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What hourly rate?

Sep 8

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08 September 2008 10:01:37  RssIcon

Surprisingly, I hear many bookkeepers aren't sure what rate they should be charging, and many still under charge.

Rates do vary for many reasons but sometimes I struggle to see how a bookkeeper can receive a proper income after taking into account all costs. Are these bookkeepers simply using rates that sound appealing to others? And thinking 40 hours a week at this rate sounds good?

If you charge at the lower end of the scale, say £12 per hour...

Are you thinking this can equate to £480 a week income?

Or possibly on a 48 week year, an annual income of around £23,000?

It doesn't sound too bad like that, does it?

But what are you really earning?

Unlike earnings when employed we do have not only other costs when in business, but other duties that result in lower earnings for time. These are very real and have to be considered, else you are doing yourself a serious injustice.

Firstly you probably can't bill a full 40 hour week. You will have travel time, internal-administration, meetings with potential clients, phone calls and possibly a lot more that cuts into your day.  If you are a employee, these are things you or someone else in the business would be paid for sorting but when in business for yourself no-one will pay for this so you must allow for it in your billable rate.

For arguments sake, let's say you lose half a day a week on all of that - although I expect it's a lot more. Now you only have 35 billable hours in a 40-hour work week.

And what about the overhead costs?

Well, many cases you work from home or use a small office somewhere. Location, size, services included all make a difference but I'd expect almost anyone would need to allow at least £200 or so per month for this.

Plus phone calls, electricity and others?  Phone calls, a split mobile and land-line could be at least £50 each month. Utilities and other basics maybe £30 a month? And maybe another £250 a year for insurance. And other incidentals of £500 would be a fair inclusion.

If your clients were employing someone, this is a cost they would have to cover so why shouldn't it be covered in the rates you charge?

A computer, software, furnishings are all things you need too. Computer maybe around £500, and much the same for software.  Furniture - desk, chair, filing cabinet etc might come to £250. A website and other basic marketing material and corporate stationery could easily be £750, something you need to cover.  This £2000 might be something you spend every couple of years, just to stay up on the very basics without going overboard or getting anything "high-end" at all!

There is a lot more you may need to consider but this starts to give you an idea.

Lastly to get an idea of our actual income, we need to consider employment costs - NI contributions, sick leave, bank holidays and so on.  We know we want 4 weeks a year recreation leave - we all need a break, and need to afford one!

So we need to add a week a year sick leave (being self employed we are less likely to take a sicky!), and 2 weeks for those bank holidays which we'd probably get if we were employed in this profession.

To get an idea now, and keeping this very simple (at least for illustrative purposes), you're charging just £12 an hour means...

Calculator1a 35 billable hours a week but only working 45 weeks a year, so this is £18,900 per annum - already quite a difference.

And from this we have to take £2,400 for the office/room usage, £600 for phones, £360 for utilities, £250 for insurance, £500 for incidentals.  And a minimum allowance for the tools needed to provide the service £1000.

So now we're looking at £13,790 less that NIC still to consider... so now our rate equates to an actual earnings of around only £12,000 per year, bearing in mind most probably achieve fewer billable hours in a 40 hour week and have even more costs!

So from that basic calculation we get an idea that £12 per hour really means about £12,000 a year. It's not a salary I would expect a professional bookkeeper to be content with, would you?

 

Harry Nicholson
H Nicholsons Accountants

You are welcome to republish this article providing you include the following text and link at the end of the article:

Harry Nicholson, H Nicholson Accountants - A fictitious sample member of The Accountants Circle.

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10 comment(s) so far...


Re: What hourly rate?

What an excellent article. I've always struggled with knowing what I should charge for my services.

On the one hand I don't want to be so low as to not make a living, or to appear 'cheap', while on the other, I don't want to be too expensive and drive potential clients to consider taking a bookkeeper on their payroll for, say, £8.00 per hour.

However, having read the article, I realise that practicalities should be the main consideration. I feel a new costing exercise coming on.............

Even the obvious sometimes has to be presented in front of you before you take notice of it.

MoK




By maidofkent on   21 September 2008 13:22:12

Re: What hourly rate?

I started out in August 2006 and charged £12 an hour, raised this in 1st Jan 08 to £12.50 an hour which took affect for current customers in 6 Apr 08, kept them happy being on the old rate for 3 months.

I am happy with my rate, my customers are happy with the rate and happy with the increase which is based on rate of inflation rounded up slightly.

Alison

By Alison Jones on   06 October 2008 08:47:24
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Re: What hourly rate?

That's a very useful article. Thanks very much.

M

By Emily Coltman on   07 November 2008 08:25:15
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Re: What hourly rate?

I recommend professional bookkeepers in London quoting between £16 to £24 per hour depending on their client's business, its affordability, complexity and whether the rate applies for a full day (lower hourly rate than for part of the day).

This way, you will have enough money to get a good job done (annualised profit circa £20K for full time wiork), ease the life of the accountant and get referrals from him/her as well. Please do not offer quality service at such low rates to make your sector uneconomical. You are doing too important a job for the financial health of your SME clients.

Good luck.

H. Ameli
Professional Accountant

By H. Ameli on   29 December 2008 21:54:09
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Re: What hourly rate?

It's great to have a rough idea of the hourlly rate charged. I am in Kent and i charge £15 per hour to start with, and i plan to increase yearly. I have some other clients who prefer me to give them a fixed fee each month. So I have had to estimate the hours the job will take and come with a flat rate, so far it has worked well for me, and i like the fact that I am paid monthly by standing order as this helps my cashflow.

The only area I am having problems with the fees is where I have to train staff at their premisies using a computerised software. I thought I could charge £250 for a whole day ( 9.30 - 4.30) I have had to reduce this at times as some think it;s high. I have spoke to other trainers who even charge more than me!

By GennyJones on   12 January 2009 23:08:38
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Re: What hourly rate?

Thanks for this post. Its always tricky to work out whether you are better off to employ a bookkeeper or outsource these services. There if that tipping point for most businesses where you need to take that plunge. We have decided to Learn Quickbooks accountancy software so we can stave off having to employ someone until we really have to!

By Tim Tav on   20 May 2009 15:37:54
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Re: What hourly rate?

Thanks for the info. just starting in a part time business this will help my planning

By Mike on   31 March 2010 16:21:28
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accountants in worcester

As I read on your post I get interested to finish my reading,I don't have any idea about the hourly rate the shall be given for the task that you are contributing.Thanks for this great facts,Now I am inform and know what to do if someone ask for my assistance.

By accountants in worcester on   26 May 2010 13:32:52
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Re: What hourly rate?

Wow... I agree.. paying hourly, you only pay for what you use, so you’re not paying for downtime. Anyway keep posting!

By accountants in worcester on   02 July 2010 09:32:08
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Re: What hourly rate?

This is a very good article for anyone entering this type of business and puts into perspective the actual hourly income bookkeeping entrepenuers make.

I am just starting out and faced the choice of trying to intice clients with a low rate or setting my price as competitive, based on my experience and knowledge. Then I read this:
JOB BANK 5266313 Forest products saw filer
Employer: Hampton Lumber Mills - Canadian Operations
Salary: $33.76/ Hourly for 40 hours

I knew then that the value of an experienced, ethical bookkeeper should be worth at least as much as someone who files saws! My business is based on tailoring packages to fit the client, that way they know they are getting only what they need and it makes my clients feel like they are not being overcharged, in turn I make a proper living wage. Besides, if you're business doesn't make a profit it is no longer a business - its a hobby.

Thanks for the information Harry.
Best Regards,
Shelby


By Shelby on   03 December 2010 18:10:54

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