Pricing Bookkeeping Services
Do you wonder what to charge for your bookkeeping services? Figuring this out can feel like tiptoeing through a pricing minefield. The choice you make today directly impacts your profit margin and your time – for years to come.
Setting your fees is one of the primary challenges that accounting professionals face. In fact, McKinsey, an analyst firm, claims that 80 to 90% of services are priced too low.
Most of us start out as employees, working for someone else. Wages, traditionally, are tied to time, technical skills and tasks. That’s true whether you were paid an hourly rate or a salary. Naturally, you continue with a similar price strategy with your own accounting practice.
Here’s what we’ll cover:
- The common pricing options
- How much should I charge monthly?
- The time / money sacrifice
- How to package your bookkeeping services
- Start to package your services
- Monthly bookkeeping packages
- Offer three monthly bookkeeping packages
- Fixed fee bookkeeping packages
- Bookkeeping price packages
- Sample bookkeeping packages
The Common Pricing Options
As your accounting practice grows, your price strategy evolves over time. No matter which option you choose, your prices ought to meet these criteria:
- Your services are profitable.
- Clients recognize your value and are willing to pay your fees.
- It’s a win-win for you and your clients since you are both happy with the pricing.
Now that we’ve set the criteria, let’s quickly review the three common pricing options.
- Hourly rate. An hourly rate connects your fees to time. This is the most common way to charge for your bookkeeping services, especially when you first start out.
- Fixed fee. You charge a set rate for the service. You estimate time and cost to establish your set fee. Some bookkeepers add in profit margin as a buffer for the unexpected.
- Value price. This price strategy seems similar to fixed fee since it’s a set price. With this price strategy; however, you price the client rather than your time and costs. As a result, you enjoy a higher profit margin for your bookkeeping services without working any additional hours.
How Much Should I Charge Monthly for Bookkeeping?
Wondering how much to charge for monthly bookkeeping is the million-dollar question.
Whether you charge by the hour or offer a fixed fee, both are considered competitive pricing. Most bookkeepers who competitively price their services focus on tasks and time. Since you’re selling the technical side of your service, potential new clients will compare your rates to others who offer a similar service.
Some research answers your questions about what to charge for your bookkeeping services:
- How much do other bookkeepers charge for their services?
- How much are clients willing to pay?
- Do I offer lower rates when first starting out?
Competitive pricing has a downside. It emphasizes your technical skills and minimizes your expertise.
You initially work with low value clients. As a result, your bookkeeping practice fills with price sensitive clients who value your low rates more than your expertise. The client experience is primarily transactional since you need more clients to meet your income needs.
The Time / Money Sacrifice
Connecting your fees to time causes, what I call, an upper limit challenge. Eventually, you max out your time. When you run out of time, you cap your earning potential.
The only way to earn more is to work more. This leads to burnout and exhaustion. Then you start to sacrifice quality of life. Do you skip your kids sporting events, stop hanging out with friends or cut back on regular workouts at the gym?
Follow these 5 steps to price your bookkeeping services so it reflects your value.
- Value. Charge rates which reflect your value. It requires courage to do this.
- Separate. Stop offering an hourly rate. Start to separate your fees from time.
- Fixed fee. Charge fixed fees for all of your services. Confidence grows over time. I recommend value pricing instead of the fixed fee model.
- Bundle. Package your bookkeeping services. Offer options to potential new clients. This FREE resource shows you the 9 steps to package and price your bookkeeping services.
- Communicate. Get comfortable communicating your value. Significantly grow your bank account with this small shift in focus.
Susan, a bookkeeper, worked 7 days / 70 hours per week when we first met. Exhausted and burned out, she knew this wasn’t sustainable. Here’s what happened when she followed the 5-step price strategy.
Susan earned an additional $56k in revenue in 9 months. Now here’s the bonus, she reduced her work hours without lowering her income. Susan currently works 3 days / 20 hours weekly. As a result, she’s regained her personal time and reduced her overwhelm.
How to Package Your Bookkeeping Services
Clients need a variety of services, ranging from basic to complex. By bundling services together, you separate your fees from time. This, of course, allows you to charge more without working any additional hours.
Packages emphasize benefits and outcomes; not tasks. Let me explain.
As a bookkeeper, you know exactly how to categorize expenses and accurately close out the books at the end of the month.
Your clients want you to maintain their financials so they are accurate, eliminate surprise tax bills and improve cash flow.
That’s the difference between tasks and outcomes. You know the mechanics of bookkeeping, possess the software and how to create reports. Your clients care about what’s possible because the financials are accurate and current. This allows them to make better decisions and remain compliant with their taxes.
Most bookkeepers emphasize tasks when meeting with potential new clients. I’ll bet your clients place higher value on the outcome – not the tasks. Consider what’s important from your clients’ perspective. Packages include a set of tasks – which is important to you. Those tasks offer a specific outcome – which matters to your client.
Start to Package Your Services
Let’s start to package your services. First, set time aside to list all of your bookkeeping services. Do this on your yellow legal pad or a spreadsheet. If you’re like my clients, you probably do some services without charging for them. Add the services which you currently do for free to your list.
Now consider the variety of clients you serve. No two clients are the same – their needs differ. Although that’s true, you do a set of core tasks for all of your clients. Highlight those tasks.
Once you consider your clients and listed your services, let’s start to bundle your services together. Remember the outcomes have greater value than individual tasks. By the way, educating your clients about the outcomes positions you as an expert instead of a technician.
Monthly Bookkeeping Packages
People, in general, make decisions by comparing one option against another. That’s true for your clients, too. When you offer one package, clients decide whether to engage your bookkeeping services or go with another option.
Tip the odds in your favor by offering options. Clients now decide HOW to work with you instead of IF to work with you. A small shift in wording significantly impacts your bottom line.
Offer Three Monthly Bookkeeping Packages
Three package options are the sweet spot. With a tiered structure, each package provides incrementally more value.
American Express credit cards are a great example. The basic card is their green card, which has the least amenities. The gold card, higher up in the tier, includes more perks. Black is an invitation only card for premium members. The $10,000 initiation fee and $5000 annual fee offers cardholders exclusive amenities and concierge service.
I work closely with my clients to develop their monthly bookkeeping packages.
- Silver. This option meets your clients most basic needs. It’s the ideal choice for price-sensitive clients, start-ups or clients with basic bookkeeping needs.
- Gold. The majority of your clients will opt for the gold package. This package includes the services most of your clients need – and possibly a little extra.
- Diamond. Clients with more complex business structures, or in a fast-growth mode, benefit from the diamond package. It’s customized to meet the exact needs of your premium clients. Clients who opt for the diamond package value access to you and prefer faster than average response times.
Educate your clients about the various packages. Then, discuss which option will best fit for their needs. Since packages emphasize outcomes rather than functions, some clients will opt for a higher package than you expected.
Benefits to Packaging Your Bookkeeping Services
Packages separate your fees from time. As a result, what you charge for your bookkeeping services reflect your expertise rather than the tasks. You client list fills with high value clients who are not price-sensitive or question your fees.
As you know, experience and technology improve efficiency. An hourly rate discourages efficiency simply because you earn less when you speed up your process.
Clients who enroll in packages do not watch the clock. When your processes become more efficient, and faster, your profit margin improves. Packages reward your expertise and speed.
By the way, some growth-minded clients will initially opt for your lowest package. This lets them get started with your bookkeeping services. But, they’ll set their sights on the next level package. As they grow, they’ll eventually move up to the next tier.
Fixed Fee Bookkeeping Packages
The move from an hourly rate, which solely charges from your time, to a fixed fee feels risky at first.
Create some price strategy processes to avoid three potential pitfalls.
- Don’t price your services too low. Otherwise, you end up with low profit clients.
- Old habits die hard. You continue to calculate the fixed fee for your bookkeeping services by time and costs. Since packages bundle your services, it’s a golden opportunity to transition to value pricing.
- Add-ons. Some clients will require additional services over time. Don’t end up doing more work without getting paid for your services – especially if it’s long term. Create a procedure to address scope creep. Then, follow through with your process.
Don’t leave money on the table. You earn more when consider value from the client’s perspective. Value pricing, unlike fixed fee, prices the client instead of the service.
Bookkeeping Price Packages
At this point, it’s necessary to decide what to charge for your bookkeeping services. Salaries start at $15 per hour. Whether you’re a freelancer or a firm owner, set your rates higher than the industry average suggests.
Remember the upper limit challenge I mentioned earlier? Well, I encourage you to challenge your limits. Basically, your self-esteem influences what you charge for your bookkeeping services. Yes, low self-worth = low rates.
Your rates ought to reflect the value of your service. Prioritize outcome and benefits instead of tasks and time. Understanding value is a game-changer. It’s possible to double or even triple your fees. Once again, it’s a mindset shift where you price the client instead of the service. If that interests you, then grab the FREE resource to package and price your bookkeeping services.
Sample Bookkeeping Packages
Reanna initially worked with any client who was willing to pay her fees. Because she was service-oriented and wanted to please her clients, she let them dictate the processes. Saying no to special requests challenged her limits.
As you can imagine, her business was running her instead of her running her business. We started to put boundaries in place so she no longer worked with clients who treated her like an employee and didn’t respect her.
Some of the processes include pre-screening clients to ensure they valued her services. And, offering packages to avoid giving away work for free or under-charging for her bookkeeping services.
Strategically shifting from an hourly rate to packages and value pricing bought added $100k+ to her bottom line. With the additional cash flow, she hired a bookkeeping assistant. By doing so, she now focuses her time primarily on business development and advisory services.
Confidently Charge for Your Bookkeeping Services
Are you ready to package your bookkeeping services? I’m always pleased when a bookkeeper shares her decision to transition from an hourly rate to value pricing. And, the benefits which occur.
Follow the steps to confidently charge for your bookkeeping services. Consider what’s possible if you increase your revenue two to three times more without working additional hours. You end up with clients who respect and value your services. Your bank account grows while lightening your workload. And, you run your business instead of having your business run you. Now’s the time to access the FREE resource to package and price your bookkeeping services.