How much should BOOKKEEPING cost?

How

much

should

accounting services

cost

? In this video, I'm going to answer that question from two perspectives: the perspective of a small business owner purchasing accounting services and trying to understand what's available, what type of services you can get, and the price of those services. and also from the perspective of an accountant, the accounting professional, the accountant who is going to provide those services. Hello, I am Héctor García, I am a certified public accountant, I am the owner of an accounting firm and in my career I have been a data entry level accountant. the path to a small business advisor who deals with clients directly by talking about high-level strategy.

What I want to make clear is that I have played many roles. I have also been a small business owner who was not an accountant and hired an accountant. So I'll try to bring all perspectives here and let you be the judge on which route you would like to charge your clients. If you are an accounting professional or a small business owner, what type of approach would you take? like that accountant or bookkeeper when introducing your accounting services, so let's start by defining accounting services now, unfortunately, the word bookkeeper is used a little loosely and it's not really well defined what exactly a bookkeeper is or what is the role of a bookkeeper in general.

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 along with, obviously, the size of the company, the complexity of the transactions, an in-house bookkeeper full time will

cost

between thirty and low. thirty thousand dollars a year up to maybe sixty seventy 70,000 a year of course this varies by state and city but just to give you an idea of ​​what it would cost to have a full time bookkeeper of course on the extreme At the lower end of the experience, you will be between 30 and 40 years old and maybe a little more in the larger cities and at the upper end you will be between 50 and 70 years old and again if that accountant is in a more of a controller position and has a high level of responsibility As a full-time employee I now find that accountants working in accounting firms are paid a little less than full-time accountants in private industry and I think the reason for this is that they have

much

less responsibility. and I'll explain where that nuance comes from, because they're dealing with multiple clients, so they don't have as much weight on their

should

ers from a client-to-client perspective as a full-time accountant with the full financial obligation would. as a controller within an internal company, in a nutshell an accountant, someone who works as an accountant as a full time employee will be an employee of 30 to 70,000 a year, now you must also keep in mind that there are benefits and that the person you get training and all that kind of stuff, so you can't really translate that to an hourly rate, but I just want to give you that perspective at my accounting firm, for example, we have some accountants that are somewhere in the middle of that range. but they are not 100% self-employed, we have sort of senior accounting staff working alongside me, who have accounting degrees and extensive accounting experience, overseeing that work and ultimately responsible for delivering that work, explain the work and take responsibility for errors.

With small business owners, you would typically have this kind of two-person team on one account, while you have the accountant making sure they collect all the documents, does the data entry classify all the transactions at their largest? part? let's say 80 to 90 of the work, but then you have a second set of eyes with a little more experience just sorting things out, making adjustments and making sure that the financial statements presented by the accountant are too standard, so when it comes to Hiring a third-party service, whether it's an accounting firm, a firm that only provides

bookkeeping

, or a full-service accounting firm that provides

bookkeeping

along with some financial statement preparation, bookkeeping, and tax preparation, you should keep in mind that It usually won't be just one person. touch on that account so I don't want that perspective of how much the in-house accountant is potentially being paid to determine what the price should be or whatever they may think I was coming at when I was explaining what the average salary is for a former qualified accountant. would be the perspective I want to give you if you are a small business owner.

It is the alternative to hiring an experienced full-time accountant on the upper end of 50 or 70,000 a year. He is outsourced to an accounting firm or an accounting firm. company that is going to charge you a fraction of that. Our company does not have clients that pay us five to six thousand dollars a month, so we would never serve the same capacity as an experienced full-time accountant and a full load controller with responsibility, so what we essentially provide as a accounting in outsourced accounting service is the job of getting all the transactions that are managed and controlled by the internal staff of the company, not by the accountant, just by their employees or the owner of the company, and take all of that. information and make sense of it by putting together a set of books in quick books or other accounting system and presenting financial statements that management or owners can use to make better decisions about their business, so generally outsourced accountants will not do something that An internal employee could do things like open mail and pay a bill or remind you to pay a bill.

Answer the phone. Talk to customers to collect invoices. Negotiate with suppliers. Those would be all things that an in-house accountant would do and you wouldn't understand that when you hire an accounting firm, so when I answer the question of how much accounting services should cost, I'm specifically referring to outsourcing your accounting services to an accountant. professional an accounting firm an outsourced accounting service now let's talk about some numbers in general and this is just A really very rough rule of thumb is to look at your total sales or your total expenses as a determination of how complex or how many transactions you will have to handle to determine What would the workload be?

So generally accountants look at total total sales expenses and look at the percentage ranges so we take the half percent for example up to two percent so let's take a look and this is by year, so let's take a look at a company that sells a million dollars, for example, so typically, depending on the complexity, we would be between half a percent of a million dollars and two percent of a million dollars in sales. , so it's between five thousand dollars a year and twenty thousand dollars a year. year, that roughly translates to between four hundred dollars a month and about one thousand five hundred thousand eight hundred dollars a month.

It would be a pretty good range I could use now. I will tell you that I have some clients and I have had some clients that are in that range in sales making a little less than the equivalent of five thousand dollars a year and I have some clients in that same range in sales that pay well over twenty thousand dollars per year, not double but a little more. On top of that and the good point, the reason we use that range is because again we take a bunch of companies and try to figure out what's in the middle, but certain nuances and complexities will cause that accountant or bookkeeper to set prices. different from services.

For example, if you are working with eCommerce and have multiple sales channels and need the accountant to track all sales by channel, the double accountant has to do a little extra work and needs to get reports from their different sales platforms. ecommerce or whatever and make adjustments so that you can have the sales per ecommerce channel presented correctly, on top of that, you may need more sophisticated software, so some of the basic ones, I would say, less than 50 to month, uh, cloud The accounting software out there could not give you profit and loss per cost center, for example, if you use Quickbooks, for example, with Quickbooks online, you will pay between 70 and 100 per month for an accounting package that it could work. multiple cost centers so you can have P&L by channel or by whatever department or category or classification you would like to use.

That's just a simple example in the construction industry, for example, accountants are sometimes asked to cost work, which means taking every single expense you see on the bank credit card and identifying which cost now belongs broadly in the digital data or the bank statements and credit card statements that give us the information of what each of those expenses are for now there, so we have to look at spreadsheets or look at other documentation, even physical receipts that have marks on them, and we're going to read through all of that to figure out how to allocate those expenses by job, so something like that would also be on the higher end in that price range, so again all kinds of different levels of complexity , whether it's at the income level or at the expense level, that's why sometimes we look at your income and other times we look at 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 pricing methods and pricing methods for work, but a value pricing advocate wouldn't look at the workload and look at the value we provide to the customer, so if we are specialists and we can do something that other people cannot and we can provide other services related to accounting, such as advice, training, quick response, a unique system for the client to deliver documents or make queries. the information, the special applications and platforms that we provide, that we work together with the client to move the data and those types of things, that will potentially be a point where we can add more value and we don't necessarily need to focus. too much on the workload that we focus too much on can we give a customer more value than what they're paying us in return and that's really the point when you're a small business owner and you're going to pay whatever. is 2,000 a month or 500 a month for accounting, in return your return on investment must be greater than that, so take the workload off to give the accountant the peace of mind to comply or potentially not lose money because you are committing mistakes and not catching things early enough, all of those things have to be mathematically and economically higher than what you're paying for accounting services, so as a person who advocates value pricing, I understand that concept very well and I'm going to develop it.

We'll explain that concept a little bit later, so whether you're a small business owner or an accountant, you'll understand where we're coming from when it comes to that, let me back up a little bit and talk about some of the traditional ways that we you would do it. You won't find some accountants and bookkeepers who set the price for their accounting services, for example some accountants and bookkeepers may charge by the hour and they might say look I'm going to charge you 50 per hour 200 per hour whoever be the number to do this work so some months it could be 10 hours of work some months it could be 30 hours of work you will have that price invoice at the end of the month now generally to be fair I have done it for hours before and worked with accountants. doing every hour before the first few months are much more valuable later, once the accountant's account takes a rhythm, they get better and better and are penalized for lack of a better term for being more efficient and starting to reduce the amount of time that they really put into the work, so if you are a small business owner and you are betting on the fact that your responsible bookkeeper will improve over time, then the hourly rate may be something you like, but it is going to take the lead. worst of the uncertainty at the beginning and yes, there may be a month or two where you have a major change in your business, bring in a new platform, have a new supplier, open your bank accounts, add a new form for customers to get paid, you have a new system for uploading the documents you want the accountant to use.

All of those variables could change the amount of time they will spend because there will be a learning curve. Now for the content that accountants love. In my experience, I charge by the hour, as I mentioned before, for the professionals, the people who do this for a living, they will be in that range of 50 dollars to closer to 200 uh, the 200 are the more experienced ones who charge tight, but I typically don't see much higher than that on an hourly rate, even if it's a CPA, which we're typically above the 200 rangedollars, but normally most people in accounting wouldn't pay more than that, that's usually the range for someone who is a professional. knows what they are doing, someone who is just getting into this, who has a side business of accounting services or who is just starting out and doesn't have the confidence to charge more, could be charging between 20 and 50 an hour and if You are a small business owner and you find someone who can do that look, if it's good it's a bargain, it's a great price in the end, if you don't put in a surprising amount of hours it will be less expensive than hiring a Time Clerk complete, in my experience the problem is that that 20 to 30 per hour external accountant may not have enough experience to do the job well and if your business is growing at a fairly rapid rate.and you need those numbers to be accurate, you need trusting them, that's when my confidence in paying that little per hour starts to erode, so what's another alternative to paying per hour?

Many accountants and bookkeepers charge per task and that's a bit. a little more complex or by result and the way it translates would be by number of transactions or by bank account, so some accountants say I'll take a look at every 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's what your bill would look like now, that's a little more tangible for the small business owner because you can actually see and you can count them and it shouldn't be like that, it should be a little less surprising and it will feel a little more fair per se because it's not really about how fast they go or how slow they go, you determine that because of the number of transactions that did more work or less work, but it's not get fooled 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 go 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 sort through super fast, but if you go to, say, Home Depot and you have to categorize it by work or you write a bunch of contractor checks and I have to read your handwriting by check to know who you are paying and what the check is for, that will be very different, so again, those The number of transactions is not always a perfect indicator, but they are more or less on a macro level, on a high level view, a good indicator of how much work it will be, so that's the second option, so we talk roughly. pricing based on an hour and now we talk about pricing based on the transaction unit in the task per se.

The third way to do this and this is what I talked about before is to charge a flat fee, a flat fee where the accountant looks. at work you look at the best case scenario, the worst case scenario, and try to find a number somewhere in between, but before you give that number, they try to determine what the client is getting out of that fixed rate, can the client extract the double, triple? an amount higher than what they are paying for the value of the work and, if they can, then that account or accountant will give you a flat rate.

Now, how do you determine the fixed rate? That's where value pricing comes in, so value pricing means they figure out how much value they create for the customer and charge that way, that way it's essentially fair now that these are subjective topics, so What is valuable to an accountant that was valuable to a small business owner may be different, but that is why you need to have a conversation. Discuss what you want to get out of these accounting services, what the results are, how the reports, and what the results are, what results you would like these services to positively impact your business, so once we have that conversation, we can determine, okay, let's set a price and a lot of these prices are practically made up.

I mean, again, they're based on our perception of the customer's perception of value and at the end of the day, the value price is probably the fairest. because there is no such thing as fair and I think it is the fairest because they are agreed upon in advance, so when you are a small business owner, if you think fair means a low hourly rate and not spending too much time, please don't commit no mistake, then you will disagree with the concept of value pricing because with value pricing it is fair because we agreed from the beginning who cares if I worked more or not.

I want to be penalized for being good and efficient and the client, a small business owner, doesn't want to be penalized for the accountant who learns and makes mistakes because we all learn all the time. No accountant is perfect. I learn things every day. I admit, again, in a nutshell, that would be my preferred method of being able to talk to the small business owner, the manager of the business, and ask them what do they want to get out of this, what kind of guarantees can I give them, can I guarantee it? . that result, how much would that be worth to you and the exchange?

If I can figure out what the value is, as long as I meet that, then we have a fair exchange now with value pricing with a fixed fee price and, by the way, accountants and people in this. In business, we call it value pricing, but in the real world, like small business owners, buyers just call it flat rate, so from the buyer's perspective they know what the monthly fee is, whatever it is, They know which one it is. We agreed that we are not surprised from the accountant's perspective because we want to maximize our profits and at the same time maximize the effort, attention and love that we give to our clients so that we can deliver those guaranteed results, so that those results of the ones we talked about were basically what we needed to deliver, you know, to be able to do everything we need to understand more or less what the value is for the client and, again, those numbers are never mathematical like an hourly rate would be or The transaction fee would be or something based on the complexity.

There's a fourth way to get paid that's interesting and one of the things you're seeing more and more, which is a subscription model and subscription is a little bit similar to value. Set the price from the perspective that it is a fixed rate, not a variable rate, but with subscription, the service should feel more streamlined, like turning on and off, so it should be relatively easy for the customer to stop and start the service . don't charge a cancellation fee don't charge a year up front don't force someone to set up a one year contract many accountants do it, they set up contracts of some kind, it just feels like buying an app now like a subscription to an accounting firm Services are a little bit more difficult for me to offer just because I have to build an infrastructure that means people, systems and technology to be able to take on, let's call it, the losses per se of those who start and stop easily. of agreements and in our business, the beginning of the engagement is usually the most expensive part because that is where we are the first to organize the client, clean it and also understand the account first, so if we have a client, we start, stop or stay with us only two three months in the most difficult months, so it gets a little difficult now with subscription services.

If you are an accounting professional, you could produce it. Producer means that you price it up front before talking to the customer, which means designing a service with a limited scope that is very explicit if we do this but we don't do this and we do it for this type of customer only with the circumstances and for the customer this is great because they don't have to work very hard to come see a price, they look at the website and they see a price and they say one of these options is for me, but again I think that in order to offer a service of subscription, I'm talking to my accountant and Accountant Friends, they must have the infrastructure to be able to attract and get clients a little bit if they are going to work with the type of recommendation to count as accountants if they are going to work. the kind of clients that require a little bit of support at the beginning, some housekeeping, some organization at the beginning, I think you should go for cheap prices just because it would be a little less unpredictable per se to have a productized subscription service from the beginning than the customers kind of fit correctly, then one of the examples I can give you of a productized subscription service would be like if your Internet service right, the Internet service gives you a thousand megabits 500 megabits whatever the speed is and no matter how much bandwidth band use, you're choosing It's based on speed per se, so the cable company builds infrastructure around those services from the beginning and gives you the ability to connect and disconnect the service, that experience when there are no contracts or no special prices, when only you know how to cancel at any time.

It's very customer friendly, like Netflix, you turn it on, you pay 10 to 20 a month, you turn it off whenever you want and that's what subscription services are: being able to provide professional services in a way that feels like an app and I think subscription services will sometimes, because of the infrastructure that needs to be built, will turn a company into a sort of lower-touch service just so they can create narrow-scope services to serve multiple customers, but it may not be So. be necessarily true if you are an accounting firm and you create subscription services of a minimum of, say, three thousand dollars a month, then based on the kind of original formula percentage that I gave you, you will have some of the highest. size of clients in the small business world and therefore you will have less number of clients and then you will be able to give them more attention, so those are the concepts that exist, so again let's say it's a half a million dollar company . that means your sales are half a million dollars, you don't have high levels of complexity in terms of recording revenue for a particular category or expenses for a particular project, a simple service-based business, there is no inventory, you can expect that medium percent to two.

The percent rule is there, which means you could basically find an accounting service for between two hundred dollars and let's say a thousand dollars a month and of course if that accounting or bookkeeping service is clean, up to date, reliable, accurate. Statements allow you to make better business decisions and you can get more value in return than you pay for, so you should have no problem paying for it, so again that was a very long way of explaining it and explaining it, but I hope that, you are already an owner As a small business accountant or bookkeeper, you can look at all the perspectives and see which one will work best for you.

I really recommended value prices. In fact, I sell a presentation spreadsheet. I'll put the link at the bottom below is what I've been using to present value pricing services to my clients and my clients love it, they love the clarity of having a spreadsheet with different columns with the price and the characteristics. You can use this spreadsheet to um. whether it's the subscription method or the value pricing method, anything that's a flat rate and because if you're going to charge an hourly rate, of course, you won't need a sheet like this, you just have an hourly rate. and so you trust that your timing system is fairly counting the time, the amount of time that you're spending and the customer has to trust that everything you're charging them is correct again because there's a lot of potential room for error in tracking. . someone's time, um, I find every hour willing to be against what the client wants and against what the accountant and the bookkeeper wants, and the reason why I'll say is, let's say, for example , you're categorizing some expenses for some client and then you start seeing a client who traveled to some country you've never been to and you see a bunch of suppliers you've never heard of before, so the accountant Googles all of them. these things and you find out that they're restaurants or That's how you say restaurant in French or whatever and then they start learning the pattern, so when I deal with that particular customer, I went to this country that I'd never been there before. and I was happy to speak French, whatever that was.

I'm taking an extra 30 or 45 minutes to learn this, so if I were to include that in my billing, that's technically almost unfair since my next client has a similar transaction. I already have that knowledge. I know what to do. Can I do the exact same job at the same time in a quarter of the time because I charged it to the other client I learned about there for the first time? For that reason, there is no true justice when it comes to getting paid. by the hour and although the accountant considers that it is a way to charge fair play and I feel that some small business ownersCompanies ask me for an hourly rate and they think it's fair, but it's not, so I'm a big proponent of charging a flat rate, I give you those percentages as a guide, but keep in mind your particular needs, how fast you want work, how much turnaround time you want, how fast turnaround time you want, what other accounting-only related services are. is there advice or training, is there support for other activities included, all of those things will ultimately affect the price because accounting is not the same for everyone, unfortunately accounting is a subjective term so fortunately for me as an accountant and accountant of books, I can educate my client and tell them what I perceive the accounting services to be and then that is transparent and well explained, then the small business owner can explain what they expect the accounting services to be and then you close that gap, negotiate and come to a fixed fee that you both will be happy with that anyway, if you are an accountant check out the link in the description, you will love it, you will love my spreadsheet, guaranteed if you are a small business owner or if you are someone and you like this video then go to the comment section and ask questions let's start the conversation what do you think about all this?

Do you know how you want to be charged as a small business? owner, how do you want to get paid as an accountant or bookkeeper? What challenges do you have when charging fixed rates? Subscription price. Whatever it is and as a small business owner, what kind of good or bad experiences have you had paying for accounting services? I hope it has been useful, that it has come from the heart of the experience and I hope you take advantage of this video, thank you and see you in the next one.