One of the major discussion topics I see in my Facebook group (and all over the internet where bookkeepers hang out) is whether to charge a flat fee or by-the-hour for services. This is true for all kinds of accounting and bookkeeping services, but when it comes to QuickBooks clean up work, it’s a really hot topic. With clean ups, you often don’t know exactly what you’re getting into or exactly how much work will be involved, and these unknowns can make pricing the cleanup pretty complicated. I want to share my insights on the two basic ways of charging for QuickBooks Online cleanup – fixed fee or by the hour. Keep reading below, or click on the linked video to learn more and decide a pricing system that works for you.
Click on the video linked below to watch: Charging for QuickBooks Online cleanup – fixed fee or by the hour?
So, the question I hear time and again is, “How do you determine how much you should you charge for a cleanup?” Through many years of providing accounting and bookkeeping services, I have learned a lot about effectively pricing my services (after many great and some not-so-great pricing experiences). I’ve found there are several effective ways to arrive at a cleanup price, and I’ve refined a pricing method that works for me. Now that I use a specific method, it saves me tons of time, and relieves much of my pricing stress. So, here are my pricing insights for QuickBooks cleanup projects.
Monthly price method (Fixed fee)
One of the methods that I‘ve used – and that many people use – is calculating how much you would charge to do a client’s monthly bookkeeping and then multiply it by the number of months that you need to clean up. For example, let’s say that you are pricing a 12-month cleanup, with monthly services going forward at $500 a month. First, you would multiply the monthly charge of $500 a month by the 12 months that you’re cleaning up. That’s $6,000. Some people then charge the cleanup project at a percentage of that amount, maybe 75% or 50%. It’s totally up to you to decide what that percentage will be.
Not exactly sure? I always recommend quoting a price range, rather than a single price point to give yourself flexibility. In the example above, you might tell the client that the pricing would range from $4,000 to $5,500. This is a much faster method of pricing. I continue to use this method because I don’t like to take a lot of time when I’m doing my pricing. It allows you to hold off on an exact price until you know how much time the work is actually going to take.
The hourly rate method
An alternative method to the monthly price method is to estimate the number of hours it will take to do the cleanup and multiply by an hourly rate. If you go this route, I highly recommend that you also consider the administrative time to onboard the client and other matters that may take up your time aside from doing the actual cleanup.
Say, for example, you estimated it would take 24 hours to do the cleanup. At a rate of $100 an hour, that’s $2,400. I’d recommend you add 20% to cover administrative time and client communications. That comes out to $2,880, so in this case, I would tell the client that the pricing will range from $2,500 to $3,500.
This method is very much dependent on your ability to estimate how long it will take to clean up the books. If you’re uncertain about how long it would take to do a cleanup, or how much you will charge for monthly bookkeeping for either method, just do the best you can with pricing initially, and your estimates will get better over time (just like mine did).
The challenge of pricing
It’s very natural to feel some level of stress about pricing because as you’re taking on a client’s cleanup, you’re assuming risk – so that stress is normal. But, as I said a moment ago, the only way that you’ll know how to price and how to diagnose your client’s books accurately is to do it over and over. As you take on more cleanups, price them, and complete them, you’ll see how well you did.
If you’re pricing too low, then I encourage you to increase your pricing incrementally as you take on new clients. Keep adjusting until you get to a point where you’re comfortable with the level of profitability for your cleanup jobs.
Getting paid up-front
Regardless of the pricing strategy that you choose, the most important thing is for you to get paid up-front. Getting paid up-front reduces a lot of the risk that you’re taking on.
In a cleanup situation, and really in every situation when you’re providing client services, you should be collecting at least 50% of the fee up-front and collecting the balance near the completion of the work. We tell our clients it’s not upon completion it’s near the completion. In other words, we aren’t delivering the final product until payment has been made. Usually, we’re asking for the final payment for the clean up during the week in which we’re expecting to complete the work.
If you charge by the hour, I would encourage you to charge for a minimum number of hours. So if you think it will take 24 hours to do the cleanup, then you ask for 12 hours up-front. I would then encourage you to move toward using more fixed pricing, giving clients a range for your cleanup. It changes the relationship with a client when you’re working by the hour versus when you are agreeing upon the desired outcome with that client. It lets you assume the role of advisor instead of somebody working by the hour.
Closing
So what do you think will work for you when charging for a QuickBooks Online cleanup – fixed fee or by the hour? Whichever method you decide on, remember that pricing is a process that can be refined over time. I’d love to hear your feedback. If you found this content useful, and would like to learn more about my QuickBooks cleanup pricing, these tips are just a snippet from my course, the QBO Paid Diagnostic Review System found on my 5MB Academy for virtual accountants and bookkeepers. To learn more, follow this link to visit the 5MB Academy.