Welcome to the most CONTROVERSIAL (and confusing) topic in the accounting and bookkeeping world…
How To Price Bookkeeping Services
It doesn’t matter if you are a self-employed bookkeeper, part-time bookkeeper, freelance bookkeeper OR if you run a team of virtual bookkeepers mastering your pricing for bookkeeping services is a must.
If you are stuck, or you feel confused, by all the different pricing strategies, you are not alone!
As a bookkeeping business coach and mentor, I help bookkeepers run their businesses better.
I have seen so many of my students and colleagues wrestle with pricing, and when I first started out, I did too. So I relate. And I have a lottttt of information and experience to share with you around pricing.
When it comes to running a bookkeeping business, you should give your pricing, and your pricing model careful consideration. Remember! You are the CEO and CFO of your business, so thinking strategically here is crucial.
It might be that you start with one pricing structure, and then you switch to another pricing structure if one strategy proves to be more profitable. Be flexible, and stay open to changing gears if it makes sense.
I am here to remind you that your job is to create a company that is profitable and provides excellent business bookkeeping to your clients. The rub is figuring out how to do both successfully.
STRATEGIES UNLOCKED: PRICING BOOKKEEPING SERVICES
In this section, I am going to talk about different pricing strategies but before I do, I want you to remember this sage advice:
“Confused buyers don’t buy.”
Make sure your pricing is clear, easy to understand, and not too complicated. If your pricing is confusing – your buyer, or customer – is less likely to buy from you.
Before you decide on how much to charge for bookkeeping services, let’s review some common pricing structures.
- Fixed-rate pricing
- Value-based pricing
- Hourly rate pricing
When deciding on a pricing structure, take some time to think about the type of bookkeeping services you are offering.
Some services are more complex than others – such as managing Accounts Payable or Receivables, designing accounting, researching and deploying apps, or taking on a guidance or advisory role.
A common question I get is:
“What is the “average rate” for professional bookkeepers or firms?”
I have seen many studies, but most of them seem to be geared for what is the average rate for a full-time bookkeeper (or someone who works in-house).
I can tell you at the time that I sold my firm, I was charging $105 per hour for general bookkeeping services, and $250+ per hour for advisory or accounting system design.
I also had built-in minimums to help protect our profit margins and ensure that the company was highly profitable.
Over the years I developed a proprietary pricing structure called Value+ Pricing (Check out my tiny training on my model here.).
When I started as a freelancer, I never thought making $105-$250 an hour was possible, especially considering I didn’t have advanced degrees. Earning $100s per hour is often reserved for people with an advanced level of education and letters after their name.
If you don’t think making six figures or more is possible, and you don’t know my story, here’s the short version:
Broke, single mom of two, without a college degree, starts one of the first virtual bookkeeping services firms in the United States.
Spends 15 years building a rock-solid business, spanning multiple states, with a team of 12, which nearly crested a million dollars per year in revenue.
Mom successfully sells and exits the business in 2023, partially retiring before the age of 50.
The point?
Anything is possible when you focus on providing excellent bookkeeping services, nurturing relationships with clients, team members, and colleagues, and deciding to constantly evolve and grow.
Here’s your guide on how to price bookkeeping services so you can make six figures or more, too!
FIXED-RATE PRICING
Fixed rate pricing is fairly straightforward – you create different “fixed rate” options for different services or the volume of services provided (or a combination of services and volume!).
All of your packages should include basic bookkeeping tasks such as data entry and reconciliation. If you offer advisory services, this could be a higher-level add-on or an ala carte service.
You could think of this like bronze, silver, or platinum pricing – you are essentially creating bookkeeping service packages. My advice is to limit your packages to no more than three options, be very, very, verrrryyy specific as to what is included, and what is not.
Word to the wise…. Do not let your clients customize their package. Your goal is to standardize your pricing, and if you have a different package for every client, there is nothing standard at all, right?
Here are some examples of packages you could offer to your bookkeeping clients:
The Bronze Bookkeeping Package
This package includes:
- Basic Bookkeeping Services for 1-2 Business Bank or Credit Card Accounts
- Monthly Reconciliations
- Monthly Reports
- Accounting Software Subscription Fees
The Silver Bookkeeping Package
This package includes:
- Basic Bookkeeping Services for 3-5 Business Bank or Credit Card Accounts
- Monthly Reconciliations
- Monthly Reports
- Accounting Software Subscription Fees
- Monthly phone call to review financials
The Gold Bookkeeping Package
This package includes:
- Basic Bookkeeping Services for 3-5 Business Bank or Credit Card Accounts
- Monthly Reconciliations
- Monthly Reports
- Accounting Software Subscription Fees
- Managing Accounts Receivable
- Managing Account Payable
- Payroll
- Monthly phone call to review financials
VALUE-BASED PRICING
In my opinion, value-based pricing can be tricky – it can also be a little icky and ethically questionable depending on how you are doing it and what “value” you are providing.
According to Investopedia, the definition of value-based pricing is:
“Value-based pricing is a strategy of setting prices primarily based on a consumer’s perceived value of a product or service. Value-based pricing is customer-focused, meaning companies base their pricing on how much the customer believes a product is worth.”
And it’s that last sentence that can trip me up – charging on how much the customer BELIEVES a product is worth.
Now, that is not to say all value-based pricing models are unethical—certainly, if you are providing consulting services that help a company 10x its profits, it would be hard to come up with an hourly rate that would make your compensation sensible.
Value-based pricing can often include strategy calls and CFO-level work, which can make the work tangibly more valuable than fixed-rate or hourly pricing.
On the flip side, I have seen people throw in a bunch of relatively meaningless reports or “value adds” to inflate their bookkeeping or accounting prices without really bringing any value to their clients – and that doesn’t jive with me ethically.
HOURLY RATE PRICING
The last pricing structure on deck is hourly rate pricing.
A CPA friend once told me she affectionately called this type of pricing “coin-operated”….”I am coin-operated, put the money in, and my work goes out.” I thought that was so funny 😂 (and brilliant).
So, what is a fair rate for bookkeepers to charge?
The cost of bookkeeping services can vary from firm to firm, and region to region. Luckily, now that we have the ability to reach clients across the globe, bookkeepers aren’t locked into how much is “reasonable” for a specific geographic area.
For example, if you live in a very rural place, the average rate for a bookkeeper might be $20-$25 an hour.
But if you start to reach out to businesses in urban areas, you might find that the average rate is $75+ an hour.
I suggest looking at the gross revenue of a client, calculating 2-3% of that, to ballpark what the cost of bookkeeping services should be annually.
For example, if the business generates $100,000 per year, the client’s monthly costs for bookkeeping would be in the $2,000 – $3,000 range.
OTHER PRICING STRATEGIES TO THINK ABOUT
You need guardrails in place to make sure you are compensated for all the work you complete on behalf of your clients. This can really trip up new bookkeepers, but can also be a problem for experienced bookkeepers.
Here’s the deal:
Your valuable time is a commodity, and you should be paid for all hours worked.
Scope creep is a real danger to your bottom line, and you must guard against it with vigilance.
Scope creep is when your client starts to slowly ask you to take on more and more tasks without paying you for them. The “scope of work” creeps up – hence why this is called “scope creep.”
For example, let’s say your client has an audit that pops up. And not any old audit, something that takes hours of research to prepare for because the client doesn’t have great records for the year in question.
Going back to the bookkeeping service packages model earlier, this would fall out of scope, but your client (rightfully) expects your support during the audit.
And this is where how we price bookkeeping can get tricky.
There are all kinds of services your client requires that aren’t included in your standard bookkeeping service packages. If you go with fixed rate or value based pricing, have a plan for how to deal with this in advance so you are paid for all of your valuable time AND services provided.
The one thing I really love about hourly pricing, and my proprietary pricing model, is it ensures you are paid for all the tasks you complete.
Logistically, hourly based pricing and billing does take discipline. You must make sure you are tracking your hours diligently, and if you have a team, you need to watch those hours carefully.
I also recommend setting up auto-billing for ALL pricing structures. Collect a credit card or ACH authorization form as part of your onboarding process, and automatically bill your client on a set day of the month, such as the 1st.
FACTORS THAT AFFECT BOOKKEEPING RATES
There are many different factors that come into play when determining how much to charge for bookkeeping services.
These include education level, experience, the types of services you are providing, location (but not really, more on that later), and sometimes the accounting software you are using.
The two most important factors when pricing your bookkeeping services are:
- Experience
- Types of Bookkeeping Services Provided
The more experienced you are, the more you can charge.
Period.
The more complex the tasks and services you are providing, the more you can charge.
Period.
In terms of education, when I started my business, I had a few college semesters under my belt, but I actually didn’t even get an associate’s degree until a few years AFTER I formed my company.
You do not need to be a CPA, or have an accounting degree to start or have a bookkeeping business.
You DO NEED a talent for numbers, a passion, and the ability to dive head first into learning all you can, as fast as you can.
I also do not advise jumping into this business without some experience under your belt. Bookkeeping is a skill that takes time to acquire, and there are high stakes involved because you are an essential part of your client’s financial team.
In business, you often hear “LOCATION, LOCATION, LOCATION!” is critical to the success of a business. That is definitely true for any retail business but for virtual bookkeepers?
The location of your bookkeeping business is not a factor in pricing your services unless you plan to work with only local businesses.
As a virtual bookkeeping business, you are not locked into “what people will pay here”.
I once had a client in Arkansas who swore she could only charge $25 an hour because “that is what people will pay here.”
I asked her if she could perform her bookkeeping tasks for a client in New York.
She said, “Of course!”
To which I replied, “And how much do you think people pay for bookkeeping in NY?”
She had a lightbulb moment, realized she was completely undercharging based on her location and tripled her revenue working with me in Evolve Collective, my elite coaching program.
SO….HOW MUCH TO CHARGE FOR BOOKKEEPING SERVICES?
I know – you read this article hoping for a magic bullet on how to price bookkeeping services.
You want a sure-fire answer.
You are looking for the keys to the kingdom.
The truth is, there are many accounting gurus and influencers out there who will say, “The way I price my services is the BEST way.”
I am here to tell you that all firms are different, and different models work for different firms. Your job is to learn about common pricing structures and different models and then figure out what works.
The lesson here?
You have to experiment, test, and find the most profitable model.
You determine what is THE MOST profitable by looking at the data — including how long it takes to complete projects (even if you’re working with a value-based model), tracking time, and measuring capacity (how much work any given person can complete in a set period of time).
This takes time and you have permission to test and play until you find the model that works. Heck I even hired a data analyst to help me create a pricing model that worked so well I was generating close to a million dollars a year when I sold my virtual bookkeeping business.
In conclusion, when determining your pricing structure, consider:
- Hourly Rate Pricing
- Retainer
- Value Rate Pricing
- Hybrid Pricing Models
- Types of Bookkeeping Services You Offer
- Bookkeeping Service Packages
