The problems with hourly rates

With so many bookkeepers scared to make the move from hourly rates to fixed fees I decided to write another short article highlighting the problems of trading your time for money.

While most would accept that charging by the hour seems so simple for the more risk averse bookkeepers, there are also some major flaws with this approach. There is no upside to increasing your efficiency or investing in newer technology. 

The more efficient you become, the longer and harder you’ll need to work to continue earning the same amount of money. You have imposed a limit on the amount you can earn.  Coupled with this, every hour you spend working on your business rather than working in your business is an hours less wage you’ll take home. 

This leads to a lack of time to develop your practice, or skills. You’ll never get a paid holiday.  If you’re not working you wont be earning.  This will eventually take it’s toll on your productivity and lead to the last problem for those too scared to make the leap… Clients will question you on the number of hours it took you to do a task. 

There are always clients who’ll say “this wont take long” or “this will only take you 30 minutes”.  Without any grounding in fact they will actually believe this, you may find yourself charging by their perceptions rather than by fact. All of these problems will add up to less money in your pocket at the end of the month.  There really is only one cure, charge fixed fees!

3 comments

Blue Horizon Bookkeeping Services Jul 16, 2013 05:28pm
Hi Kris, I absolutely agree with you! I am just starting out and have downloaded your flow chart. What I'm not sure about is what I should be charging. Is it possible to give me an indication of the range of prices I should be looking at for each item? Do you charge differently depending on the software used or is that irrelevant? I would really appreciate your help with this. Thanks, Heather
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Hi Heather, We'll be adding other articles on this over the course of the next few days. These may help to answer your questions.
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Could you give me an example of the fixed price flowchart please I'm a bit confused ...
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