How to Price Your Bookkeeping Work For Maximum Profitability

As a bookkeeper, you're in the business of providing excellent services to your clients. To do this, you must know how to price your services correctly. Setting the right price for your bookkeeping services is essential for your long-term success. You want to charge a reasonable amount and avoid not making a profit, and you want to charge too much and risk losing great clients. In this article, we'll explore the best ways to price your bookkeeping services so you can achieve the best possible outcome.

Pricing your bookkeeping services doesn't have to be complicated. Charging the proper rates can help you attract and keep customers, make more money, and stand out from the competition. This post provides valuable tips on how to set competitive and profitable prices for your bookkeeping work. Follow these tips, and you'll be on your way to success!

Calculate Your Firm's Operating Costs and Overhead

Why shouldn't we do the same thing when instructing our clients to do this? Reverse engineer your costs. Once you have established a reasonable bookkeeping rate, you need to consider your operating costs when calculating the price of your services. Software subscriptions, marketing services, and accounting tools are examples of business expenses included in operating costs.

Remember the other expenses of your business overhead, which are the costs related to the operation of the business, such as rent for the office, legal fees, internet service providers, etc. Having an understanding of these costs will enable you to determine the price of your services and optimize your bottom line so that you can maximize your profits.

Identify Your Legal Niche & Services

Identify your target customers and what services you plan to provide before determining your bookkeeping fees. Are you going to micro niche to a specific law type?  For example, I want to only work with Immigration firms or family law firms.  To be able to price your services appropriately, you need to understand the value you are providing to them. You need to create an accurate list of all the services you intend to provide, including the time estimates and any additional expenses for any software, so you can plan accordingly.

Services can include:

• Basic write-up bookkeeping
• Accounts Receivable
• Accounts Payable
• Payroll
• Advanced Reporting
• Do they need class reporting?
• Do they need location tracking?

These areas will need to be analyzed when pricing the work.

Get to Know Your Competition & Their Rates

You should be aware of what your competitors charge for their bookkeeping services to determine the appropriate fee for them so that you can remain competitive and profitable. Consider extra expenses, such as time allocated for onboarding, payroll, 1099s, and frequency of when you do this work. Is it weekly, monthly, or quarterly when setting up your rates? Do your research to determine what you are offering to the client.

Determine How Much You Want to Charge

It would be best if you always considered both the time and effort it takes to complete the bookkeeping job and the additional costs involved with providing the service when you are pricing your bookkeeping services.
The best way to make this easier is to establish a flat rate for a specific task and adjust it up or down depending on the task's complexity. Once you feel comfortable with your pricing model, you can start marketing your business and launching it. Knowing this will be your launch point for how you will set up your practice management software.

Pricing Trust Compliance Work

Does your client have trust accounting? Do they use outside software to track this, or are they using QuickBooks alone? This last point can make or break your workflow. For example, working with an immigration or family law firm with many trust matters or many transactions with the ins and outs of trust will require more time from you or your staff to complete this work. You will be required to generate a three-way bank reconciliation report as part of the compliance process. The three-way reconciliation will be a lengthy process, but it is necessary. Remember, you need to know the bar association rules where your client practices law.

Pricing Accounts Payable

We recommend using Dext or Hubdoc to assist in this workflow. Both software will help you to automate the workflow as it gives the client one place to forward or upload receipts. Both Dext and Hubdoc attach an image to the transaction. All we do next is code any expense that is client related to the client or matter. All costs are included, and we have the documentation at our fingertips.

The fee for the software MUST be included in the pricing to your client.  Pricing is determined by how many documents you will need to code and how often you work in the file. While we should be using something other than time as our only pricing metric, it is a guide to help us figure out the cost. The practice area is also something you want to consider, as a personal injury firm will have a higher volume of expenses than a corporate law firm.

Pricing Accounts Receivable

Accounts Receivable pricing has some tricky aspects to this question. You should clearly define your role and responsibilities when working with the client:

• Are you creating the pre-bills or drafts?
• Is there an approval process?
• Is there a write-off or modification process?
• Does the client bill based on fixed fees, hourly fees, evergreen fees, and LEDES fees?

Define who is responsible for sending out these and following up if they are not paid. Accounts Receivable is one of the more costly and time-consuming items to address.

Payroll

Almost everyone these days uses a payroll service. For my recommendation, see this earlier post. However, what about your client who uses a payroll service that is outside of the company? What is your recommendation for this service? Gusto? ADP? Paychex? Are you going to use Gusto or another one? How easy will it be to navigate through it? Will Quickbooks be able to integrate with it? If you wish to calculate the payroll correctly, you must, at the very least, perform a quarterly payroll reconciliation.

Does the company have a 401K plan? Who funds it? What is the organization's benefits program? Do you have any responsibility for it? Are there only salaried employees, or are there hourly employees too? How will you track payroll accruals such as PTO and vacation? Will you be keeping track of payroll accruals? As you can see, there may be many actions you will have to undertake to manage payroll duties.

Complex Reporting

Ask the client if there are any external spreadsheets you need to maintain. You will be amazed by the answer to that question from clients. There may be a bonus structure in place where they use external software or just a general google sheet or excel spreadsheet. Some spreadsheets take hours to enter the data and ensure correct calculations. There also may be a heavy time deadline for these calculations.  

Adjust Pricing for Specialized Work & Industry Trends

Increased revenue is one of the reasons why we specialize! To stay competitive, research market prices from trusted sources like competitors’ websites and surveys with other bookkeepers before determining what will work best for your business. Adjust pricing to reflect the added complexity of the work as your business grows and you become more specialized. You may also want to use industry trends as a guide for setting prices – attorneys are accustomed to paying higher rates for similar services, you should follow suit.

As a bookkeeper, you know the importance of pricing your services correctly. You need to be able to cover your costs and make a profit while at the same time offering competitive rates that will attract clients. It can be tricky to find the right balance, but it’s essential to get it right. A good gauge is looking at all the potential clients you are pricing your services.

“You should only be landing 50% of the clients to your services. You need to raise your rates if you are at 100%.”

This article is informative and gets you off to a good start. If you want to learn more about topics like these and deepen your pricing knowledge, join our group, The Accountant’s Law Lab; we would love to have you as one of our legal bookkeeping nerds!