What to charge?

AAT 123

Hello

Hoping for some guidance, I am just about to leave my job and start to work for myself but am unsure of what to charge, companies online advertise an hourly rate of £10 but they are not members of the AAT.

Here is an example of the main services offered.

Bookkeeping - maintaining ledgers & bank reconciliation etc (including producing P&L's & B/Sheets.
VAT return preperation.
Payroll.
End of year online filing for PAYE

I would appreciate any help/guidance and if you want to keep it private as it may show your charges please private message me.

Thanks all

paulr

Good morning,
I asked this question recently and fees ranged from £12 to £65;
what you need to ask yourself is what is a realistic hourly rate
based on the level of expertise needed to perform the work;
obviously higher level work attracts a higher amount of skill ;
best wishes,
paulr.

Poodle

Hi AAT 123

First things first. I presume that you have registered as a MIP with the AAT and are intending to take out some PI insurance?

Poodle

AAT 123

Hi both

Firstly as yet I have not registered for PI insurance what is this?

As far as charges go that's a very big difference do you have the thread for your previous post so I can have a look?

Thanks

Vern

Hi AAT123

Like you I have just started trading and there is lots of prices quoted on the web.

As paulr says what is a realistic hourly rate? subjective isn't it.

In determining my prices I examined my expected expenditure (3 ex's in a row is that english?) for the first year (software, laptop, printer, advertising and general overheads) then looked at various hourly rates and the time available to break even, in your case you need to look at the break even point and then determine what you need to live on as salary/drawings. Once you have done that maybe you can come up with an hourly rate to suit your needs. Don't forget a lot of time will not be chargeable, especially in the first year as you will be doing a lot of 'free' initial consultation and time spent on administration such as phone calls and advertising.

PI insurance is Personal Indemnity insurance which is a must for anyone in business, this can be bought through the AAT's blanket policy if earning under £5,000 in the first year. In addition to this if your income is likely to be over £1000 pa you need to be licenced (through the AAT again).

So to reiterate there are lots of things to think of before giving up your paid job and hopefully both of us will be succesful in time to come.

Good luck and prosper

Vern

claudialowe

I am not convinced that charging according to a break-even point is viable in our sort of business. You can only charge what the local market will take.

What point is there in working out that you need to charge say £30 per hour, when the local market will only pay £15??? Surely it is better to earn 3 hours work @ £15 than 0 hours @ £30.

You need to see what other people are charging locally, and be guided by that - and your gut instinct - that is how I work out most of my charging - along with whether I like the client, how busy I am, the type of work it is, whether I am in a good/bad mood that day etc etc etc. Also on a fixed price, you win some and you lose some - and learn by your mistakes!

There endeth the Claudia very scientific method of pricing

Claudia

red_devil

Hey guys and gals! I have just started working for myself here in the north-east of england (geordieland!) and I am charging £50/hour for bookkeeping/VAT/payroll work and £100/hour for tax and accounts work. No complaints from any clients so far about these prices. As Delboy Trotter would have said....."I will be a millionaire" one of these days! As Justin lee Collins would say....."Good times"!!

Sue

Hi Red Devil

Can I ask how many Bookkeeping/Vat/Payroll clients you have?

Sue

deanshepherd

I am never quite sure why sole-traders charge different rates for different services.

An hour of your time is surely worth the same no matter what you do.

Firms with staff have different rates because different grades of staff will be doing the work.

In my mind I tend to work to a rate of £70 per hour but I generally quote clients for an annual service rather than be strict about the time. I'm sure it would come to around that figure though if I kept time-sheets, which I don't.

As Claudia says, you are probably better off finding the market rate for where you live and deciding whether you need to undercut to establish yourself, or differentiate yourself and charge more.

red_devil

Sue: I have only been doing this for a few months but now have 41 clients and it is a complete mix of all different types of work that I am doing for them.

Dean Shepherd: Surely there is more skill, experience and knowledge required to prepare accounts and tax returns than just do basic bookkeeping for example. Therefore the charges should reflect this (IMO!). Each to their own....

red_devil

Sue: I have only been doing this for a few months but now have 41 clients and it is a complete mix of all different types of work that I am doing for them.

Dean Shepherd: Surely there is more skill, experience and knowledge required to prepare accounts and tax returns than just do basic bookkeeping for example. Therefore the charges should reflect this (IMO!). Each to their own....

claudialowe

Dean - don't you value different skills at different rates - I know that I do.

Bookkeeping and VAT requires far less skill/CPD etc etc than tax calcs for example - heavens above even some of MY clients can enter figures onto XL and I have two that attempt their own VAT returns :ohmy::ohmy:

Far more people are "qualified" (and I use the term loosely!) to do bookkeeping and VAT than accounts work and tax comps.

Even when I quote an annual fee I try to guestimate the amount of time that the bookkeeping will take and the time that the accounts and tax will take, and then price probably on about a 1:3 ratio in terms of GBP.

Claudia

richardw

Its only the professions & plumbers/electricians that seem to charge by the hour, instead of just charging for the product or service.

If you can guestimate the amount of time for a tax return, multiply that by your hourly charge, & offer it as a fixed charge.
If one clients work takes a lot longer, because their in a mess or something, offer them an extra service to help them, eg accounts preperation & then the tax return.

Vern

Claudia

Your point about what the local market rate can take is a valid point and yes in setting my prices I asked around to get the market rate however I do have premium rate for local government work as this is more specialised.

Also in preparing my prices I will be offering my clients a table of fixed rates based on the estimated length of time to complete a task (or set of tasks) and on the skill level required for that work.

I am sure that last sentence doesn't read very well!

Maybe I am underselling myself based on red_devils information and need to move back up north (I don't think I need a passport as my old dear was born in Durham)

Vern

deanshepherd

claudialowe wrote: »

Dean - don't you value different skills at different rates - I know that I do.

Nope.

I tend to value and differentiate people rather than skills.

E.g. my time, I believe, is worth £70 per hour whether I am doing book-keeping or tax planning. The loss to me (i.e my free time) is the same regardless.

I have a part-time assistant who does my payrolls, hence I can offer this at a lower rate, otherwise I would not offer it as a service at all.

I do not currently do any book-keeping as I could not justify charging my clients £70 per hour when I can recommend better book-keepers for less than half that rate.

I guess it's just a case of playing to your strengths.

Letting go of lower market-valued work as a sole-trader is hard to do at first. I took a decision some time ago that I would outsource every accounts job that came in so that my time is spent on tax affairs, more my speciality, rather than accounts prep.

Once you make a decision to take the next step you rarely look back.


Oh and p.s. I very much agree with Richard's comments - rarely do firms really charge on the basis of hours, even with a full time-keeping system. They usually charge on the basis of 'worth' so why not ditch the time-sheet in the first place?

Sue

Hi Red Devil

Any tips on how you picked up 41 clients in less than 3 months?

I've been Self Employed for 2 years and still not got that many clients so any advice would be appreciated.

Sue

deanshepherd

Must be down to the competitive rates quoted!

Poodle

Hi,

When I started I sat down and worked out how much I needed to earn to live plus any anticipated business operating costs, computer software, stationery (I use loads), subscriptions, CPD etc plus 30% for tax. I then worked out how many hours a year I wanted to work.

Dividing one from tother gave me a base hourly rate.

I then made a couple of anonymous telephone calls to other self employed bookkeepers/accountants in my area and averaged from there.

Unless I am doing bookkeeping I find that most of my clients prefer to operate on a fixed fee and pay by standing order. I see all new clients on an initial free consultaion, I ask them to bring their books along (so I can see the state they are in!) make a judgement call on how long it will take to do the work and if I want to do the work, and go from there. These often end up being round figure quotes that are easily divisible by 12 to fit a standing order programme. And if I quote a figure, I stick to it.

I do have a minimum for the preparation for very basic self assesment of £100

But however you pitch your fees be assured that you will always win some and lose some, and I recommend that you review on an annual basis.

Oh and one thing that I did get caught out with was the time it takes to actually takes to set up a new client, letters of engagement etc.

Best of luck

Poodle

red_devil

Sue: I have sent out approx 300 A4 flyers to local businesses and have had a fantastic response to this. I thought it would be mega difficult to get clients but it has been way easier than expected. Hang in there girl!

Dean Shepherd: Are you taking the michael about the rates that I am charging?!

Dean

deanshepherd wrote: »

E.g. my time, I believe, is worth £70 per hour whether I am doing book-keeping or tax planning. The loss to me (i.e my free time) is the same regardless.

That's reassuring! :001_smile:

Regards

Dean

paulb

red_devil wrote: »

Sue: I have sent out approx 300 A4 flyers to local businesses and have had a fantastic response to this. I thought it would be mega difficult to get clients but it has been way easier than expected. Hang in there girl!

Dean Shepherd: Are you taking the michael about the rates that I am charging?!

Are you in fact taking the 'michael' red_devil? I also work in the north-east and couldn't imagine getting awau with the rates that you say you are charging. Also, you are suggesting that you get an approximate success rate of 1 in 6 with your flyers which seems very high. Either that or I should be asking myself where I am going wrong?

Sue

As there was a topic in January where Red_devil was initially stating he put through £50.00 a week for use of home, then later backed down and said it was a typing error, that he'd actually typed more than once in that topic, I'm assuming that all his posts are taking the 'michael'.

Dean

Sue wrote: »

As there was a topic in January where Red_devil was initially stating he put through £50.00 a week for use of home, then later backed down and said it was a typing error, that he'd actually typed more than once in that topic, I'm assuming that all his posts are taking the 'michael'.

Hmm, I remember that thread.

Prehaps it is still a typing error and it mean to say;

I am charging £5/hour for bookkeeping/VAT/payroll work and £10/hour for tax and accounts work. No complaints from any clients so far about these prices.

= 41 clients

Now that I would believe!!

Regards

Dean

deanshepherd

When I first set up on my own I hand-delivered (D'oh) around 300 flyers and got the grand sum of 3 enquiries and 1 client!!

Needless to say it was a quick lesson in how not to build up my practice!

I agree with Poodle that most clients seem to prefer a fairly fixed fee structure and paying by monthly standing order. I rarely quote my hourly rate unless it is a one-off assignment where I would be unable to recover any fees in future if there were unanticipated complications.

As a guide, I tend to offer a starting quote of £35 per month for simple sole-traders, £50 per month for partnerships and £100 per month for one-man-band companies. It is only a payment on account, rather than a fixed fee, so if time does start to escalate I can tell the client that the actual bill will be higher. I can then decide whether the standing order has to increase or whether payment will just take a little longer.

red_devil

To be honest guys and gals I know what I am charging and how many clients I have and believe me I am well chuffed so far! Whether you think I'm joking or not is of little concern to me! Believe me, I'm worth it!

Poodle

deanshepherd wrote: »

As a guide, I tend to offer a starting quote of £35 per month for simple sole-traders, £50 per month for partnerships and £100 per month for one-man-band companies. It is only a payment on account, rather than a fixed fee, so if time does start to escalate I can tell the client that the actual bill will be higher. I can then decide whether the standing order has to increase or whether payment will just take a little longer.

Exactly what I do and I do try and start off 6 months prior to y/e with roughly that years fees, so theoretically by the tiem the accounts are finished then you ahve your money in place. It helps me budget with my bills as well with a constant income stream to the business.

The only thing that does worry me a bit is the consumer credit act,(I had a career in Barclays in a former life) are you licensed Dean? I am not

Poodle

Poodle

Sorry I appear to have dyslexic fingers today:laugh:

deanshepherd

I had not even considered a consumer credit licence until you just mentioned it.

I have read through the OFT's guidance material and the arrangements we use appear to be covered under Exemption 1: Normal trade credit.

PaulPSB

deanshepherd wrote: »

Oh and p.s. I very much agree with Richard's comments - rarely do firms really charge on the basis of hours, even with a full time-keeping system. They usually charge on the basis of 'worth' so why not ditch the time-sheet in the first place?

We keep a full time recording system for all staff (including admin) and use the time reports as a basis for billing. I've found over the years that its the only way to ensure you're billing properly for work done. If you're on your own as a sole trader I suppose its fairly easy to recall how long you have spent on a job but once you have a few staff its impossible without timesheets and time recording.
A time recording system also means you don't forget to bill the 35 phone callls you had from a client over the course of the year! :001_smile:

richardw

When charging by the hour, how do you decide what hour is worth more?
Surely you expect an average number of calls/emails/letters with the average client, & these can be costed into the price you charge.

If you going to start counting & billing for every single item, it starts to get like the lawyers who charge for answering a letter, & then charge for any advice given in that answer.

deanshepherd

Time keeping systems are only ever a guide.

If they weren't then managers wouldn't be so worried about write-offs!

As Paul says, it's a way of monitoring to ensure you don't underbill. I'm just of the opinion that it is a huge (time) cost to reduce what is probably a small risk anyway. A quick look through the file will give you a good idea of how much time has been spent. And we all know who our 'needy' clients are without requiring a timesheet to prove it!

Billing aside, I guess monitoring staff performance is probably the most advantageous outcome of a time-keeping system.

It seems to be such a huge part of our daily lives as accountants that it is hard to imagine life without timesheets. However, along with avoiding the commute and waking up naturally as oppose to an alarm clock, that has to be one of the three best things about working for myself!