A Clear & Simple Guide on Pricing Your Accounting Services

The rush of landing a new client: There’s nothing like it. 

For entrepreneurs, you live and breathe for sales calls. It scratches the itch you haven’t been able to reach working for someone else. 

But don’t get too starry-eyed by the glow of a shiny new client. 

Keep your head level and establish accounting service pricing for your firm that definitively sets your business up for success in profitability and in doing the work you and your team most want to do.

Let’s dive into how to price accounting services for your firm step by step and why it’s so important.

Why Figuring Out Your Pricing Is Critical to Growing the Firm of Your Dreams

People hate talking about money. In fact, 1 in 5 people admit to never talking about it. We get it; money is a powerful force that can change perceptions of people in our lives and how they live theirs. 

And when it comes to talking about money in business, it gives your customer even more information. 

By discussing money and establishing prices for your accounting or bookkeeping services, you’re not just determining how you’ll build your business, you’re also sharing your cards with your clients about what it’ll be like to work with you. 

For example, a higher rate demands a certain amount of service and quality. A lower price can signal that the client won’t get enough for their investment or that you’re ill-equipped to assess and handle the work requested. 

It’s a delicate balance, but how you price yourself determines so much about your business, including how profitable it is, and guides the contents of your standard operating procedures. 

It isn’t enough to have a good idea for a business; you must price it accurately. With so many factors, pricing is a mix of art and science.

Pricing your accounting services can help you complete the following goals for your business:

• You can more easily scale your business with automation in billing, financial reporting and forecasting, and team building.
• You’ll know whether or not adding a new client to your roster is feasible at any given time.
• You can attract and retain top talent with steady client work and established processes and workflows.

Hourly vs. Fixed vs. Value Pricing: Which Model Makes Sense for Your Business?

This is where the rubber meets the road. 

Determining whether to charge for your accounting services using a fixed fee, hourly rate, or value-based pricing is the ultimate crossroad in your journey to becoming an accounting firm owner. 

The only one who can truly know which model works best for you is, in fact, you.

Hourly Pricing

Using an hourly rate for your accounting services gives you a straightforward way to bill clients for the time it took to complete the work. It’s traditionally been the most common way accounting firms charge. 

With this pricing model, no matter what services you’re performing for which clients, you’ll use the same hourly rate to be compensated for your time. 

Charging by the hour is simple and a standard across the industry, though you won’t get rewarded for working quickly and efficiently. 

Fixed Pricing

With fixed pricing, you determine what price corresponds to your services for any client type or size — and only do that once. 

That means creating one accounting firm price list and applying it to an onboarding and selling process, which can be easy to automate. 

This model lets you respond more rapidly to prospective client inquiries since you’ll insert your fee schedule into any sales deck or proposal and let your automated processes and team fly. 

Taking away the variation in pricing allows you to automate your business processes more easily and with less time invested.

Value-Based Pricing

The value-based pricing model allows you to price each client based on the value you bring to their company. Although this definition is variable, this format can improve your profit margins on services to specific clients. 

For example, a blue chip prospective client fills out your lead form. You learn they’re firing their big firm in favor of better service or more in-depth service offerings. 

With value-based pricing, you can customize a retainer agreement to accommodate both the scope and depth of your anticipated work.

Adding variety to your pricing means you have more moving parts with each sales pitch; however, it can be more profitable.

How to Price Your Hourly Accounting Services (4 Steps)

The billable hours model for pricing accounting services may not be as common today as it once was. However, it’s still a widely used structure by many CPA firms, favored for its simplicity. 

If you want to stick with this traditional billing method, here are some steps to help you set your hourly rate. 

Step 1: Calculate your overhead and variable costs.

The foundation for setting an hourly rate is determining your monthly fixed costs. 

At the very least, you want to ensure the fee you’re charging clients covers your recurring expenses like office rent, utilities, accounting software fees, and salaries. 

You should also account for the variable costs you could incur to support each client, like travel or materials. Combining the total fixed and variable costs your firm pays each month is the starting point for determining your hourly rate. 

Step 2: Determine your desired profit margin. 

Along with covering your essential monthly spending to keep the lights on and maintain payroll, you should also set your hourly rate to generate a profit for your firm. 

Assess what profit margin you would like to achieve. That gives your firm fuel to reinvest and grow, but it also provides a cushion should you face unexpected expenses, inflation, or other market conditions that impact profitability. 

Using your ideal profit margin and monthly expenses you calculated in Step 1, come up with a dollar value of revenue you’d need to generate each month to achieve this level of profitability. 

Step 3: Estimate the number of billable hours you’ll work. 

During this step, you’ll start to get a better idea of what your hourly rate might be. 

First, you need to come up with an estimate of how many billable hours your employees work each week or month. 

You can base this on historical data for the firm or use industry benchmarks if you’re just getting started. 

A simple calculation for formulating your hourly rate is to take the target monthly revenue from the end of Step 2 and divide it by the number of estimated billable hours your team works each month. 

Step 4: Research the average accounting fees in your area.

Now, you should have a baseline of what to bill hourly to cover your fixed costs and earn a good profit. 

Going one step further, you can research the average hourly rate for similar services in your area to see if your prices align with the market rate. 

You don’t need to match the rate that every other firm charges. Researching your competitors’ fees simply gives you a good idea of what prospective clients in your area are willing to pay. 

You can adjust your rate to stay competitive, but be sure you’re charging enough to earn a profit and be compensated for your expertise and experience.  

How to Price Your Fixed Accounting Services (3 Steps)

Setting fixed prices or creating tiered service plans may be more complex than setting an hourly rate. You must have a solid understanding of your clients’ needs and the resources your team requires to get the job done. 

However, clients may appreciate paying for accounting services at a fixed rate to avoid billing surprises. 

That said, unlike hourly pricing, if your team spends more time than expected on a given deliverable, it will likely cut into your profitability. 

To avoid underpricing yourself, here are the steps to establish fixed prices for your accounting services. 

Step 1: Calculate the direct costs for each service you plan to offer. 

Consider the different accounting services your firm will offer, like tax return filing, client advisory services (CAS), CFO outsourcing for small businesses, or others. 

For each service, assess the fixed and variable costs that go into its delivery, such as overhead, salaries, software expenses, etc. This calculation reflects how much it costs for your firm to fulfill a given service. 

Step 2: Assess what your ideal profit is.

Like setting an hourly rate, establishing fixed prices for your accounting services requires determining your ideal profit margin. 

You can base your desired margin on several factors, such as your expertise, planned growth initiatives, and market fluctuations. 

For instance, to earn a 50% profit, you’ll need to raise each service price by the appropriate amount to achieve it. 

So, if you calculate that it costs your firm $1,200 on average to deliver a given service, you need to charge clients $2,400 to earn your desired profit. 

This step is essential with a fixed pricing model because it gives you a buffer should your team use more resources than expected on a certain deliverable. 

Using our example, even if service delivery costs your firm $1,600 instead of $1,200, you can still cover your expenses but with a lower profit of $800. 

Step 3: Consider bundling your services. 

Clients may not understand your rationale for charging a fixed price for your services versus hourly billing, where they know you’re getting directly compensated for your time. 

Even if the final price for both models ends up in the same ballpark, some clients may feel more comfortable committing to a service at $65/hour than an upfront fee of $2,400. 

To make it easier for prospective clients to rationalize the cost, you can opt for bundling different services and create packages that offer clear and undeniable value. 

This way, clients feel they’re getting additional services or conveniences for just one fixed price. You can also create different service levels that cater to clients with varying budget constraints. 

How to Price Your Accounting Services Based on Value (5 Steps)

Finding the right price for a service doesn’t necessarily mean it’s the cheapest. 

Instead, prospective clients want to be sure they’re spending their hard-earned money on a worthwhile investment. Follow these steps to price accounting services to provide value to both you and your clients.

Step 1: Have a conversation with your prospective client.

This conversation can be in person, over the phone, by email, or video conference. 

Asking the right questions in this conversation can help you determine if the client is a good fit for your expertise and how you’ve set up your business. 

When you both walk away from the conversation, you should each have a good idea of whether or not your services are what they need and an amount they’re willing to pay. 

Use these questions for your initial consultation call or form on your website.

1. What have you learned about accounting services and the types of services you need?

This question gives you an understanding of where they are in the decision-making process and how familiar they are with hiring or working with an accountant or bookkeeper. 

This context can help you determine the value you’re bringing to their business (value-based pricing) or if your pricing aligns with their budget (hourly or fixed-fee pricing).

2. How do you currently handle your accounting needs?

Get an idea of what they’re doing now and how much they like it. You can use any complaints in your pitch to seal the deal. 

If you have a specific product or service that matches a complaint, you can lead with that in your proposal, which could also support your pricing model. 

Additionally, learning that they currently do nothing or DIY can determine whether they fit your ideal client type and how you can assist them with implementing a formal accounting process.

3. What are your business goals for next month? Quarter? Year and beyond?

Understanding your client’s business goals helps you meet their needs and dig into areas where you can add value as a consultant and expert. 

Tying business goals to your finances is what we’re explaining to you right now in this article, so go ahead and do the same for them!

Step 2: Gather requirements and determine the scope of work.

Once you have the initial conversation and answer the above questions, you can discuss technical onboarding requirements like software, communication preference, and anticipated meetings throughout the engagement. 

In your proposal, include the answers to your questions above and pair them with associated services or packages from your accounting firm price list.

Step 3: Present your proposal.

Creating a standard proposal template for the accounting clients you’re pitching is a great way to organize your thoughts and key selling points. 

It’s also a chance to impress them with both the time you spent preparing and your organization. 

Use the questions above to tell the story about what you can offer them and outline the slides in your presentation.

Step 4: Negotiate and come to an agreement.

Now, you have to talk about money and time. These exchanges are how business was created and continues to work. 

If your client is trying to talk down the price, reinforce how your fees align with the pain points they mentioned during your initial call. 

Or, If they’re expecting around-the-clock availability, be clear if you can’t deliver on it, whether it’s your business model or personal preference. 

Otherwise, you could face scope creep as the client tries to get you to provide more services than you initially anticipated and charged for. 

Step 5: Implement your new client.

Don’t put your feet up just yet. Once you’ve done the hard work in the selling and agreement phase, it’s time to onboard the client. 

That can mean integrating software, sharing passwords and banking information, gathering documents, and more. 

You’ll also need to put the agreed-upon statement of work from Step 2 into action with your team’s workflow and process. 

Free Download: 32 Workflow Templates & Checklists for Accounting Firms

Deciding how to price your accounting services directly correlates with your ability to grow your firm and bring in more profit. 

As you scale operations, you’ll need to find ways to streamline workflows and become more efficient with your resources to support your profitability. 

To standardize repetitive accounting or bookkeeping tasks for better efficiency, download our set of 32 free customizable accounting workflow templates and checklists to help you get started.