On-going battle

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Ok, so I’m an accountant (FCA for those who are interested – you’re not? – didn’t think so). I am also a bookkeeper, or should I say I do bookkeeping for a number of clients.

When I price accounts and tax work for a client I always base it on how long I think it will take, use a cost per hour – £60 at the moment, put in a little extra for support through the year and a contingency and there I have it - a fixed price, paid in monthly instalments nice and easy. This works pretty well for accountancy not so well for bookkeeping.

The trouble is £60 an hour for bookkeeping work seems to me to be a bit excessive. Yes big local firms may charge their staff out at that rate but I don’t think I can really justify that as an hourly rate.

Ok, so I wouldn’t go to a client’s office to do bookkeeping (I use subcontractors for this and charge them out at £175 a day). I do bookkeeping from the comfort of my own office – some on VT and now Clear Books, but mostly on Xero.

The hourly return on bookkeeping is lower than the £60 I use for pricing accounts work – more like £40, so should I be worried about this?

I’ve come to the conclusion – NO.

I sometimes think I should charge more for bookkeeping, but then if I do the bookkeeping for a client then when it comes time to do the year end accounts a 15 hour job (where I didn’t do the bookkeeping)  may only take me 8 hours .

That huge time saving more than makes up for the lower return on the bookkeeping work.

So thinking about it rationally, if I do the bookkeeping, I can produce the year end accounts quicker that if I didn’t. Giving me more time to take on more clients, do more work, earn higher fees and recover much more than the ‘lost’ income from doing the bookkeeping.

Does that make sense?!

I think so.

So yes, I’ll carry on with the bookkeeping.

I think those small practitioners who turn it away may be missing a trick.

About Kent accountant

Man of Kent

Chartered Accountant based in Kent.

After leaving practice very soon after qualifying, swearing never to return, in 2011 I did exactly that.

Now a sole practitioner and loving it, business growing rapidly and looking forward to the future as my own boss.

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01st Nov 2013 11:22

Agreed

My charge out rates for bookkeeping/mgnt accounts are anywhere from £45-59 per hour. As you say, the tax bit is very simple so I don't need to add much for this. I am trying to move to fixed fees for bookkeeping as much as possible For the larger companies I have been caught out several times on fixed fees because I couldn't possibly have known exactly how complex their requirements were before and I've wasted hours of time because the information I've been given was inadequate. I'm still thinking about how to overcome that problem.

Bookkeeping is a good way of making money, and the more regular connection with the client can help us save them tax in the long run.

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01st Nov 2013 11:39

Regular contact

Definitely a good way to iron out problems early on and sometimes generate further work as well.

I always include a clause in my terms of business to cover off increases in bookkeeping work volumes, or I charge by the day if the work needs to be done at the client's and I'm not sure how long it will take.

Fortunately most of my bookkeeping work is very straight forward and probably takes 1 hour per client per month. There are a few that take longer 

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01st Nov 2013 11:56

are we not offering....

.....good financial management of the client's financial affairs, rather than just book-keeping?

Which is why the price is higher than just book-keeping services rates.

As an accountant, I agree, spend time on managing the book-keeping and not only are the end of year accounts easier and quicker, but the client is more satisfied and the accountant can provide real time advice to that client. 

 

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01st Nov 2013 11:58

I don't like fixed fees for bookkeeping

We have a couple on fixed fees, but they are long standing clients who are reliable.

We have a couple of bookkeeping clients that are so disorganised, despite all our entreaties to prepare the records in a specified way, and the job can take 4-5 times longer than should be really necessary.

This means we get paid for the extra time we need, and saves arguing with the client that the fixed fee isn't enough, and they know that if they get themselves better organised the overall fees will automatically come down without them having to ask for a reduction.

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By Jimess
01st Nov 2013 12:46

Bit of a mix really

I don't charge fixed fees in the first year I do bookkeeping for the client - mainly because you don't really know what is involved until you have done the annual cycle.  I do charge bookkeeping out at a rate lower than my usual charge rate - volume tends to make up the difference somehow.  Work done at clients premises is charged by the day plus travel expenses.  Some clients also have a very flexible idea of what bookkeeping means - some think it is anything to do with a peice of paper that happens to pass their way and some still like to retain a bit of control over their paperwork so not charging fixed fees in the first year allows me to get to know how the client operates and what they actually want me to do. Once we both know what to expect from each other we agree fixed fees for the work going forward.  I do agree with the OP in that if I keep everything neat and tidy as the year progresses, the annual accounts become a dream job. 

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01st Nov 2013 14:17

Hmmm

Just done a vat return for a client, where I agreed to do the bookkeeping again and I'm probably earning around £25ph for the bookkeeping and vat return.

Normally I'd turn my nose up at this stuff.

But, BIG BUT, following from Jimess's comment - the year end accounts and CT600 will probably take 5 hours start to finish.

I'd costed that work element at £900.

So I will get to the level of return I wanted, but not the way I intended.

I think I need to work on the way I price this work.

 

@RedLeader - I don't particularly like it and I've only started doing more of it where I can get the client to use cloud based software and when I've put clients on FRS Vat.

@Jekyll - advice - yes, I usually include it in the fixed price, doing the bookkeeping can make this a lot easier. 

 

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01st Nov 2013 22:19

It's difficult to judge
I am also worried about over committing on bookkeeping work, as you state its difficult to get a good rate on it. But as you state you have to look at the whole job so you may do some low value work which pulls itself back when doing the year end. If you do tax inspection work you will probably charge a premium. I still do a basic time sheet for the month and look at total work charged out against chargeable hours worked and see what the average is as a KPI, hopefully in your case it will average to around the £6o per hour you are hoping for.

For me as I grow the key is to get clients hooked on cloud bookkeeping, and your position becomes one of periodic review , and checking to submit VAT returns etc then rattling off the year end, they trying to push high end value added stuff.

I have quoted wrong on 2 jobs which I have had to get someone in to do as they were taking too much of my time and I was struggling to get the fee up.

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02nd Nov 2013 21:02

value, value, value

There is bookkeeping & there is bookkeeping.  As you've identified, the value in your bookkeeping is more than the value in the bookkeeping done by the client or bookkeeper, which then has to be presented to an accountant at the year end.

Then, there's no such thing as a standard client, some will handle 0% of their own books and others 90%.

Consequently, and I can hear the groans, unless you can factor in a range of hourly rates for each client, for each piece of work you, and your subbies, do, hourly rates are a complete pain and hinderance. 

A few years back we landed the bookkeeping for a client as well as quarterly management and the annual stuff, we already did.  Had I charged on an hourly basis, the bookeeping element for my administrator/bookkeeper, might have been say £30 ph and my time for the other stuff might  have averaged say £80 - £100 ph.

I quoted them £25K for the year's work, the outsourcing of their accounts department, as they put it, the whole job as Glennzy puts it. Had I worked backwards this would have been say £40-£50 for my administrator and £120-£130 for me, and, the client would have been pleased with £30K.

I know this is an extreme but it has happened loads of times, in smaller examples, in the 5+ years since I stopped looking at the clock.

 

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to davidbarry
04th Nov 2013 10:46

opportunity for more profit

Couple of points.

@Kent, Glennzy: how's about if instead of doing b/k in house, you get a good freelance b/k to work with the client. B/k and client deal with each other directly as regards fees, etc. You then get an end of year set of books that are to a high standard, and can do the year end stuff efficiently, make your high rate, and without the hassle/dilution of b/k work. Obviously it's crucial that you are able to introduce a good b/k.

@Paul: it's marketing, isn't it? Present it as outsourcing the accounts dept and your fee gets compared with the cost of an in house accounts dept: fee looks good value. Present it as b/k and it's usually compared to external accountancy costs: just extra overhead.

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04th Nov 2013 11:14

Bit of both

@RL - fair point.

I tend to split the bookkeeping, some done internally by me or Mrs KA, some done by freelance bookkeeper.

Usually the v small jobs, less than 1 hour a month, I'll do. 

Those that require a client visit, I use a freelancer.

More detailed jobs which can be done remotely Mrs KA will usually do.

I've also had a couple of requests for bookkeeping which I passed straight to a freelancer - no financial gain here other than knowing the bookkeeping will be done well and I can save time when I do the year end. 

In return the bookkeeper has referred several clients to me.

 

Looking forward I may have to adopt your suggestion more - put the end client in contact with the bookkeeper - keep me out of the arrangement meaning I don't get bogged down with any bookkeeping queries.

I have actually got 2 clients I'm in the process of moving into the cloud and thinking about it, I may pass the bookkeeping straight on to the freelancer.

 

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