I do the books for an IFA. From 2013 the way IFAs are allowed to charge for work is changing, and I'm told they'll need to charge per hour (or similar) rather than take a commission.
My client asked me the best way to calculate an hourly rate. I know how to work out my own charge out rate but I'm not sure if its the correct way for my client.
Any other bookkeepers had this question before?
Cheers
John
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John
Full Time Book-keeper, Dad of 3 Teenage Girls, Part-Time Taxi Driver :)
By IFA I assume that you mean Independant Financial Advisor. On this site IFA tends to be used for a member of the Institute of Financial Accountants. That's one of the many three letter acronyms that you need to be wary of.
strange that a client is asking you what they should be charging!
The only reason that I can think of that your client would ask you this is that you know their annual income. However, how they get to that income could be from wildly different commissions so setting an hourly rate for any given client is difficult to estimate.
One sollution would be for the client to look at the charge rate of what other people in their profession are charging and they might be best to adopt similar hourly charge rates. As this is not changing until 2013 maybe best that they wait to see what others charge before setting their own rates.
Another approach might be for your client to look at the commissions that they would have revceived for any given job and then charge that rate for the job at hand. In that instance there would be no set hourly rate.
Your best approach is to just point out to the client that at the moment they earn x amount and to continue to earn x amount they will need to cost each job individually based on the commission that they would have receieved previously.
All in all though it's really not your job to tell your client the rate that they should be charging going forwards, only to inform them what they have been charging in the past and using that information they should be able to calculate their own charge rate.
On a different matter there may be new credit control opportunities for you here as if they are charging by the hour I assume that they will be paid by the client rather than by the insurance / investment companies as they have in the past. Maybe time to inform the client that you will be offering a debt collection advice service in the future?
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I actually think they are better off doing a fixed fee, something that matches the commisions they woukd have received under the earlier format. I don't tend use hourly rates, more if a value based approach.
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JohnBoy, if this is still an issue, I suggest your client join IFALife and ask there. In fact, join anyway! It's a free online professional network for IFAs.
