What are you worth?

If you calculate your real value, you might be as shocked by the answer as our bookkeeping friend…

Have you stopped to think about your true worth to the people with whom you do business?

One businessperson of our acquaintance did just that and was shocked to find that, in one case at least, they were under-charging by 50 per cent – that’s five-O per cent! Half!

That is, to paraphrase the great Tony Hancock, very nearly an armful! Talk about giving it away!

The trouble was that our friend had probably set their original hourly rate too low, as some of us often do when we start out in business. The amount did not reflect, for example, the cost of software licences needed in order to begin working with a client.

In more than a decade in business, they had raised their charges just three times … another reason why their rates seriously failed to reflect their current worth.

The basic error was further compounded by a failure to ensure that they charged for the right number of hours spent doing the work. While it’s relatively easy for plumber to prove they’ve spent 30 minutes unblocking a toilet or tightening your stopcock, it’s less straightforward if you’re a bookkeeper.

Sue Haynes

MICB PM.Dip

Sue used to work for a Partner at a leading East Midlands law firm, but a career change came about with her husband wanting someone to man the home office for his own business, so after a little research she decided to study to become a bookkeeper.

Cactus Bookkeeping

After Sue completed her exams in 2007 Cactus Bookkeeping was founded.

As for the name Cactus, that was chosen as it’s a word found in the word “accounts”.

Sue is a Member of the Institute of Certified Bookkeepers and offers bookkeeping and payroll services.

Visit Cactus
Find Sue on LinkedIn

Processing Invoices

The amount of time it takes to process purchase orders or sales invoices, for example, can vary depending on their complexity, something which clients don’t necessarily appreciate.

And while it’s commonplace in consultancy, law and other corporate environments to charge for thinking time, if we all did same, it would probably quadruple our charges.

It was quite a wake-up call when our friend realised they were selling themselves short and that 50 per cent more income would pay for a significant number of the Chancellor’s two-for-one meal deals this month – or a new bike and gym membership, depending on their priorities.

Moving to a fixed-fee-per-client format which could better reflect the body of work done over a period of three, six or 12 months seemed a much better way to go in their particular case. A fixed rate provides clarity for the client and consistency of income for the person providing the service.

Working Out Fixed Fees

I know what you’re thinking, however. Philip, you financial management wizard, just how do you work out your fixed fee?

Let me point you in the direction of bookkeeper Sue Haynes who was recommended a method which involves compiling a spreadsheet with separate category headings to reflect the different tasks germane to each job.

(I know what you’re thinking again. Philip, you’re saying, we love it when you slip between the balance sheets. Be still, your beating hearts! There’s more.)

In Sue’s world, these tasks include the number of bank cash and card transactions, purchase and sales invoices processed in a month, all with different sums attached. It may even include the cost of items such as document scanning which may seem negligible but is still a running cost.

Add up the costs for each month, then multiply by three, six or 12, as required, to arrive at your flat fee figure.

“Even if the flat rate per month initially works out at less than you were receiving with an hourly rate, you can expect – over time and if you’ve done your calculations correctly – that you would come out with a fairer reflection of your worth,” she says.

Hourly Rates

A fixed fee compared with an hourly rate avoids the risk of a spike in costs for the client in a particularly busy month which helps keep the business relationship on an even keel.

“As a bookkeeper/accountant, you will ‘take a hit’ some months and gain in others but you would hope that, over the year, the method would provide a better reflection of the work you are putting in because the fee is more accurate.”

Hourly rates might still be the way to go with new clients until both parties gain an understanding of what costs overall are going to look like. However, having some kind of formula for working out your charges in the longer term sounds eminently reasonable.

We currently charge by the hour, but I am wondering now if a better and more efficient approach would be to shift to more fixed fees.

It would save time, which is a cost-benefit in itself, and give Robyn fewer grey hairs. I’m afraid I’m a bit of a lost cause on that front.

If you have jumped one way or the other on the fee front lately, we’d be interested to hear your experiences. Email me at web@pelliottassociates.com