, you can charge higher than the industry rates too.
- Type of Services: Different services can command different rates. Basic bookkeeping might have one rate, while more complex services like financial analysis or tax preparation can be priced higher.
- Client Size and Needs: A small business might not have the same budget as a larger one. Consider how much effort is required and how much value you offer each client. Businesses with more complex financial activities or higher transaction volumes will require more time and expertise, hence justifying higher fees.
- Expenses: Include your charges, such as software, office supplies, and other company expenses. Make sure your rates cover these so you can stay profitable.
- Geographic Location: Rates can also vary based on your location. Bookkeeping services in urban areas with a high cost of living typically command higher fees than those in rural areas.
Pro Tip: You may want to check out the top accounting practice management software for UK bookkeepers in 2024 that can elevate the bookkeeping services that you provide.
How To Package and Bundle your Bookkeeping Packages?
3-Tier-Pricing
An effective method for bookkeeping fee structure can be to come up with three different pricing packages based on the services that you offer, like Cone business proposal software does: Starter, Essential, and Growth.
Clients can choose according to how many services they need from you. A good, better, best pricing strategy is likely to make 66% of your clients feel the middle/better offering is ideal for them as it covers major features without costing them a bomb, as Goldilocks pricing suggests. The proposed three-tier pricing structure for bookkeeping services could be as follows:
- Starter Pack: This pack would be for individuals or startups with basic needs such as monthly bookkeeping, income and expense tracking, basic financial reports and bank reconciliations. Suggested pricing for a pack like this would be $200-$500 per month.
- Standard Pack: For a growing business with additional support such as accounts payable and accounts receivable management, cash flow management, payroll processing, and budgeting expertise, a standard package at $500-$1,000 may be more appropriate.
- Premium Pack: For larger firms who may need more professional services such as inventory management, legal support, detailed financial analysis and reporting, tax management and financial forecasting, a premium package priced at $1,000-$2,000 a month could be more appropriate.
In addition to these tiers, you could also offer clients custom add-ons for specific, popular services such as tax considerations, compliance assistance or reporting and analytics.
While providing these services, it is essential to keep in mind that clients may grow and ensuring seamless transition from one package to the next is a prerequisite to run a good business. You may also offer clients discounts or other special considerations to make your packages more attractive to them.
Common Challenges Faced with Pricing Bookkeeping Services
Despite the advantages, several bookkeepers face hurdles when it comes to setting their rates:
Undervaluing Services: Many bookkeepers don't realize their worth. They set their rates too low to get business and clients, but this in turn hurts their financial stability.
Client Pushback: Clients often resist high rates or fixed fees. They may not understand the value a skilled bookkeeper offers. Bookkeepers need to show how they save clients money, time, and stress.
Inconsistent Workload: Hourly billing can mean unpredictable income. When clients have different needs, it can make income uneven and hard to plan for.
Competition: There are many bookkeepers out there. This can push bookkeepers to lower their prices. Competing only on price can hurt the profession and its value.
Scope Creep: Clients sometimes try to get more work done than the agreed output required from their end without wanting to negotiate the pricing that is fixed. This can lead to a potential loss for the bookkeeper but also create tension with the client and affect the future possibility of work. Learn more about What is Scope Creep.
The Importance of Standardizing Pricing for Bookkeeping Services
Clarity and Predictability: Standardized structures eliminate ambiguity around costs. Clients know exactly what to expect in their budget, allowing for better financial planning. Bookkeepers can efficiently manage their workload and income with clear pricing tiers.
Transparency: A standardized approach fosters trust by establishing clear pricing upfront. It strengthens the relationship with clients and saves you from the uncomfortable feeling of going back and forth during pricing negotiations.
Scalability and Efficiency: You can cater to a wide range of clients with pre-designed templates to help your business, without the hassle of crafting individual quotes for each one. Standardized pricing structures will also save valuable time on proposal creation, allowing bookkeepers to focus on delivering exceptional service.
Professional Image: A clear and consistent pricing structure portrays a professional image. It positions the bookkeeper as a well-established business that values its expertise.
Easier Budgeting for Clients: By standardizing your bookkeeping fee structure, your clients will find it easy to budget when there is standardized pricing. It helps them plan their finances, and if it works for them, as a bookkeeper, you are likely to retain your client because of the standardized bookkeeping fee structure!
Pro Tip: Learn how to write an accounting engagement letter.
Finally, how Much To Charge For Bookkeeping Services?
We hate to break it to you but the answer to this question is slightly complex, as there is no specific number that is generalized across bookkeeping. As we have seen in the article, the charges are dependent on a variety of factors that the bookkeepers have to consider.
Hourly Charges: Bookkeepers tend to charge around $15-$30 per hour. This rate may vary depending on the experience of the bookkeeper and the workload. But, this model is dying and is not ideal.
Monthly Charges: It is recommended to set your monthly charges based on the size of your client, complexity involved(like number of transactions, frequency of reconciliation etc.) for them every month. The average rate for small clients can be between $200-$350 per month; for medium-sized clients between $400-$600/per month and for larger clients around $700-$1000 a month.
You can also use a template like this to come up with pricing.
Annual Charges: Annual bookkeeping services can be priced for much higher. An ideal charge for a year can be between $30,000-$60,000 a year. This is the estimate whether you work as a bookkeeper for a business or a freelancer.
Pro-tip: Consider using a pricing software like Cone which helps you price services profitably.
Cone also helps you automate proposals, engagement letters, billing and payment all in a seamless workflow.
Why Are Bookkeeping and Accounting Services More Expensive?
The services bookkeepers offer and the ones accountants offer can have an overlap sometimes but it is no news that accountants have a set of more complex tasks. Tax preparation, financial analysis, planning, and budgeting, among other things are specific to accountants. However, some bookkeepers may provide such services on their end.
While it may not be possible to charge the rates that accountants do, given their qualifications and expertise, being aware of accounting services charges can help you come up with a system on how to charge for the services that you provide as part of bookkeeping services.
- Hourly Charges: Accountants can charge clients around $175 per hour for their services, while accounting services can charge between $60-$400 an hour. In larger cities, highly qualified accountants may also charge $500 per hour or more.
- Annual Charges: The Bureau of Labour Statistics states that the average median hourly pay for accountants is around $38.14 an hour. Their annual average salary is $79,880 per year for accountants. The annual pay can range anywhere between $40,000-$128,000.
- Fixed Fee: For specific services, as an accountant, you may also charge fixed fees. While tax returns may charge anywhere between $200-$550, other complex services may be priced higher.
Depending on what services you offer and the qualifications of your employees, you could alter your pricing to match market standards.
Cone Proposal Software for Streamlined Bookkeeping
Whether you’re a bookkeeper or an accountant, it is best to go with software that does all the work for you. As somebody looking for the right option, you might have come across a lot of software on the market. But one that will stand out with its exciting features is Cone’s proposal to payment software.
Cone's proposal software can help you price your services, optimize your engagement letter operations, impress clients and streamline billing. Your proposal and engagement letter process with Cone Proposal Software can take your client interactions to the next level.
Try it for free now!
But Why Choose Cone?
Pricing Engine: Cone allows you to price your services based on multiple pricing factors like number of transactions, frequency of reconciliation and other factors.
Here is the template for bookkeeping pricing you can use as a reference.
Efficient Engagement Letters: Cone's proposal software allows you to effortlessly create and manage engagement letters, ensuring that your clients receive clear, professional, and legally binding papers as part of the proposal-to-payment process.
Cost-Effective Solutions: Compared to competitors such as Ignition and GoProposal, Cone's pricing begins at $8 per user/month, making it accessible for small businesses and independent freelancers.
Best Features: Along with creating effective engagement letters for bookkeeping, Cone's proposal software comes with extensive features such as a flexible proposal editor, an automated billing and invoicing system, a simple E-sign option, sales pipeline management, and extensive pricing tool capabilities.
Minimal Learning Curve: The user-friendly interface of Cone makes getting started fast and easy.
Integrated Solution: Cone platform combines proposal, billing, and invoicing features, so you don't have to worry about multiple expensive software solutions.
Using technologies such as Cone Proposal Software will help you optimize your engagement letter operations, making managing and maintaining professional connections easier while increasing client satisfaction.
Learn more about client management software for accountants, CRM options for bookkeepers and accounting firm project management software.
Get It Right
The journey to find the right pricing strategy for your bookkeeping services may be full of trial and error. You may need to experiment a bit with the pricing structures and see which one works for you and your clients. Evaluating the market standards and the client size, along with the work you do will help you give your clients a good price while ensuring that you scale your business and profits. For a streamlined bookkeeping experience, consider Cone software.
Try for free today!
Frequently Asked Questions
1. How much should I charge as a freelance bookkeeper?
As a freelancer, it is safe to charge an hourly rate ~ $25 per client. This cost is in sync with the average bookkeeping charges, as mentioned by the US Bureau for Labor Statistics. But, it's better to charge on a fixed price rather than hourly.
2. How do bookkeepers charge their clients?
Bookkeepers charge their clients based on a variety of factors, such as experience, client size, scope of work, industry rates, location, etc. The bookkeeping fee structure can be different, depending on whether the bookkeeper works hourly, charges a fixed rate, or is project-to-project.
3. How much should I charge for bookkeeping of a small business?
An ideal charge for a small client with around 6-8 employees and a gross annual revenue of $150k would require you to do 5-8 hours of bookkeeping for them in a month. A standard rate could be $250 per month for such work.
4. Should I offer different pricing tiers for my bookkeeping services?
It is ideal to offer different pricing tiers to your clients for your bookkeeping services. A 3-tier pricing could be a model, as every tier could have a different range of services you offer, and you can set the pricing accordingly.
5. Which one is better - an hourly rate or a flat fee?
Both bookkeeping pricing packages have their pros and cons. A flat fee ensures a fixed fee for the bookkeeper for a budget and gives the client a fixed budget to work with, but an hourly structure can give both the client and bookkeeper flexibility and allow a variable workload.
6. Can I charge different rates for different types of bookkeeping services? How?
To charge your clients differently based on the services, you can set up a fee structure with different tiers. This will let you cater to different needs of bookkeeping services. This can be a standard pricing structure. If not, you can also consider sitting with the client, evaluating their needs, and, based on the services required, coming up with pricing that fits their needs.