Every month as part of my BlackBelt coaching programme I run a private training webinar for my clients called a ‘Spotlight Session’.
The purpose of the call is simple, to put somebody or something (related to the accountancy industry) in the spotlight, so that my clients can learn from them & implement in their practices.
Last month, our session was all about Bookkeeping services, and I decided to put together an ‘expert panel’ and interview 3 of my bookkeeping-only clients about how they have mastered bookkeeping and made it extremely profitable.
The following article is a brief summary of some of the points that were covered in the call.
Why do businesses need bookkeeping services?
Businesses need a bookkeeper just as much as they need an accountant, so why not do both?
For most businesses, they will likely fall into one of the following two categories:
- There simply isn’t enough work to justify the cost of employing people in-house to do the bookkeeping.
- There’s enough work to do in-house, but it’s far too costly and things aren’t efficient as they could be.
By offering outsourced bookkeeping services, you can not only save these clients money, but also take away the worry and hassle of managing their own books.
What exactly do ‘bookkeeping services’ include?
In its simplest form, bookkeeping services include:
- Raising and sending invoices
- Posting purchase invoices
- Bank reconciliation
- Prepare P&L & balance sheet
On top of that, you may also look to offer these services:
- Making supplier payments
- Paying staff salaries and expenses
- Debt collection and client relations
- Management accounts
- Departmental analysis
- Cash flow forecasts
- Other financial reporting
What are the benefits of offering bookkeeping services to your clients?
Here are a few of the key benefits of offering bookkeeping services to your clients:
- It allows you to build strong meaningful relationships – bookkeeping services often require more frequent communication with clients than standard accountancy services (meeting once a year). The clear benefit of this is that you and your team can spend even more time understanding your client’s needs, and as a result being able to sell additional services to them where needed.
- It can be extremely profitable – from my 3 clients that were interviewed, their net profit percentage ranges from 47%-59%. It takes a lot of hard work and focus to get margins like this, but it’s absolutely possible.
- You have access to large amounts of data – when doing bookkeeping, you are often dealing with your client’s data in real-time. This data can be used to offer additional services e.g. management accounts, cash-flow forecasts and other financial reporting services, all of which have very high margins.
What’s the best practice for pricing bookkeeping services?
There are 3 main ways you can price for bookkeeping services:
- Hourly (average seems to be around £35-£50 per hour)
- Fixed Fee (anywhere from £300-£3000 per month)
- Transactional (e.g. £1 per invoice)
There is a definite shift away from hourly billing towards a combination of fixed-fee/transactional pricing.
Scope creep can be a huge challenge with bookkeeping services, especially when it comes down to things such as the quality of client records etc.
Consider building this into your pricing e.g. clients with poor-quality records pay more, and clients with excellent records may even get a discount on normal price.
It’s also worth considering quarterly fee reviews for bookkeeping services so that you can minimise scope creep, adjust the fee accordingly and also spend time with the client exploring the additional services you can offer.
What kind of technology do you need?
I’m told that for Xero you can negotiate rates as low as £7 per client for a full user licence when you agree to move a number of clients on in bulk, and for Quickbooks you can get as low as £1 per client.
It’s also important to ensure that automated bank feeds are set up and linked with either Xero or Quickbooks to save huge amounts of time.
In addition, software such as ReceiptBank and AutoEntry will allow your clients to send in receipts and invoices straight to your bookkeeping software without you having to enter it manually. This requires a certain amount of training/educating for your clients.
If you’re looking to utilise this rich data to offer additional services, apps such as Float and Futrli allow you to generate cash flow forecasts, management accounts + other financial reports at the click of a button.
- From a marketing perspective, bookkeeping services are the ultimate time/cost saver for your clients, making their lives much easier by taking away the hassle, and saving them the worry.
- Bookkeeping can be extremely profitable, but it requires the right combination of technology, pricing, systems and processes to make it so.
- The data from bookkeeping services can be used as a huge stepping stone to offering additional services e.g. financial reporting, all of which have high margins and offer massive value to your clients.
What are your experiences of offering bookkeeping services in your practice? Do you do it? If not, why? What are some of your tips and tricks to improve profitability?