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Hourly, subscription, or real-time: Which pricing model is right for your accounting firm?

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Hourly, subscription, or real-time: Which pricing model is right for your accounting firm?

In this article, we unpack pricing structures and how to make them work for you and your accounting practice.

Here’s what we cover:

Putting together the right plan, so you’re not working for free 

Switch to subscription-based billing 

Move away from hourly pricing

Putting together the right plan, so you’re not working for free

When starting an accounting practice, it’s a good idea to figure out how you’re going to charge from day one and how you will transparently tailor pricing to each client.

If you’ve ever been in a situation where a client asks you to “just do this” or “please help with that”, and you oblige, before you know it, you’ve spent two days working for free doing someone else’s admin. Not ideal.

Here are a few strategies to help you set boundaries and avoid getting into this situation.

Switch to subscription-based billing

Generally, accounting firms will adopt one of three pricing models: hourly billing (the traditional or “old school” way of working), monthly subscription-based billing (new way of working), and real-time billing.

With subscription-based billing, accountants charge per transaction, i.e., the value they deliver. They will consult with their clients and agree on a set monthly fee for a set of deliverables.

For example, a client signs up for monthly bookkeeping services as well as VAT returns, annual financial statements, corporation tax, personal income tax, and payroll. You would then create a package for the client, covering all these items and a set number of transactions for a fixed monthly fee. The benefit of this approach is that you have guaranteed income and get paid upfront for the month, which is good for cash flow.

The downside with subscription-based billing, which is generally reviewed annually, is that it locks you into a set fee and does not account for business growth and variability. For example, if you bill a client for 200 transactions a month and suddenly they get busy and record 400 transactions, that extra work will only be factored in during the annual review, which means there’s scope creep from day one right the way through. You also need to find extra time and resources to service the additional transactions.

However, there is a workaround, and that’s to charge a variable rate or a fixed amount per transaction (i.e. real-time billing). There’s still an agreed fee structure in place, but you charge per transaction instead of a bulk fee for a certain number of transactions –make it clear in your scope of work.

The advantage of real-time billing is that you can increase your resources as the volume of transactions increases, rather than trying to plan ahead to service a set number of transactions. What’s more, you could earn more every month than you would with a fixed contract.

This approach is great for seasonal businesses, whose accounting needs might ramp up during a busy period and plateau in between. Knowing that a client needs additional resources during the summer months, for example, allows you to plan, keeps you agile, and lets you adapt to every client’s business.

Move away from hourly pricing

Clear, transparent pricing lets you set boundaries with clients and allows you and them to better manage your cash and workflow. The real-time model is fair, transparent, and consistent.

On the other hand, hourly pricing could come as a shock to clients who were expecting a bill of R1,000 but receive one for R1,500, which makes it difficult for them to plan and forecast.

If there is any ad hoc work that falls outside the scope of work, be clear on how you will charge (hourly, per item, etc.) and let your client know well in advance of billing.

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Want to know how you can take control of your business? Read this guide for top tips to help you master your business admin.

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