You didn’t start your business to do the bookkeeping or accounting so you’re going to go ahead and pay your trusty accountant bookkeeping and tax fees per hour.
As recent as today, many bookkeeping and accounting firms still bill you by the hour for work they complete. I’m here to tell you that this is a bad proposition for small businesses. While you can determine roughly how much it may cost you for these services with an hourly rate, you’re basing your assumption purely on the feedback of your bookkeeper or accountant. Truthfully: they’re ballparking it themselves and will likely come over that estimate. People are terrible at estimating their time if they haven’t directly tracked it (here’s a blog from one of my favorite apps and blogs on why we suck at estimating time). But even tracking the time is relying on past data and you want an estimate upfront instead.
So, why is this bad for you, the customer, the one paying the bill at the end of the day? Here are but a few reasons why:
1. You don’t know how much the bill will cost at the end of the day.
It’s a surprise to you, and never a good one. I bet you’ve had a conversation just like this with your bookkeeper or accountant:
Accountant: “Here’s your bill Mr. Clare. You owe us $1000+HST for our 10 hours of work.”
You: “10 hours! $1000! WTF!?!?! You said it would be 6 hours of work”
Accountant: “Mmhmm yes well it took longer than we thought.”
You request one of:
- “I want a discount”
- “Write-off some of your hours”
- “I’m not paying that much”
And now negotiations ensue.
This is an all-too-common instance of hourly billing and it sucks for you because you have no idea how much it will cost you at the end of the day.
2. It’s much more difficult to manage your cash flow when you don’t know how much the bill will be. Again, surprises coming down the pipeline. You get an estimate of 6 hours at $100 per hour and have fit that estimate into your budget for the month, quarter, or year.
Now you receive a bill that is 2/3’s higher at $1000. What gives? You now need to shift some money around so that you can pay your accountant, that bills you hourly, and doesn’t care about the value you receive for the work they’re performing.
I’d be pissed, too!
3. You may or may not be paying for extra time because your accountant was ineffective.
This one is not so obvious, but it still hurts your wallet. When your accountant is billing you by the hour, it doesn’t matter whether they’re working on your books or taxes, or some other clients – they’re still making their hourly rate. This means they can be ineffective and/or inefficient, which ultimately hurts you. You end up paying more for their ineffectiveness, but they are still making their same hourly wage for simply punching the clock.
So, how do you get around this? You can request a fixed fee contract. Here’s why you should do this with your bookkeeper and accountant:
1. You know exactly how much you’ll pay. The only reason the price would increase, or decrease is if the scope of work changes. You’ve defined your scope up-front for the services. But they can most definitely change as you work through your engagement. If that happens, you renegotiate your fees and voila, you still know exactly how much you’re going to pay.
2. You can budget for this cost so much easier. As with the above comment, you now know exactly how much you’re going to pay (scope changes aside). You can now build this fee into your budget – another variable you don’t have to worry about when completing your cash flow forecasting, which you do anyways of course.
3. You’ve now married value and cost to each other. You have a value in-mind and a cost associated with that. You know that if your accountant completes X task then you value it at Y. The value you’ll receive is hopefully defined well and you’re content to pay for that value. Assuming you’ve made the right choice with your bookkeeper and accountant, that value should be exponential to the cost you’re paying for their services. If it’s not, we have a cost-value misalignment.
At Blueprint, we can provide bookkeeping and tax services that can bring value to your business. You can expect no overcharge fees and service suited for you. If you feel you’re not getting value from your bookkeeper or accountant and are tired of paying bookkeeping, tax or any accounting service on an hourly rate, contact us today.