How Does a Bookkeeper Charge
for Their Bookkeeping Service?

Setting Bookkeeper Rates - By The Hour or Flat Fee?

Bookkeeping service fee charged by the hour

Some bookkeepers charge out their bookkeeping service at a basic hourly fee with a set minimum charge. The average rate in Canada right now (2009) is $35/hour (Intuit survey). Note - expect to pay more for "advisor" services with regards to your computer software.

New Bookkeepers Tip

If you are just starting out in public bookkeeping, set your rate in line with your experience. As your experience grows, increase your rates.

If you are hiring a bookkeeper, make sure you inquire about their formal training, their practical experience (was it obtained in private industry or through public practice ... small business or large corporations) and ask for references ... then follow through. Don't be afraid to give them a bookkeeping test to see if they will be able to perform the work you require competently.

As this is the average rate, some bookkeepers may charge less per hour and others may charge more. Here is a very loose guide:

• If a bookkeeper charges below the average bookkeeping rate ... say $25/hour or less ... they are probably new to bookkeeping ... their inexperience is reflected in their rates. This doesn't automatically mean they don't have formal bookkeeping training or bookkeeping experience, just that they may be new to public bookkeeping.
• If a bookkeeper charges well below the average bookkeeping rate ... say less than $16/hour ... I'd recommend you make arrangements for them to take a bookkeeping test to gauge their skills ... because your business could be at risk if poor bookkeeping practices are followed. The bad news will likely show up during a CRA audit.
• If the bookkeeper works for and is supervised by a certified accountant (CA, CGA), expect to pay well above the average bookkeeping rate ... you are paying for quality of work due to the supervised environment ... a second pair of eyes that is well versed in GAAP.
• If the bookkeeper is working freelance ... but is certified, expect to pay $10 to $15 above the average bookkeeping rate.
• If the bookkeeper is experienced ... but not certified, expect their bookkeeping rate to be plus or minus $5 of the average bookkeeping rate.

Don't quote me on this .... this is just an educated guess ... I have no figures to back this up ... the price ranges for bookkeeping service just stick in my mind from things I've read or heard over the past ten years.

Rates vary in different areas within a province and across Canada. In communities experiencing a recession, rates may be below the averages while large cities seem to command a higher rate.

From the various websites I've visited while doing research for this page, it seems $75 is the lowest minimum charge I found bookkeepers (online anyway) are accepting. This is for a very basic business with minimal transactions ... and it may be the best $75 you spend each month if you are just starting out.

IPBC (Institute of Professional Bookkeepers of Canada) now has a report titled Status of the Canadian Bookkeeping Industry 2009 Benchmark Study available for sale at www.ipbc.ca> Continuing education> 2009 Benchmark Study. The study "focused on bookkeepers and their salaries, education and training levels, accreditation." It provides useful information pertaining to bookkeeping services.

Bookkeeping service fee charged as a flat fee

The second method that bookkeepers charge is by an agreed upon, in advance, fixed monthly charge. This charge is usually based on a combination of so much per number of transactions plus a fixed amount to cover preparation of financial statements and a monthly (or quarterly) meeting with you to discuss your financial results.

It usually works out to a minimum charge in the $125 to $175 range for bookkeepers who use a fixed fee structure, again for a very basic business with minimal transactions ...

... But the advice they can provide, if you let them, by having an ongoing relationship with them, usually repays your fee in actual money savings and use of your time (that is only if you feel your time is actually valuable and worthy of placing a dollar value on.)

Expect to pay a one-time setup fee and a deposit in advance

Often times, a bookkeeper will charge a one-time administration fee to set up the books. This fee covers setting up your chart of accounts and inputting your opening balances.

It is normal practice to request a deposit up front and in advance of processing. This fee can vary but is usually between 25% to 50% of the estimated bill. The worse you are at paying your outstanding bill, the higher the deposit requirement.

Many bookkeepers only work on a 100% estimated payment up front as they do not extend credit of any kind ... or they may request a retainer which is applied to your final bill.

If you would like to pay your bookkeeper by credit card and they don't offer that service yet, ask them if they would consider using PayPal. It is a great way for a small business to accept credit cards without all the merchant fees.

All they need to do is sign up and send you an e-mail. Instructions on how to pay are provided.

If you are wondering how much to budget for bookkeeping services, I'd say $2,500 including taxes annually for a set of audit proof books. That would include a one time setup fee, monthly bookkeeping for 40 transactions or less per month, monthly conversations and management reports , year-end, internal financial statements, and T1 tax preparation for sole proprietors.

Sometimes, a bookkeeper will want to do your books at an hourly rate for three months before they set a fixed price for you. The reason ...

... clients' presentation and completeness of information.

You can help keep your bookkeeping fees reasonable by asking your bookkeeper how they would like the information presented.

The more organized you are, the less it costs you. Why?

The bookkeeper does not have to spend time organizing your receipts or following up on missing information or ... figuring out which account you paid "that" expense from. Picture a lot of head scratching, and hearing the word "hmmmm"! ;-)

Let's Chat About ...

Most bookkeepers don't mind sorting "shoebox" type filing ... especially for the "I don't like or do paperwork" client ... but if this is you ... you must be prepared to pay for this service.

It takes time and time is money ... which is why you probably opted not to sort and organize it yourself. So no complaining when you get the bill ... and prompt payment of the bill is always appreciated.

If you want to hand in your receipts sorted in an organized fashion, consider adapting this portable document filing system. It's a real money and time saver.

As many clients don't indicate payment sources, I enter all the purchase receipts and bills into Accounts Payable. Then I pay it from "my best guess" source. When I reconcile the bank or credit card statement, I can quickly fix the source of payment if my best guess was wrong. It saves voiding and reentering the transaction if the period is still open or doing a journal entry to correct the entry if the period is closed. Using Accounts Payable as a type of clearing account is a good internal control procedure.

This method saves me time when providing bookkeeping services. It also provides a good vendor history for the client and ensures no expenses are double booked. It achieves this because when a client pays a bill with a cheque, but never submitted the actual bill with their source documents, the cheque now gets coded to Accounts Payable and not the expense account. Recording the cheque now places the vendor account into a "credit" balance. It alerts me that the original source document needs to be tracked down if the bookkeeping is going to be audit proof. When I receive the supplier invoice, I code it to the expense account. Next, I apply the outstanding "credit" to the supplier invoice to clear it and show it paid.

This method makes it easy to review the Accounts Payable and see what documentation is missing because the Vendor's balance will show a "credit".

If, by the end of the year, a client has not provided the appropriate source document, the amounts are "expensed" to owner's draw as they are not tax deductible without the source document ... so you can see how important organized paperwork is when you have a small business. A lost invoice or receipt means increased taxes ... which means less money in your pocket.

And while I think of it ... when you collect money from a customer, deposit it as soon as possible ... the whole amount received. Don't keep some of the cash for yourself. If you need money, take a draw from your business account. It's much easier for the bookkeeper to match deposits and it will make any future tax audits go more smoothly.

If you expect a bookkeeper to process your quarterly books and GST return with less than two weeks lead time, expect to pay more.

Remember you are not their only client and they need to be able to schedule all their work to meet government compliance deadlines. Giving them lead times allows them to perform high quality work.

As you can see, it's not that easy to give you a figure as to what you could expect to pay for bookkeeping services. Because fees are based on volume of transactions, complexity of your industry, and different services you can opt in or out of, you need to get some quotes or ask your friends who they use.

Once you start asking around for a quote, be sure to ask if year-end preparation is included in their fee quote or if it is an additional charge.

Before you speak with prospective bookkeepers about bookkeeping services, you may want to read What Are Your Responsibilities When You Hire a Bookkeeper?

When you pay a bill, get in the habit of writing down on the bill: (yes muck it up! ... because if you get audited three years down the road you will not remember the specifics of that bill.)

• what date you paid it
• from what account or credit card you paid it
• if you wrote a cheque to pay the bill, the cheque number
• the amount you paid if different from the balance
• and anything else relevant .. especially if there is a "story"

If you can staple the paid receipt to the bill, that's good too!

Do the same thing for customer payments received. Write the following on the invoice:

• what date you deposited it
• what account it was deposited to
• the amount you deposited if different from the balance
• the customer's cheque number
• the customer's address on the cheque if it is different than your billing address
• and anything else relevant .. especially if there is a "story"

If you can staple the bank deposit receipt to the customer invoice, that's good too!

This habit may seem silly when you are just starting out and you don't have many transactions ... but once your volume grows, it is just inefficient to be hunting around while doing data entry, trying to figure out where money came from or went to. Remember always keep an audit trail. ;-)

Why would a bookkeeper fire a client?

Get excellent bookkeeping service by being an excellent client.

If you find a good bookkeeper, treat him or her well ... because like a great hair dresser, they can be hard to find. A great bookkeeper can save you money.

And remember this possibility, just as you can "fire" your bookkeeper, they can also "fire" you.

Why would that happen? ...

... Hmmm. Let me count the reasons ... Slow payment for bookkeeping services rendered, continually submitting work late or just in time, or giving it to them in bits and pieces, or there is always something missing ... come immediately to mind.

You are probably wondering what's the big deal with stuff like that. The big deal is that it costs the bookkeeper in time and efficiency ... making the account much more expensive to operate.

• Stopping and starting on a file takes more time than just working on the file once.
• Taking time for collections means the bookkeeper is not providing bookkeeping services to another client.

If it is ongoing and your bookkeeper keeps you as a client, these inefficiencies will probably be built into your pricing ... interpret that as meaning you are paying more for bookkeeping services than the client who is well organized and always on time.

You may at some point wonder, "Does a bookkeeper have the right to hold a client's books until payment is received?". I talk about this issue in Small Business Bookkeeping Questions and Answers.

One thing you should be aware of ... bookkeepers and accountants are subject to third party civil penalties.

CRA brought in these penalties in 2000 to deter false statements or omissions. The financial penalty can be significant to the professional preparer and advisor ...

... So if you ask your bookkeeper to be willfully blind to obvious errors when preparing your information, they would be justified in withdrawing their bookkeeping services and resigning from the engagement.

In the U.S. tax preparers must register with the IRS, pass competency tests and attend continuing education as a preventive measure against dishonest tax return preparers.

P.S. Bookkeepers - If a client comes to you reporting very little income, it is acceptable to ask how they support themselves ... as a way to protect yourself. They could be supported by financial gifts from relatives or ...

If you aren't satisfied with the answer, I would turn the client away.

... Just in case you missed what I said earlier ... slow bill payment of bookkeeping services rendered increases the cost of bookkeeping ... because unbillable hours for collections now has to be factored into the bookkeeping service rate.

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