When comparing and evaluating bookkeeping services, we believe that it’s important to consider more than just the hourly rate or fixed fee that you’re paying. I believe that there are at least two considerations. One is the total cost of the service(s) that you’re receiving and the other is the quality of the service that you’re receiving. I’m going to look at each of these aspects. Many people make decisions about their bookkeeping quite blindly, not really knowing what they’re getting and whether it’s good value. Near the end of this article we’ve included a free download of twelve questions that you can ask your prospective bookkeeper and why these questions are important, in case you really want to investigate your options thoroughly.
The total cost of the service that you’re receiving
There are many price points in bookkeeping. Some are $50/hour and some are $90/hour. On the fixed fee side, some might offer $500/month and others $1,000/month for what seems like the same thing on the surface. How do you compare them? It can be informative to ask your prospective bookkeepers what the total expected costs are likely to be per month, on average and what this covers. A price range is fine. There are a couple of reasons for this.
- If you’re being offered bookkeeping by someone providing other related services, ask them for prices for each component individually so that you can compare apples with apples. Some providers offer bookkeeping services as a loss leader, but make up for that through charges for other services. Loss leaders are products or services sold for less than cost price to entice customers to buy, with the likelihood of them purchasing other products or services that make up for the loss. Don’t fall for the trap that you’re getting a fantastic deal because the bookkeeping looks cheap. Look beyond the special offer.
- In the case of hourly billing, some bookkeepers charge a lower hourly rate to win business, but then bloat their timesheet with more hours to get a higher effective charge-out rate. It’s really hard to tell if this is happening. Hourly rates aren’t a bad way to go, as you get exactly what you’re paying for, but the actual hourly rate for work received may not be what you think it is.
The quality of the service that you’re receiving
Wow, this is a huge topic. I could write pages and pages about this. I did in the process of writing this article, but I’ve had to distill it down into something that can be easily digested. A good question to ask yourself is: do you want a bespoke, premium service, or a homogenised, commoditised service?
The bespoke, premium service will make sure that all of your needs are taken care of, that your best interests are constantly at heart, that things are done the right way rather than the short-cut way and initiative will constantly be in action to think of better and better ways to service you, help you cut costs, (in more than just your bookkeeping expenses), be more efficient and help your business grow.
The homogenised, commoditised service will most likely offer a narrow scope of work. It will provide certain things and most likely exclude a bunch of things. It will probably come with a fair usage policy too. The focus is usually on minimisation, providing coverage of major compliance matters and letting a few things go through to the keeper. Extras needed to cover these gaps will cost extra. If you don’t opt for the extras, this service can leave areas of your business finances unattended to completely, or not scrutinised as closely as the bespoke, premium service.
It’s important to understand that it’s horses for courses. Neither one is right or wrong. It can be dependent on how much revenue and/or profit your business is making as well as/or what level of service you want.
This article was written by ICB Member, Carmen Morris and originally appeared on the On The Money Bookkeeping blog.