how to take that big first step.
by penny breslin
it’s not just the numbers
the big part of pricing is the value added. how do we go from fixed to value-added pricing where the firm actually can really make a difference and move from just back-office support to client advisory services? the steps to get there mean providing the base of bos so that you have the needed knowledge to perform client advisory services.
more: set expectations with an anticipatory set | get the most out of your client meeting | why bos calls for flat rates | four steps for controlling source documents | why you need standard naming conventions | procedures require regular revisiting
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the u.s. bureau of labor statistics states that about 20 percent of small businesses will fail in their first year and by the end of the fifth year 50 percent will fail.
i started in business in 1982. those statistics were the same then as they are now. shocking? no! i did not really go to school taking courses on “how to run a business.” other business owners i knew either went to university or trade school to learn a skill and then started a business. if they survived the first year, it was often out of sheer tenacity. if they were alive at the end of five years, they often had that “how to run a business” degree handed to them by the school of hard knocks.
today, the speed of business and the speed of change is at warp speed. the business options out there are so completely different in some ways, cyber monday is now bigger than black friday. some new business models are complementary to existing business models. for example, a young digital marketing company in montana markets and sells cattle through facebook and instagram. this is a change that has occurred in the last two years.
how we shop, where we eat, how we obtain education services, medical services, how we live day to day is changing. business owners feel this impact as much as anyone else and they are also trying to keep business afloat while at the same time learning how to run the business. keeping their numbers current, or, rather the lack of that, as well as the lack of understanding those numbers, is most often the contributing factor to the failure.
i needed help back in 1994 on how to even run the bookkeeping. i took a six-week bookkeeping course to learn. today i would just go on youtube. but that course in bookkeeping did not teach me how to know my numbers and how those numbers affect the success of my business. i asked my accountant for that information. those discussions are the client advisory services. those discussions are what having the bos allows. those discussions are the value added. those discussions make a business one of the 50 percent that survive year five.
having the client advisory services discussion for a large firm or small even sole proprietor means having control of the numbers in real time. knowing those numbers are correct is important. so too, must your client know the importance of those numbers. this may mean letting go of compliance. this means showing your clients what you do so they can see the value of the work. this will mean giving an opinion. this will mean having a relationship that includes mutual respect. this will mean good client service. this will also mean setting boundaries and getting rid of clients who don’t respect you.
over the years, i have met quite a few accountants who want to provide these services but find getting it going tough. there are tools out there that can make this easier. the bos steps and tool recommendations get you the baseline. your actual training and your own group of professional contacts should give you the confidence.
i’ve found two programs – qbexpress profit improvement and mastery network – that can give you a structure to follow in order to provide client advisory services. these programs outline topics and schedules you can set up with clients that focus on what the client needs. they make this part simple. the hard part is just taking the first step. but bos without client advisory services is flat rate. bos with client advisory services is flat rate plus value added.
how to price various services provided by your firm
payables: if you are managing payables, you will need to know how many transactions they process in an average month. count the number of bills they enter and then double it because a bill that gets entered will be pushed to either online pay through the accounting software, a third-party add-on or the online banking service. you may not disperse these funds, but you will prep them and report on them to the point where the owner will just click a button to send them out. each payable has two elements. you will enter the payable and set it up for payment. your client will release the payments.
sales and receivables: these transactions are similar to payables. find out the number of invoices they generate and then double the number. hopefully each sale will be matched with a customer payment.
payroll entry: how often does the client run payroll, and how long do you estimate it will take to do the journal entry or download the detail to the accounting program? the time will vary by payroll service and the ability to download into the accounting software. also, if you run job costing for this client, the payroll journal entry will be more complex. if you are not familiar with their payroll service, you might recommend a program your firm has mastered.
bank reconciliations: these should be done monthly. on average, each of the reconciliations should take 1 hour per account. using the online banking feeds of web-based accounting programs like xero, qbo or the direct downloads to server-based programs, along with well scheduled updates, should even cut that time by as much as half. this also includes credit cards and merchant services accounts. each of these is a separate reconciliation, in and of itself.
bank deposits: these will be done by the client’s in-house staff. with mobile banking they can send the scanned deposits to the email account on file for the client’s account. this email should be one that both your office and the client can access. you really need to take control of this. if the client is not willing, then charge an extra hour of bookkeeper manager (bkm) time for “chasing documents.”
pickup work: this will be done by your bkm if needed. typically, this is done in the initial setup. after the bkm has been on site to meet the onsite staff and the owner and to get familiar with any processes or bottlenecks, they can observe and obtain any documents that were not available on the first visit by you. the bos should be the front-facing member of the team.
do not default to allowing manual pickup of paper on a regular basis. your team needs to be trained to not revert to the old ways of doing business. once your bkm has gone on site for the initial intake, the bos will have the continuing face-to-face relationship. if you pick up paper, you have breached your side of the sla.
review preparer work: your bkm reviews the work and calls or emails the client if there is missing information.
- sales tax – monthly or sales tax – quarterly: assigned to the bkm
- sales tax annual reconciliation: assigned to the preparer
- corporate tax return: assigned to the bos
- annual report: assigned to the bos
calculation formulas
please note the cost of the preparer and bkm in the calculation below are the flat rate we provided to the accounting firm. please adjust your costs to the actual costs for those doing the work.
bos time budget proposal worksheets
example 1a
example 2a
example 3a
bos calculations for cost of bookkeeper to client business
example 1b
example 2b
example 3b
administration time
one area i find that people most often forget is allocating administration time to the fixed price. we can tighten and use technology for quicker data entry but there is always or at least should be administration time allocated. consider time spent on the following:
- daily organization of the tasks at hand
- updating notes on atypical occurrences
- creation and updating of procedures
- regular meeting to discuss clients (a very big must)
in the calculation demos provided, the items above are considered in the final fixed price.
remember, you are the rainmaker in your firm. each bos client needs to see you at least monthly. and you need to see your bos client at least monthly.
we suggest that you schedule a one-hour meeting with your client that’s included in the monthly fee. this will give you the opportunity to build your relationship with the owner, the opportunity to give your client one hour of consulting that will generate needs for your specialized premium fee services outside of the sla. again, it is a win-win.