Key takeaways
- Define the scope before you name a price.
- Calculate the cost to serve, including the software and the review time.
- Choose a model the client can understand and the firm can renew.
- Write down what is not included.
- Raise the price with the scope and the notice, not with an apology.
Start with the scope
A monthly bookkeeping engagement can mean very different things: transaction entry, a full close, reconciliations, sales tax, payroll, invoicing, reporting and advisory. Write down what the firm will do each month and what the client will send.
The scope should also name the number of accounts, the transaction volume, the number of employees and the reporting package. A client with three bank accounts and 100 transactions is not the same as a client with six accounts and 1,000 transactions.
Calculate the cost to serve
Add the staff time for the work, the review time, the software subscription, the document collection tool and the overhead the engagement consumes. Include the time spent chasing missing documents and answering questions, even if the firm does not bill for it separately.
A simple estimate is the hours per month multiplied by the fully loaded hourly cost, plus the direct software cost. If the result is higher than the price the firm has in mind, the scope or the process needs to change before the price does.
Choose a pricing model
A fixed monthly fee is easy for the client to budget and easy for the firm to renew. An hourly rate is useful for cleanup, advisory or work with an unclear scope. A value-based fee works when the firm can show the client a specific outcome, such as a clean set of books for a lender.
Many firms use a fixed monthly fee for the recurring close and a separate project fee for onboarding, cleanup or a backlog. Keep the two separate so the recurring price reflects the ongoing work.
Write down what is not included
The engagement letter should list the exclusions: payroll, sales tax, audit support, catch-up work, a new entity, a new location and extra reporting. Each exclusion should say how the firm will price the work if the client needs it.
An exclusion is not a threat. It is a way to keep the monthly fee honest and to give the client a clear decision when the scope changes.
Present the price with the scope
Show the client the scope, the deliverables, the due dates and the price together. A price without the scope invites a comparison with a cheaper firm that is doing less work.
If the client asks for a lower price, reduce the scope rather than the margin. Fewer accounts, a later due date or a smaller reporting package can lower the price without making the work unprofitable.
Raise the price on purpose
Review the price at least once a year against the actual hours and the software cost. If the work has grown, the price should grow with it. Give the client notice as the engagement letter requires, and explain the change with the scope and the service, not with an apology.
A price increase is easier when the firm has a record of what it delivered. The close report, the review notes and the response time are the evidence that the fee is connected to the work.