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Getting Advice From Strangers

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Recently, several clients were asking questions related to pricing.

One wanted to know what to charge to set up a set of books, another wanted to know how to get a set of books up to date after the firm had avoided any accounting for months, and another just wanted to know which was the best software to choose that would allow them to pay on a per return basis.

 

I know I try to act all knowledgeable, but don’t let my smart alec answers steer you wrong.

These are all questions that you, as a professional, need to figure out for yourself, and use a little common sense.

About what to charge.

Do you have the ability to estimate the amount of work involved, based on your own history and the number of transactions to post, the number of bank accounts, the number of ledgers, the number of checks, the number of employees, and all that sort of stuff?

About getting the books caught up.

Same deal, except you need to extrapolate the work out to cover the number of months you have to get caught up.

Of you don’t have enough experience to have developed even some seat of the pants feel for how long it will take you to get that amount of work done, then you need to come up with an amount you want to realize on an hourly basis, multiply it by some number so that you’ll be able to cover the overhead you’re likely to run into, and charge by the hour.

Once you have some experience with either a client, or several clients, then you can start quoting fixed rates, or as the hot word is these days, the value price..

Your objective in any kind of pricing is to first come up with what you want to net at the end of the year, calculate what your productivity will be, and get a multiplier. Basically, if you want to earn $100,000, and you will only be working 1,650 of the average annual 2,200 hours per year, then you need to charge one and one-third as much as you would charge if you were working all of your available productive hours.

And, you need to bump it up a bit to cover overhead, such as rent, utilities, insurance, supplies, wear and tear on machinery and supplies. Plus anything else that you are going to have to cover.

I know this is a simplified explanation, and I may have calculated incorrectly, but the idea is simple, and if you have trouble figuring it out, take a little time and think on it. You got to cover costs, you got to earn an income, and you’re not going to be doing production all the time if you want to grow your business, so you have to figure non-billable hours in for marketing.

That’s it.

And what software to use?

I have no idea. I didn’t like taxes, I don’t do them now that I’m retired, and I don’t know who to ask. In cases like this, Google is your friend.

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Best to you and yours,

kirks-sig

 

Kirk

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