How much should BOOKKEEPING cost?

how much should bookkeeping services cost in this video i'm going to answer that question from two perspectives the perspective of a small business owner shopping for bookkeeping services trying to understand what's out there what kind of services they can get and the price of those services and also from the perspective of an accountant the accounting professional the bookkeeper that is going to provide those services hi i'm hector garcia i am a cpa i own an accounting firm and in my career i've been a data entry-level bookkeeper all the way to a small business advisor dealing with clients directly talking about high level strategy the point i want to make is i've been in many many roles i've also been a small business owner that wasn't an accountant that hired an accountant so i will try to bring all perspectives in here and let you be the judge on maybe which route you would want to charge your clients if you're an accounting professional yourself or if you're a small business owner what kind of approach would you like that accountant or bookkeeper to have when presenting your bookkeeping services so let's start by defining bookkeeping services now unfortunately the word bookkeeper gets tossed around a little bit loosely and it's not really well defined what exactly is bookkeeper or what is the role of a bookkeeper generally if you have an in-house bookkeeper a full-time employee depending on that person's skill level amount of experience and level of responsibility together with obviously the size of the company complexity of the transactions a full-time internal bookkeeper will cost anywhere between thirty low thirty thousand dollars a year all the way to maybe sixty seventy 70 000 a year of course this varies by state by city but just to give you an idea what it would cost to have a full-time bookkeeper of course in the lower end of the experience you're going to have those 30s and 40s and maybe a little bit higher in larger cities and on the higher end you're going to be in that 50s to 70s and again if that bookkeeper has a more of a controllership position and has a high level of responsibility as a full-time employee now i find that bookkeepers working in accounting firms they get paid a little bit less than full-charged bookkeepers in private industry and i think the reason for that is because they have a lot less responsibility and i'll explain where that nuance comes along uh because they're dealing with multiple clients so they don't have as much weight on their shoulders from a client to client perspective as a full-time bookkeeper would have with the full financial obligation as a controller inside an internal company so long story short a bookkeeper someone that serves in a bookkeeping capacity as a full-time employee will be a 30 to 70 000 a year employee now you also have to keep in mind that there are benefits and that person gets training and all that sort of thing so you can't really translate that to an hourly rate but i just want to give you that perspective in my accounting firm for example we do have some bookkeepers which are somewhere in the middle of that range but they're not 100 autonomous they we do have sort of senior accounting level staff people that work alongside of me that have accounting degrees and heavy accounting experience supervising that work and ultimately responsible for delivering that work and explaining the work and taking responsibility over errors with the small business owners so generally you would have this sort of two-person uh team up on an account while you have the bookkeeper that makes sure that they collect all the documents does the data entry categorizes all the transactions for the most part does let's say 80 to 90 of the work but then you have one second set of eyes with a little bit more experience just kind of tidying things up making adjustments and making sure that the financial statements presented from the bookkeeper are too standard right so when it comes to hiring a third party service whether it's a bookkeeping firm a firm that only provides bookkeeping or a full service accounting firm that provides bookkeeping alongside with some financial statement preparation accounting and tax preparation you should keep in mind that generally it won't be just one person touching that account so i don't want that perspective of how much potentially the internal bookkeeper gets paid to kind of determine what the price should be or or or whatever you might think i was getting to when i was explaining what the average salary of an ex skilled bookkeeper would be the perspective i want to give you if you're a small business owner is the alternative to hiring an experienced full-time bookkeeper in the higher end 50 or 70 000 a year it's outsourcing to a bookkeeping firm or an accounting firm that is going to charge you a fraction of that our firm doesn't have any clients that pay us five to six thousand dollars a month so we never we would never serve the same capacity as a full-time experienced bookkeeper full charge controller with responsibility so what we provide essentially as a as an accounting firm in the outsourced bookkeeping service is the work of getting all the transactions that are managed and controlled by the internal staff of the business not bookkeeper just their employees or the business owner and taking all that information and making sense of it by putting it together a set of books in quickbooks or another accounting system and presenting financial statements in which management or the owners can use to make better decisions about their business so generally outsourced bookkeepers won't do something that an internal employee could do stuff like opening the mail and paying a bill or reminding you to pay a bill answering the phone talking to clients to collect invoices negotiating with vendors that would be all the things an internal bookkeeper would do and you would not get that when you hire an accounting firm so when i answer the question how much should bookkeeping services cost i'm specifically talking about outsourcing your bookkeeping services to a professional bookkeeper an accounting firm an outsourced bookkeeping service now let's talk about some numbers so generally and this is just a really really rough rule of thumb you want to take a look at your total sales or your total expenses as a as a determination of potentially how complex or how many transactions you'll be dealing with to kind of figure out what the workload would be so generally accounting bookkeepers they'll look at the total sales total expenses and they look at percent ranges so we take half a percent for example all the way to two percent so let's take a look at and this is uh per year so let's take a look at a company that sells a million dollars for example so generally depending on the complexity we would be somewhere between half a percent of a million dollars and two percent of a million dollars in sales so that's five thousand dollars a year to twenty thousand dollars a year that roughly translates between four hundred dollars a month to about fifteen hundred eighteen hundred dollars a month that would be a pretty good range i could use now i'll tell you i have some clients and i've had some clients that are in that range in sales with a pay a little bit less than the equivalent of five thousand dollars a year and i do have some clients in that same range in sales that pay a lot more than twenty thousand dollars a year not not double but a little bit more above that and the point well the reason why we use that range is because again we take a whole bunch of companies and we try to figure out kind of what's in the middle but certain nuances and complexities will cause that accountant or bookkeeper to price services different for example if you're working with e-commerce and you have multiple sales channels and you need the bookkeeper to keep track of all the sales per channel double keeper has to do a little bit of extra work it needs to pull reports from your different e-commerce platforms or whatever and and make adjustments so that it so you can have sales by e-commerce channel presented correctly in addition to that uh you might need more sophisticated software so some of the basic i would say sub 50 a month uh cloud accounting software that's out there could not give you a profit and loss by cost center for example your um if you go with quickbooks for example uh with quickbooks online you'll be paying anywhere between 70 to 100 a month for an accounting package that could do multiple cost centers so you can have a profit and loss by channel or by whatever department or whatever category or classification you would like to use that's just one simple example in the construction industry for example uh bookkeepers sometimes are asked to job cost that means take every single expenditure that you see on the banking credit card and identify which cost it belongs to now generally speaking on the digital data or the bank statements and credit card statements that are given to us the information about what job each of those expenses are for is now there so we have to look at spreadsheets or look at other documentation even physical receipts that have markings on them and we're going to read through all that to figure out how to assign those expenses by job so something like that would also be in the higher end in that pricing range so again all sorts of different levels of complexities whether it's in the income level or in the expense level that's why we look at sometimes as their revenue and sometimes we look at the expenses so we can try to find complexity and figure out what the workload is now i'm a big proponent of value pricing and i'll explain methods of pricing and methods of pricing the job but a proponent of value pricing wouldn't look at the workload and we'll look at the value we provide for the client so if we are specialists and we can do something that other people can't and we can deliver other services around the bookkeeping such as advisory training fast response a unique system in place for the client to deliver documents or inquire the information uh special apps and platforms that we give that we work together with the client to uh move the data around and that sort of thing that's going to potentially be a point where we can add more value and we don't necessarily need to focus too much on the workload we focus too much on can we uh give a client more value than what they're paying us in return and that's really the point right when you're a small business owner and you're going to pay whatever it is 2 000 a month or 500 a month for bookkeeping in exchange your return investment needs to be higher than that so taking the work load off to give it to a bookkeeper the peace of mind of being compliant or potentially not losing money because you're making errors and not catching things early enough all that stuff needs to mathematically economically be higher than what you're paying for the bookkeeping services so as a person that's as a proponent of value pricing i very much understand that concept and i'm gonna develop that concept a little bit later on so whether you're a small business owner or a bookkeeper you understand where we're coming from when it comes to that let me backpedal a little bit and talk about some of the traditional ways that you wouldn't you will encounter some accountants and bookkeepers pricing your bookkeeping services for example some accountants and bookkeepers might charge by the hour they might say look i'm going to charge you 50 an hour 200 an hour whatever the number is to do this work so in some months it could be 10 hours of work some months could be 30 hours of work you will have eso price bill at the end of the month now generally to be fair and i've i've done hourly before and i worked with accountants i do hourly before first couple of months are a lot more valuable afterwards the once the account of the bookkeeper kind of gets on a rhythm they do get better and better and they get penalized for for the lack of a better term for being more efficient and start lowering the amount of time they actually spend on the job so if you are a small business owner and you are betting on the fact that your accountable bookkeeper will get better over time then the hourly rate might be something that you like but you're going to take the brump the brunt of the uncertainty at the beginning and yes there might be a month or two where you have a major change in your business you bring a new platform you have a new vendor you open your bank accounts you add a new form for the clients to pay you you have a new system in place to upload documents that you want the bookkeeper accountant to use all those variables could change the amount of time they'll spend because there will be a learning curve now contents of bookkeepers love to charge by the hour in my experience as i mentioned before for professionals people that do this for a living you're going to be in that 50 dollar to closer to a 200 uh range the 200 are the most experienced ones that charge tight but typically you don't see a lot higher than that in an hourly rate even if it's a cpa which we normally are above the 200 dollar range but uh typically bookkeeping most people wouldn't pay more than that that's typically the range for someone that's a pro that knows what they're doing someone that's just getting into this that's kind of having a side hustle bookkeeping services business or just just started and doesn't have the confidence to charge more might be charging between 20 and 50 an hour and if you're a small business owner and you find someone that can do that look if they are good that's a steal it's a great great price at the end if they don't take a surprisingly crazy amount of hours there are going to be less expensive than hiring a full-time employee the problem is in my experience that that 20 to 30 an hour uh external bookkeeper it's might not be experienced enough to do the job right and if your business is growing at a pretty fast pace and you do need those numbers to be accurate you need to trust them that's when my confidence on paying that little per hour anyway starts eroding so what's another alternative to paying by the hour a lot of accountants and bookkeepers will charge per task and that's a little bit more complex or per or per outcome and the way that translates it would be per number of transactions or per bank account so some accountants that bookkeepers say well i'll take a look at every single debit and credit that goes through your banks and credit cards i'll count them at the end of the month i'll give them a price per unit and that would be what your bill looks like now that's a little bit more tangible for a small business owner because you can actually see and you can count them and it shouldn't be it should be a little bit less surprising and it'll feel a little bit more fair per se because it's not really about how fast they go or how low slow they go you pretty much determine that because of the number of transactions they did more work or less work but don't let that fool you with quickbooks online with quickbooks desktop even with many accounting systems you can program and automate the accounting system to enter 20 30 40 50 transactions all in one shot if they all follow the same pattern so if you go to amazon 50 times a month and it's all office supplies you don't have to look at any of the details that stuff will be categorized super fast but if you go to let's say home depot and you have to categorize it per job or you write a bunch of contractors checks and i have to read your handwriting per check to figure out you know who are you paying and what the check is for that's going to be a lot different so again those the number of transactions are not always a perfect indicator but they they are more or less in a macro level in a high level view a good indicator of how much work it will be so that's kind of the second option so we talked about roughly we talked about pricing based an hour and now we talked about pricing based on unit on the transaction on the task per se the third way to do this and this is what i talked about earlier is to charge a flat fee a flat fee where you the accounting bookkeeper looks at the job looks at best case scenario worst case scenario and tries to come up with a number somewhere in the middle but before they give that number they try to determine what does the customer get out of that flat fee can the customer extract double triple just an amount above what they're paying of value from the work and if they can then that account or bookkeeper will give you a flat fee now how do they determine the flat fee that's where value pricing comes into play so value pricing means they'll figure out how much value they create for the customer and charge under that that way it's essentially fair now these are subjective topics so um what's valuable to an accountant that was valuable to a small business owner might be different but that's why you need to have a conversation a value conversation discuss what do you want to get out of this bookkeeping services what are the outputs like the reports and what are the outcomes what results would you like these services to affect positively positively in your business so once we have that conversation that we can determine okay let's come up with a price and a lot of these prices are pretty much made up i mean again they're based on our perception of the client's perception of value and at the end of the day value pricing is probably the most fair because there's no such thing as fair and and and i think it's the most fair because they're agreed upon ahead of time so when you're a small business owner if you think fair means a low hourly rate and don't spend too much time please don't make any mistakes then you will be at odds with the concept of value pricing because with with value pricing it it's fair because we agreed up front bottom line who cares if i worked extra or i didn't i don't want to be penalized for being good and being efficient and the client a small business owner doesn't want to be penalized for the accountant learning and making mistakes because we're all learning all the time no accountant is perfect i learn things on the daily i admit them so again long story short that would be my preferred method to be able to talk to the small business owner the business manager and ask what do you want to get out of this what kind of guarantees can i give you if i can guarantee that result what would that be worth to you and exchange if i can figure out what the value is as long as i come under that then we have a fair exchange now with value pricing with flat fee price and by the way accountants and people in this business we call it value pricing but in the real world like uh uh small business owners buyers just call it flat fee right so for from a buyer's perspective they know what the fee is the the monthly fee whatever it is they they know what it is is agreed upon they pay it no surprises from the accountant's perspective because we want to maximize our earnings while we also maximize the effort and attention and love we give to our clients so we can deliver those guaranteed results so those results that we talked about that were basically table stakes that we needed to deliver um you know so in order to be able to do all that we need to understand more or less what's the value to the client and again those numbers are never mathematical the way an hourly rate would be or a per transaction uh rate would be or something based on complexity right there's a fourth way of charging which is an interesting one and it's one of the things that you're seeing more and more which is a subscription model and subscription it's a little bit similar to value pricing in in the perspective that it is a fixed fee it's not a variable rate but with subscription the service will need to feel more streamlined like turn on turn off type of thing so it should be relatively easy for the client to stop and start the service to not get charged a cancellation fee not get charged a year upfront not force someone to set up a one-year contract a lot of accountants do that they set up contracts of some sort it just feels like buying an app now as an accounting firm subscription services are a little bit harder for me to offer just because i have to build an infrastructure that means people and systems and technology so i could take the let's call it the losses per se of those start and stop easyget onboard and off board type of type of deals and in our business the beginning of the engagement is typically the most expensive part because that's where we're number one organizing the client cleaning the client up and also understanding the account in the first place so if we have a client start stop or only stay with us two three months on the toughest months then it becomes kind of difficult now with subscription services if you're an accounting professional you could productize it productizing means that you price it up front before you talk to the customer that means that you design a service with a limited scope that's very explicit if we do this but we don't do this and we do for this type of client only with the circumstances and for the client this is awesome because they don't have to work very hard to come to look at a price they look at the website and they see a price and they say one of these options are for me but again i think that in order to get to offering a subscription service and i'm talking to my bookkeeping and accounting friends it's you gotta kind of have the infrastructure to be able to get clients on board and off board quite a bit if you're to work with the type of recommendation to account as a bookkeepers if you're going to work be working with the type of clients that require some handholding at the beginning some clean up some organization at the beginning i think you should go with value pricing just because it would be a little bit less unpredictable per se of having a productized subscription service up front that clients kind of fit into right so one of the examples i can give you of a productized subscription service would be like your internet service right internet service gives you a thousand megabits 500 megabits whatever the speed is and regardless of how much bandwidth you use you're picking it based on speed per se right so so the cable company builds infrastructure around those services up front and gives you the ability to connect and disconnect the service that experience when there's no contracts or no special pricing when it's just you know cancel any time type of thing it's very pleasant for the customer right like netflix you turn it on pay the 10 to 20 a month turn it off whenever you want and that's kind of what subscription services are it's being able to deliver professional services in a way that it feels like an app and i think that subscription services sometimes because of the infrastructure that you need to build around that will turn a firm into a sort of less high-touch service just so they can build limited scope services to to to serve multiple clients but it might not be necessarily true if if you're an accounting firm and you create subscription services of a minimum of let's say three thousand dollars a month then based on the original um kind of formula percentage i gave you you're going to have some of the higher size clients in the small business world and therefore you're going to have less number of clients and then you can give them more attention so those are kind of the concepts that are out there so again let's say you are a half a million dollar business that means you your sales are half a million dollars you don't have high levels of complexity in terms of uh recording income by a particular category or expense by a particular project straightforward service-based business no inventory you can expect that half percent to two percent rule to be there so that means that you could you could essentially find a bookkeeping service for anywhere between two hundred dollars and say a thousand dollars a month and of course if that accounting or bookkeeping service those clean up-to-date dependable accurate financial statements allow you to make better business decisions and you can get in exchange more value than what you pay for that you should have no issue pay for it so that was just again a very long-winded way to kind of go through and explain that but i hope that whether you're a small business owner or a bookkeeper an accountant that you can see all perspectives and see which one is going to work best for you i really recommended value pricing i actually sell a spreadsheet for presentation i'll put the link in the bottom below it's what i've been using to present value price services to my clients and my clients love it they love the clarity of having a spreadsheet with different columns with the price with the features and you can use this spreadsheet for um either the subscription method or the value pricing method anything that's flat fee and because if you're gonna charge an hourly rate of course you're gonna have you don't need a sheet like this you just have a a rate right this per hour and then you trust that your time keeping system is fairly counting the time the amount of time you're spending and the client needs to trust that whatever you're charging them is correct again because there's just so much potential um uh room for error on tracking somebody's time um i find hourly willing to just be to just be against what the customer wants and against what the accountant and bookkeeper wants and and the reason why i'll say that is let's say for example you're categorizing um some expenses for some client and then you start seeing a client that traveled to some country that you've never been to and you see a bunch of vendors that you never heard of before so the bookkeeper is actually googling all these things and it's learning that these are restaurants or this is how you say restaurant in french or whatever and then they start learning the pattern so when you when i'm dealing with that particular client i went to this country that i've never been there before with happy to speak french whatever it is i'm taking an extra 30 minutes or 45 minutes to learn this so if i were to include that in my billing that's technically almost kind of unfair because of my next client that has a similar transaction i already have that knowledge i already know what to do i can do the same time the exact same output of work in a quarter of the time because i charged it to the other client that i learned there for the first time so for that reason there's just no true true fairness when it comes to charging by the hour and while it feels to the accountant bookkeeper that that's a fair play a way to charge and i feel some small business owners ask me for an hourly rate and i and they think that's fair it's not so i'm a big proponent of charging a flat fee i give you those percentage arranges just as a as a guide but just keep in mind your particular needs how how fast you want to work how much response time you want how quick response time you want what other services around just bookkeeping is there advisories or training is there support for other activities included all those things will affect ultimately the price because bookkeeping is not the same thing for everybody unfortunately unfortunately bookkeeping is a subjective term so fortunately for me as an accountant and bookkeeper i can educate my client and tell them what i perceive bookkeeping services to be and then after that is transparent and well explained then the small business owner can explain what they expect the bookkeeping services to be and then you bridge that gap negotiate and come up with a flat fee that you both will be happy with so anyway if you're an accountant bookkeeper check out the link in the description you will love you're going to love my spreadsheet guaranteed if you're a small business owner or if you're anyone and you like this video go into the comment section and ask questions let's get conversation going what do you think about all this you know how do you want to be charged as a small business owner how do you want to charge as an accountant or bookkeeper what challenges do you have charging flat fees value pricing subscription whatever it is and as a small business owner what kind of good experiences or bad experiences have you had with paying for bookkeeping services so i hope that was helpful that came from from the heart from experience and i hope that you get value out of this video thanks and i'll see you on the next one

Channel: Hector Garcia CPA

Views: 58,504

Keywords: bookkeeping, bookkeeper, accounting, bookkeeping for small business, bookkeeper job description, be a bookkeeper, how to be a bookkeeper, accounting for beginners, value based price, pricing strategies, how to price bookkeeping, quickbooks online, start bookkeeping, value based pricing, bookkeeping clients, pricing strategies for services, pricing bookkeeping services, outsourced bookkeeping pricing, bookkeeper salary, bookkeeping salaries, bookkeeping hourly rate

Id: 2Js8cHiBGmo

Length: 30min 34sec (1834 seconds)

Published: Wed Jun 02 2021