Lyndsey wrote:

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I've also posted this on ICB forum, I'm not spamming :S 

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Traitor...

Hourly is the simplest approach but often not the most cost effective for your time.

If you intend to be working at client sites then you hit two problems. Charge hourly and they want you to justify every minute. Charge by the job and they will pile more work on you thinking that they can get something for free.

If you work from home / office you can charge a fair amount for the job and the client is no wiser as to how long it actually took. With only one exception that I can recall this has worked to my advantage.

Regardless of whether you actually charge by the hour or job try to set yourself a daily average that you need to take and work an hourly rate from that.

I have two hourly rates, £18 plus VAT for bookkeeping work and £35 plus VAT for Accountancy and Analysis work which I think are fair rates. When it comes to quoting for work I will generally add slack to my quote.

The hours are only really for my own thinking when calculating out a quote that I could justify. I don't actually tell the client that it will be (say) 4 hours at £18 per hour but rather I would be thinking four hours plus one hour slack bookkeeping and an hour with my accountants hat on so £115 plus VAT. If I do the work in two hours, result. If I hit problems and it takes all day I don't ask the client for any more money unless the issue was caused by something that they ommited to tell me.

As for how long a job takes, that one is really how long is a peice of string and number of invoices seems to have little effect on that as the old 80:20 rule invariably kicks in with 80% of the work taking 20% of the time.

HTH get the ball rolling,

kind regards,

Shaun.

 

Oops, embarrassing typo there!

Far less embarrassing where my chunky fingers just put the wrong letter in a word in my replies!

I'm really thinking that I need a trainer keyboard with huge chunky colour coded keys.

AliG wrote:

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I charge £25 per hour if that helps (no VAT).

 

Crikey AliG....where are you based?  

Makes me wonder that I'm well underselling myself.

 

Pauline

Hi Kris,

I think that the fact that my charging is based on a hybrid of hourly and fixed in coming up with a fair rate for the job is what gives me such a hard time explaining my approach to Bob as it neither fits into one camp or another but it works for me.

I think that if I were completely new to this like many others I would be looking for some form of matrix that dictated a quote whereas once you've done this a few times you generally develop the plumbers whistle and just know how long something will roughly take so quote a price that you are happy to work for that you know that you will make a profit on.

As mentioned, I think in hourly rates but they are just used as yard sticks. I could just as easily for the above example have said £25 per hour for five hours (or more likely £31.25 per hour for four hours) but say that to a client and their jaws drop whereas quoting a price based on what I think that job will take without mentioning the hours that one expects it to take and they generally seem quite happy... I do have one that no matter how reasonable the quote they will always try to get at least 10% off.

He didn't succeed on the base cost but when I quoted for some additional work I added 10% to my quote and let him beat me down which kept him happy.

Brings a whole new meaning to Know Your Client procedures doesn't it.

kind regards,

Shaun.

p.s. the above varies from Bobs value pricing in that I don't value the client but rather my time. I would never charge a client a different rate based on their turnover as crazy at it sounds that just feels to me unethical.

Kris, despite the fact that I absolutely LOVE your signature quote... am am shocked the not only do you actually have a name (desperation pricing) for this type of pricing, but that you have admitted to using such a thing. I'm not sure whether you are my worst nightmare or my hero.

Pauline, I am based in Bristol. I can charge what I do, because I can also guarantee that I can not only halve the time a companies current bookkeeper takes, but I can save them money at the same time. If I didn't have spreadsheets and fun formulae, I wouldn't be able to charge that much... so I do have to be grateful to technology & those who make it work.

I'd suggest you research and learn everything you can about pricing because it is a key driver of the success/profitability of a business.

My take is that there are fundamentally two approach to pricing bookkeeping/accounting services:

Cost/time based
This can be charging by the hour, or it can offering a fixed fee (based on the estimated time).

Charging by the hour is the simple. Fixed fees require a clear definition and there is potential for extra fees if the scope of the work extends outside the original definition.

Many accountants are switched to cost/time based fixed fees.

Value based
This is where the price to the value. A simple example is 25% of the tax saved so the fee will be different for different clients.

The key with value pricing is that you price the client, not the job.

In my opinion, this type of billing encourages a different type of service than traditional bookkeeping (e.g. data entry) and accounting (e.g. compliance).

For what it is worth, I am looking at adding value to my proposition and charge for the value.

Malcom

Accountants North London

Hi Malcolm,

welcome to the forum.

From your answer can I take it that you are a Crunchers franchisee?

I know what you mean about data entry and compliance work but to be honest the bare minimum seems to be all that clients are willing to pay for.

Going down the 25% of savings route would be entering the ethically murky world of contingent fee's which is severely frowned upon by some professional bodies (although I believe that strangely on this subject the ICAEW is more flexible on contingent fee arrangements than some of the others).

I cannot get away from the thought with these sort of arrangements that two clients are being charged possibly wildly different amounts for exactly the same amount of work.

That would surely make anyone place more emphasis on the work for the higher grossing client which is one of the reasons why bodies such as the ACCA are so anti this approach to pricing models.

Anyway, good to have you on board Malcolm and look forwards to chatting... I promise not to drag you into any conversations relating to that sheep ad which has been the source of much strong debate with Bob on the site.

kind regards,

Shaun.

Sorry, natural assumption as your website speaks of alternate accountants which is the thrust of Bobs sheep campaign.

Spamkebab wrote:

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Thrust and Sheep in the same sentence,

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Have I ever mentioned my Welsh heritage Neil?

And with that revelation another burst of Pepsi nasal spray

AliG wrote:

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Kris, despite the fact that I absolutely LOVE your signature quote... am am shocked the not only do you actually have a name (desperation pricing) for this type of pricing, but that you have admitted to using such a thing. I'm not sure whether you are my worst nightmare or my hero.

Pauline, I am based in Bristol. I can charge what I do, because I can also guarantee that I can not only halve the time a companies current bookkeeper takes, but I can save them money at the same time. If I didn't have spreadsheets and fun formulae, I wouldn't be able to charge that much... so I do have to be grateful to technology & those who make it work.

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I find this interesting Alison.  I think you said you don't do much bookkeepeing now, but if you had someone come to you on 15th January with a bag of papers needing them done for their self assessment, would you charge them the same, per hour, as the person who brought theirs in to you in May?  If so, where's the incentive to be on time?  

The AA do something similar where they charge you through the nose if you're broken down and then decide to join.  A plumber will charge you more per hour if you have water pissing out a pipe than if you want them to put a sink in.  Why shouldn't a bookkeeper?  

In my book, you get what you pay for and if you want it quick, you pay more.  What I should get clear is that I give upfront prices, I don't use ambush pricing (that is unethical).  My clients all know what they'll pay in advance.  I don't force anyone to use my services, I give a price and they decide if they are willing to pay it.

 

Kris

PS I got another distinction on my ICB Payroll YAY only SA to do now ...

Kris, I think that is a great way to look at pricing. I have to admit I have not been brave enough to increase my hourly rate if it is urgent, I always feel it will still take the same amount of time to do, whether it is in the normal working day or not, therefore more work will mean a higher fee.

I think I will start looking at trying this in January, particularly for my tax return work as I always get a few last minute ones!

Hi Bob,

I can see the logic to that but surely that would mean advertising yourself at a higher fee in order to come down to the real fee for clients who play ball.

In such instance with all other variables such as qualifications and experience being equal human nature would invariably opt for the professional advertising the cheaper fee's up front.

Another way to look at desperation pricing would be that where your time is already fully allocated (such as January) and someone needs an emergency then that's always going to be processed beyond the normal working day (regardless as to whether by choice one had been working that time anyway at normal rate for other clients).

Who anywhere works over the normal working day at normal time on a regular basis. You charge a premium for out of hours. If a client desperately wants something such as a report by the morning and they only ask you for it at 15:00 the day before then they know that there is going to be a premium involved whether that comes in the form of a higher rate or charging more hours than it takes is purely symantics.

Just to emphasise to others reading this though, this is not overtime, it's a rate variation. Any use of words like overtime and it's venturing into deemed employment territory.

kind regards,

Shaun.

Saving money is a powerful incentive and people probably prefer discounts to penalties.

We don't particularly use either way, we've focussed instead on a series of client email reminders for accounts work, getting stronger in emphasis as the year goes on. We've found it works very well, with long standing clients now bringing their books in 2-3 months earlier than previous years.

@Kris - I don't think so.

I am coming from this from the position that the service normally is say £500 and the provider wants to charge say £700 if the client leaves it late. So, I am suggested the price is set at £700 but there is a discount of £200 if the information is provided by X date.

If anything, clients will feel good paying £500 (the standard price) because they think they have saved £200. The clients who leaves it to the last minutes pays £700 for the privilege, or they can annoy someone else.