How Much Should A Client Pay? How do I know if I am paying a fair rate for my bookkeeper? How can I save money on my bookkeeper?
One thing customers do is (wrongly) assume that the work of putting together records for bookkeeping purposes in order to get a real set of accurate financials doesn’t (or shouldn’t) take very long. It is my experience that an average business has approximately 200-400 transactions per month and that averaged over the period of my bookkeeping business (over a ten-year span), each transaction takes approximately 2.5 minutes each.
Some entries take longer, some entries take less time. Multiply that time by your bookkeepers rate and you’ll see (about) what you should be paying them for their service for that function.
Data entry is a tedious and diligent task. If you had time for it yourself it would be done, so that is one reason why your bill may seem high to you. Re-think your mindset about how much time your bookkeeping ‘should’ take and balance it against how long it actually does take to perform those necessary monthly and daily tasks that you don’t have time for.
Bookkeepers charge one of two ways – Either a flat fee for designated and specific services or an hourly rate for things they cannot determine how long the process will take.
Normally, if you hire a new bookkeeper they will be hesitant to go with the flat fee for the first two-three months because they don’t know you yet, how easy it is to get receipts and records from you, and what the details involved are in taking care of your records.
If you are still being billed an hourly rate after the first three months then it’s time to sit down with your bookkeeper and find out how you can work together better so that you can create a more cost-effective method.
Your bookkeeper will benefit because their schedule will be better structured and they can feel confident about freeing up time they may have tentatively penciled in for you. You are dealing with a professional and they will understand.
If you need coaching or training on your accounting software or other software to track your records – spreadsheets for example, then you will pay extra for that service from a bookkeeper. Perhaps you would be more wise to seek out an online or in-house course at your local community college instead.
Hiring a Bookkeeper – Check their credentials, experience and education and references – Check it ALL.
If you are hiring the $16 an hour bookkeeper out of the paper then you will get what you pay for – Somebody who takes twice as long to accomplish a task (Now you are paying $32. an hour (or more) for that same person, plus opening the possibility up that you could have to hire a second bookkeeper who knows what they are doing to fix the mistakes of the $16 an hour person – Now you are paying $78 an hour for that work that you thought you could save some money on – OUCH).
One thing you can do to help you decide whether to hire that person is have to have that person take a simple bookkeeping test before you hire them. If they are confusing debits and credits and assets and liabilities with expenses and income then you are in BIG trouble. Not only will you be getting your books done twice, but you will probably get audited several times.
Here are 3 sample questions and answers you can use on basic journal entries, adjusting entries, bank reconciliations, correction of accounting errors and other key skills, provided by The American Institute of Bookkeeping:
“1. On October 1, your calendar year company, which is on the accrual basis, signs a
$15,000 painting contract and makes a $5,000 advance, which you record in Painting
Expense. If, on December 31, management tells you that 20% of the work has been
completed, you will:
a. credit Painting Expense for 2,000
b. debit Painting Expense for 2,000
c. debit Painting Expense for 3,000
d. credit Painting Expense Payable for 5,000
2. While doing the bank reconciliation, you discover in your company’s bank statement
a debit of $150 for another company’s check. To correct this error, you will:
a. add $150 to the end-of-month-bank balance
b. add $150 to the end-of-month-bank Cash balance
c. deduct $150 from the end-of-month bank balance
d. deduct $300 from the end-of-month Cash balance
3. On May 2, your firm paid $225 for office supplies but incorrectly recorded the check
in the cash disbursements journal as $252. Upon discovering the error, you should:
a. debit the ledger Cash for $27
b. debit Office Supplies Expense for $225
c. debit Office Supplies Expense for $27
d. credit Office Supplies Expense for $27
Bookkeeping experience coupled with a CPA means you’ll pay more because your records are getting the bonus of a review by a licensed professional with strict credentials.
Bookkeeping experience coupled with a bookkeeping certification also means a higher rate.
Bookkeeping with experience, but no certification means an hourly rate of approximately $5-10 above the average rate. In Canada that means approximately $35-50 an hour for a standard bookkeeping rate, the same is true in the USA.
Where recession and the economy have hit hard, you will find rate negotiation to work very well.
A long-term relationship with your bookkeeper is ideal, but don’t get so comfortable that you are handing over the keys to the vault, either. That’s just scary – No matter how much you ‘trust’ them. After all, it was the church secretary who is serving 25 years for fraud and extortion.
Advance fees – Normally asked for with new clients. This fee is based on an estimation of what the cost will be based on what is needed and the number of transactions involved. It is also normally 1/3-1/2 of the total. If you can’t pay it, don’t hire that bookkeeper.
How Can I Save Money With My Bookkeeper?
– Do not fold your receipts
– Keep your receipts in date order
– Organize your receipts into categories (auto, office supplies, medical, job materials, advertising,… )
– Write on your bill or receipt: Date pd, account pd from, check number, amount you pd if the balance is different, anything else that is relevant (for instance is part of a receipt a gift and part an office expense – document that for your bookkeeper. Time is money. Their time, your money.
– Write on your invoices: Deposit date, To which account was the money deposited, Amount deposited, customer check number, and other relevant information like a customer address change. Also keep the deposit slip with the invoice – if you can.
– Pay on time and don’t make your bookkeeper use their time to phone you or send you – additional – invoices.
– Don’t miss appointments or make a bookkeeper wait for you. They have schedules and throwing off their day means they have to re-schedule others all along the way. You’ll pay more for that service. It’s called a “PIA” fee for ‘those’ clients.
– Do not lie to your bookkeeper or they will fire you.
They need to know if your trip to the Bahamas was really for vacation or business.
They need to know that your dog, Lucy, isn’t listed as one of your dependents.
They need to know that the new lingerie you bought for your wife at your local mall isn’t a, “small tool.”
They need to know EVERYTHING about your business to avoid penalties or fines they could be subjected to because of your untruths. So, tell them everything.
The money you save by following these simple rules will not only save you money, but will promote goodwill and a long relationship between you and your (most excellent) bookkeeper.