I am relatively new to bookkeeping (I am ACCA qualified and have spent the last 30 years in a Corporate Finance role) and I am just about to take on my first payroll client.
However, I don't really any idea how to charge for payroll. I would prefer to charge a fixed fee rather than an hourly rate and set the client up on a standing order. I do know one Accountant who charges £10 a month to process one employee, but I am not sure what she charges for subsequent employees.
Hi Dawn,
Believe it or not many people doing payroll charge as little as £1.50-£2 per payslip, including returns.
I believe that unless you are doing a huge number of payroll clients there's really not much money in it.
Kris
Thank you for your reply. I don't particuarly want to do payroll, but she is an existing client who is just starting to take on employees. I think I will say that I have a minimum charge of £10 for one employee and it will be £2 for each additional employee. Does that sound reasonable?
It's different if she's an existing client. That's the only people I do payroll for, but it was one of these things that sneaked on when I took my eye off the ball so I haven't increased my charges yet. I don't do it myself, there's a very kind member here who does it for me for just £2 per payslip.
If you have the software and inclination go for it, £10 then £2 seems fair if they're happy to pay it.
There's no easy answer to this but I want to seek opinion on a related matter and it might help to share the following.
I normally provide payroll as an ancillary service only but made an exception for a chartered accountant friend who's son, upon qualification had gone into a professional business with his friend from university. It seemed simple enough so I quoted and charged a flat £20 per month plus £50 for EofY Returns. I immediately got roped in to a back-pay squabble and made a loss even with charging again to do several months payroll.
They have (another) semi-retired CA to do the accounts and, unbelievably had yet a further firm to do the individual Tax Returns and BIK's. The friends son left after a while so there were further squabbles but I was happier this would simplify matters and I offered to do the SA to consolidate his advisers. A year later, I was re-doing an earlier SA which didn't agree with a P.35 I'd filed.
The thing that has always confused me is that the semi-retired accountant has always seemed to expect me to decide how much salary they should be paid even though I've never seen the accounts or books! I must have set out the usual (minimum wage + dividends) standard advice four or five times. Anyone a clue why he thinks I should be giving tax advice?
@Dawn - pricing is the number one driver of your profits so I'd recommend you master it.
There are three models...hourly rate, fixed billing and value pricing. Different people prefer different models but the evidence is that value pricing (when done well) produces the best results. But, it requires a change of perspective. The idea is to add value to basic service and price the client, not the job.
Oh dear, I don't think I could justify charging two different prices for exactly the same work. It seems very unfair...
(reminds me of a well known national exhaust/tyre/MOT etc.. repair places, who once quoted three times the price of my other quotes for a new exhaust, on the basis that one in ten customers pay it without quibbling. When challenged, they said "oh, but we'll price match", but the damage was done - so to speak - and I went elsewhere, as did others I mentioned it to)
-- Edited by Figurate on Wednesday 25th of April 2012 09:36:50 AM
@Dawn - my post was designed to encourage you to research/study pricing, not to question if you know pricing is a key driver of profit.
Having said that, knowing that pricing drives profit doesn't mean you've mastered pricing as a discipline. And, to explain how important this is, I know an accountant who charges £75 a month for one employee because he is niche, prices the client, not the job or how long it takes.
There are also a hell of a lot more than three pricing models but think we'll keep that as our secret.... Oops, just told everyone.
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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 could be completely misunderstanding what you mean by value pricing but are you not there advocating charging different clients different prices based on their income which surely assumes that clients don't talk to each other.
It's certainly something that I've been victim of myself but as soon as you find out your being priced based on your income rather than the work being done for you then you simply dump the accountant and make sure that non of your freinds or acquiantances use that accountant which has to make that pricing model the biggest anti marketing option available?
As I say, maybe I'm misunderstanding what value pricing is.
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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.
That was how I read it first; but is it actually pricing the fact that the client requires a niche service rather than his income so the premium pricing model applies to the service?
I have been approached this evening by a potential client who is a coaching consultant earning approx £30k month. I won't charge her anymore than I would charge any other client with the same number of transactions. Whilst her income is high, her number of transactions/complexity is relatively low. I wouldn't dream of charging her any more.
Also, I don't understand a 'niche service'. A set of accounts for one client is the same as a set of accounts for any client................. am I missing something?
Not as far as I can see. But I think Hal has hit the nail on the head and I'm seeing a light at the end of the tunnel (of course it might be a train coming!).
Thanks Hal,
That actually makes a lot more sense.
I can understand the idea of a niche service such as solicors accounts, forensic accounting, producing prospectice financial information, etc.
For that yes, there is complete justification in charging a different rate for services similar to my practice where I charge a substantially higher rate for process automation work.
But, to me that just seems like common sense and don't we all already do that?I mean, we would all charge differently for preparing information for the bank manager than preparing a VAT return wouldn't we?
All in all I think that fixed pricing or hourly pricing are both the same thing as value pricing in that you charge the rate, whether by the hour or by the job for the complexity of the work that you are doing.
Sure that Bobs under the impression that I'm some new age luddite but I'm really not as anti change as I may come across. I'm just anti change for the sake of it. Prove to me that I'm embracing something different and better and I'll change.
Maybe coming from an industry where we seemed to get a new methodology every other day where under the hood they all did exactly the same thing but using different terminology has made me a little jaundiced towards such things.
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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 think I am begining to understand bobs pricing model. Its seems to be based on talking to the client and finding out their issues and solvong them thus being able to charge more, even if these are only percieved issues. Dawn, I disagree that its not legitimate to charge someone more based on their turnover, this was something that was part of my pricing matrix before and will be again when I remove the quote system from my website. I have also used a method of pricing by desperation in the past when I sense the client is in a mess and desperate for someone to take it off their hands. This may mean a missed tax deadline or just that they come accross as stressed. Again I think this is legitimate. I'll be honest I aim for as high a price as I think I can get away with without making the client cringe. Is this value pricing bob? Its not easy for 2 clients to compare bookkeeping prices as their services and needs are rarely identical. I may come across as a snake oil salesman, I'm not. I have a client who is a photographer, he earns £60 an hour minimum. Are my skills less than his? Probably not. I do in an hour and a half what it would take him 3 hours to do. I save him £180 of his time and charge him £80. He's happy, I'm happy is that wrong? Equally I have a plasterer who is scraping through right now. I charge him £40 for the same work pretty much. I know any higher and I lose a client, so its still worth it. He's also referred others to me in his time.
Sorry for going on.
Kris
I think I am begining to understand bobs pricing model. Its seems to be based on talking to the client and finding out their issues and solvong them thus being able to charge more, even if these are only percieved issues.
I believe this is how management consultants operate :)
