Are you charging enough?

A bookkeeper that I’m mentoring was recently advised that she couldn’t possibly charge market rate as she was just starting out.

Here’s why I wholeheartedly disagree with this, and why you shouldn’t charge a low hourly rate even if you are just starting out.

Market rate is market rate

Anyone charging less than market rate does the whole industry a disservice.

We’ve worked so hard since the days when I started my bookkeeping practice in 2007 to improve the profile and image of bookkeepers as accounts professionals worth their weight in gold, and part of that is charging what we’re worth.

We still have a way to go with this in the eyes of the public, accountants, and clients. So any bookkeeper charging low rates is bringing all of us down and makes it harder for the next person to charge what they’re worth.

 Don’t charge for learning or slow time

Undoubtedly, if you are new you will have learning time that the client shouldn’t have to pay for, or you will be slower than someone more experienced. Instead of charging a lower hourly rate to compensate for this, charge less time.

If you have to go away and research something, or ask a mentor, or figure out something yourself, that’s unbillable time. We all have it, even those of us who have been in this game for a long time. There is always something new to learn.

In my early days as a bookkeeper I had so much unbillable time for this reason, but once you learn it, you’ve got it. And next time someone asks you that same question, you'll know the answer.

Better to do this than to lower your hourly rate.

Start as you mean to continue

You may feel like you’re not worth market rates because you’re new to the industry but the thing is, you’re only new now. In 6 -12 months, you may have learned a bunch, have all your client’s accounts running smoothly, and be feeling a lot more confident about the value you’re bringing to your client’s business.

Then are you worth being paid market rates?

Imagine trying to put your rates up then. You’ve been charging $35/hr when market rate is $70-$80/hr. Do you think your client is going to happily agree with you that you should get a $25/hr pay rise? Good luck with that.

Better to start as you mean to continue with the rate, whilst not charging for slow or learning time.

Get help if you need it

Don’t struggle on your own. You’re much better equipped now than when I started my business and really was on my own. I would have loved the support available now - from the bookkeeping communities, software companies, online knowledge, Facebook groups, and more.

Reach out if you don’t know how to do something and someone will usually be only too happy to help you. We all want to support those who are willing to learn and we all have a vested interest in raising the standards of our industry.

This means that your rate also includes the knowledge and experience of your mentors and communities. Remember that and don’t devalue their help.

Experience beyond bookkeeping is valuable

Don’t discount your previous life and job experience. It’s all valuable.

Before I got into bookkeeping, I had experience in banking, accounts payable, payroll (in the US, not NZ), and sales. I sold Tupperware, sang in bands and I was a wife and a parent (negotiation skills anyone??).

I had various summer jobs, while I was still at school, working for a freight company, packing clothes for a clothing manufacturer, working Saturdays in a stationery shop, collecting money for the NZ Herald, working a milk run, and working in a petrol station.

Some of these things have obvious connections to my bookkeeping pathway but every single other thing brought a breadth of experience that has come in handy in my bookkeeping career.

From knowing how to talk to people from varying backgrounds and cultures and having a better understanding of people’s desires and motivations, to understanding how business works and understanding what’s involved with freight charges and foreign exchange knowledge.

Even just the stretch of the comfort zone as I learned new skills has value. It’s all growth.

Write a list of all your life experience and the skills you learned from each of them and you will start to see how your past life experience might add value to potential clients.

Perception is sometimes everything

When I was a new bookkeeper just starting out, someone told me that if they had quotes from 2 bookkeepers and one was $40/hr and one was $60/hr they would go with the $60/hr bookkeeper because they would assume that the cheaper bookkeeper would be slower, less efficient and not as good.

I had never considered this perspective before. In my mind, I was thinking that by having a lower price my services would be more desirable, but here I was being presented with an alternative perspective and it was quite an eye-opener.

Perception is such a crucial thing when it comes to pricing. Our perceptions are shaped by a variety of inputs from many directions.

Our culture tends to covet expensive things, aligning the price to value or worth. You just have to think about how often you’ve heard the phrase “you get what you pay for” or “you pay peanuts you get monkeys.” This stuff is drummed into us from an early age.

We all know that cheaper is usually not better and that is why brands like Gucci, Armani, and Chanel can charge such high prices and have people more than willing to pay.

Perception is sometimes everything.

What your rate includes

As a self-employed bookkeeper, your rate has to include so many things that would be provided or paid for you as an employed person, and this is something a lot of bookkeepers don’t take into consideration enough.

If you are employed, you get a desk and a computer and stationery provided for you. As a self-employed bookkeeper, you are likely providing these things yourself.

Professional development and professional memberships are so important as a bookkeeper to maintain and update professional knowledge -  which often has a significant time and money cost to you. As an employed person this would usually be paid for you.

Insurance – you should have professional indemnity and public liability insurance – another cost for you.

If you’re captured for AML then there’s another time and money cost, although I do suggest that this be a cost that is on-charged to those clients that you are captured for. It’s not fair for you to wear this as a business cost when it enables you to provide your clients with a high level of service and convenience but places you in a position of risk.

Leave – annual leave, public holidays, sick leave. All these you would get paid for but as a self-employed bookkeeper, your rate needs to include enough to compensate for this so you can still get paid for these days off. Add this all up and this alone should be enough for you to realise that you should be charging more.

Job security – as an employed person you are protected by employment laws so you can’t be dismissed without due process and at a moment’s notice. The same is not true for self-employed or bookkeeping businesses.

Admin time – tracking your time, invoicing your clients, ensuring you’re getting paid, following up late payers. You are running a business and there is admin time involved with that. Your rate needs to be enough to cover that as well.

Sales time – there is a cost to getting new clients and to keeping your clients happy. You need to factor that in.

Regional variation

Some regions in NZ seem to have bought in to the idea that their region is a lifestyle region, and that you should expect lower wages and rates than the rest of NZ.

I’m calling bullsh** on that. Business is business no matter where you go.

If your clients are not making enough to pay their people a decent wage or rate, then they need to take a look at the viability of their business and how sustainable it is. Perhaps that is something you can help them with.

Or worse, if a business is making exceptional profit because they think they don’t have to pay their people as well as the rest of NZ, and they have managed to get their people to buy into that, then that’s just taking advantage. Don’t buy into that.

Additionally, more so now than ever, business is not restricted to local regions. We are increasingly in not only a national economy but a global economy as well. Businesses in remotes regions of NZ are selling their products and services nationwide and across the globe.

Don’t settle for that regional rate nonsense. You are not worth any less than an Auckland or Wellington bookkeeper just because you live elsewhere.

A note for contract bookkeepers

Everything that I have said in this article is aimed at self-employed bookkeepers or bookkeeping businesses. Contract bookkeeping rates, contracting to another bookkeeping business, are different.

A bookkeeping business has got to make a margin on their contract bookkeepers’ work. This is obvious, right?

The bookkeeping business has done the sales work and is handing you work on a plate. There’s no cost to you to getting that work.

On the other hand, getting the sale can sometimes involve hours of networking and meetings, and marketing and branding work, which can also be expensive. Sales is also a skill and not everyone is good at getting the sale.

The bookkeeping business is also managing the admin and finances and the risks associated with that. Your contract is with the bookkeeping business and not the client so you still get paid even if the client doesn’t pay.

The value that you get as a contractor usually goes beyond the money as well. You usually get the benefit of support and education and working as part of a team. Additionally, if a client moves on for any reason the business can find more work for you. 

 A note about fixed fees

I know there’s a lot of talk about fixed fees and value-based pricing these days (fixed fees and value-based pricing are different and I’ll write more about that someday).

For now, for the purposes of this blog, I’ll just say that I’m not wedded to fixed fees or hourly rates. I think that both can work and sometimes one suits one client or one bookkeeper, and the other suits another type of client or another type of bookkeeping business.

I talk about hourly rates because even if you are charging a fixed fee, it will usually be rooted on an hourly rate. And in my opinion, you still need to measure how much time it takes so you can check that the job is profitable - especially if you have staff or team that you’re paying to do the work.

It can be very difficult to price a fixed fee when you are just starting out. You have little experience to estimate how long something is going to take and sometimes it can be a bit of a Pandora’s Box when you get into the file. Sometimes you don’t know what you’ll find. 

If you are wanting to get into a fixed fee agreement with a client then it might be a good idea to suggest that you work on an hourly rate for the first month or two, at which point you will have tidied up any messes and have a better idea of what’s involved going forward. Then agree with the client on a fixed fee. There are advantages to both you and the client in doing that.

Are you charging enough?

I will end this by saying that if you are a bookkeeper in New Zealand, outsourcing directly to clients, and you’re charging less than $50/hour then you aren’t charging enough.

Even at $50/hr you’re at the low end of market rate. There are many bookkeepers successfully charging $70 - $80/hr and above.

I know that some of you know this already, and aren't sure how to go about fixing this. If that's you then talk to me about business coaching because this is exactly the kind of thing that I work on with my clients. 

I hope that this blog post has helped you to understand why you should be charging market rates as a bookkeeper, even if you are just starting out.

Stephanie 

PS: Interested in working with me as your bookkeeping business coach? Send me an email  or Message me to start the conversation.