How to Price Accounting Services

Posted on May 6, 2015 By

One of questions that I get from new bookkeepers and newly established CPA firms; is how do you price the services?

First, you need to job cost how much it takes you to produce paperwork.  That includes overhead, like rent, computers, telephone/internet and office supplies.  But wait, aren’t those monthly expenses?  Yes, take the monthly total and divide it by the hours billed each month.  That is your hourly overhead charge to all the jobs.

Second, find all the costs that are directly assignable to that client or job.  Online Software expense, filing fees, and report covers.

Third, Determine how many hours it takes to complete the job.  That might be more difficult for a new practice.  Ask an established bookkeeper or accountant for some time estimates.

Once you have determined how many hours it will take; add 10% for review before the customer sees the paperwork.  Then take your overhead rates and actual costs to the cost estimate.  If you systematically job cost every assignment; it will keep you from unprofitable jobs.  If the potential client is bidding the work between multiple sources; don’t be intimidated into lowering your price.  If it’s unprofitable or unreasonably low; there is no point in winning the bid.

I also like to add a day to sleep on the reports.  My suggestion is to review the original request and think, ‘does this information answer this question.’

It’s helpful to use a time tracking system to help you remember how long it took you to complete the work.  You may not remember the six hours to stew over a complicated problem, but that doesn’t mean that you shouldn’t bill the client for thorny problem research.

Fourth:  Make sure the client approves the estimate in writing.  If they need to provide a retainer, make sure you get one in advance.  If they hem and haw at a $200.00 retainer for a $2,000.00 job;  you can save yourself from working on their project and find something more lucrative.

Clients not paying their bills is a time honored tradition in some businesses.  Remember that you are loaning them money if you are not working for a retainer.  They don’t let you eat the burgers at McDonalds and then pay.  Why should you work and then get paid months later?

An advantage to looking the business books; is that we can see if they pay their bills on time or their average cash balance.  Do you think they have the funds to pay on time?  Or do they have a history of short paying their vendors?

It’s important to review the average hours worked on typical projects.  Technology is quickly changing and we need to be able to react to sweeping changes that online accounting is doing in the small business sector.

Laura Dodson
Follow me

Laura Dodson

Laura Dodson, CPA is a Seattle Financial Planning & Analysis consultant.She has attended Western Washington University, Pierce College and Bates Technical College. She has written four accounting instructional books. She has worked for small family businesses, mid-sized businesses and a Fortune 500 company.She founded and operated Blue Stone Accounting LLC for five years.She currently runs Paper Butterfly Forge LLC.
Laura Dodson
Follow me

Latest posts by Laura Dodson (see all)

Uncategorized