Value Pricing for Bookkeepers Because bookkeeping is not accounting The buzz about value based pricing doesn’t seem to be dying down. The noise that the hourly rate needs to go has reached the ears of many bookkeepers. However, more questions than answers have been raised. How does a bookkeeper move from hourly rate billing to fixed price billing? What are the risks and potential gains?
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hy move to value pricing?
The landscape of small business accounting packages is changing. As Rod Drury stated during Xerocon South 2016, Artificial Intelligence (AI) is creeping into every program and software engineers are scrambling to meet the insatiable demand for all things automated. Consumers are turning to the cloud in droves. As AI increases, productivity increases. This is great news for the business owner and bookkeeper alike. Xero is leading the way in accounting software automation by incorporating AI into much of the traditional bookkeeping processes. The traditional bookkeeper who visits the client, types bills, invoices and payments into an accounting package, then reconciles and files paperwork all on an hourly rate is an endangered species. We must make some changes now to enable the role of a bookkeeper to remain incremental to a business owners’ success. We must become conversant with cloud technology and be able to cater for the client’s appetite for efficiency improvement. If we continue to charge our clients 18 / Issue 13
@bkrelief
Julie Watson, Founder, Bookkeeping Relief Julie is a Xero Certified Advisor and BAS Agent. She and her team offer complete support to business owners wanting to run their business financials in the cloud. Utilising cutting edge apps and add-ons combined with precision in-house management, client support has never been more efficient.
using an hourly rate, we will earn less income as productivity increases and income decreases. What once took two days of processing, billed at an hourly rate, now takes half the time and soon will take only a quarter of the time. All the education and investment we make will not be compensated under an hourly rate. We need to value our service and fix that price to allow for productivity increases at no cost to us. We are moving away from hourly processing to service delivery and we must change our pricing model accordingly. In 2016, 56% of businesses were using totally browser-based accounting solutions (this figure has increased by 24% from the previous year) – ICB Bookkeeper Survey How do I value package my services? 1. Divide your clients into categories Write down all your clients and try and find some categories that will work for multiple clients. For example: For some clients you may do accounts payable,
accounts reconciliations, BAS and end of year work. If you find there is more than one client in this category, group them. Do this with all your clients until you have some main categories. 2. Calculate the annual revenue for each client in each category By doing this, you should see approximately how much each of your categories is worth based on your current model. From here, you can approximate how much to charge a new client for each category. You may choose to increase or decrease this amount based on the last twelve months. Divide this average annual amount by 12. This is your new monthly fixed fee for each category. 3. Once you have a monthly fixed fee for each category, apply it to your existing clients If, over the last twelve months, all your clients were on these monthly fixed fees, how much money would you have made/ lost. Ensure once you apply this value to each client, you haven’t lost any money on the time spent. This is easier to do if you have been recording hours spent on a client (not just hours billed). 4. Divide this monthly fee by
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