For Their Bookkeeping Service?
Bookkeeping fees are dependent upon the volume of transactions, whether you have employees, how complex your industry is, whether you need job costing ... there are many factors that can influence the price but...
... Generally there are two ways bookkeepers set their fee. Hourly Rate or Flat Fee with many requesting all or a portion of the fees paid upfront through a deposit or retainer.
If you are hiring a bookkeeper, make sure you inquire about their formal training, their practical experience (was it obtained in private industry or through public practice ...small business or large corporations) and ask for references ... then follow through. Don't be afraid to give them a bookkeeping test to see if they will be able to perform the work you require competently.
Some bookkeepers may charge less per hour and others may charge more. Here is a very loose guide:
If a bookkeeper charges below the average bookkeeping rate ... say $25/hour or less ... they are probably new to bookkeeping ... their inexperience is reflected in their rates. This doesn't automatically mean they don't have formal bookkeeping training or bookkeeping experience, just that they may be new to public bookkeeping.
If a bookkeeper charges well below the average bookkeeping rate ... say less than $20/hour ... I'd recommend you make arrangements for them to take a bookkeeping test to gauge their skills ... because your business could be at risk if poor bookkeeping practices are followed. The bad news will likely show up during a CRA audit.
If the bookkeeper works for and is supervised by a certified accountant (CA, CGA), expect to pay well above the average bookkeeping rate ... you are paying for quality of work due to the supervised environment ... a second pair of eyes that is well versed in GAAP.
If the bookkeeper is working freelance ... but is certified, expect to pay $10 to $15 above the average bookkeeping rate ... although the increase in the average rate may be due to more bookkeepers becoming certified with the CBA or IPBC.
If the bookkeeper is experienced ... but not certified, expect their bookkeeping rate to be plus or minus $5 of the average bookkeeping rate.
IPBC (Institute of Professional Bookkeepers of Canada) now has a report titled Status of the Canadian Bookkeeping Industry 2009 Benchmark Study available for sale at www.ipbc.ca> Continuing education> 2009 Benchmark Study. The study "focused on bookkeepers and their salaries, education and training levels, accreditation." It provides useful information pertaining to bookkeeping services.
The second method that bookkeepers charge is by an agreed upon, in advance, fixed monthly charge. This charge is usually based on a combination of so much per number of transactions plus a fixed amount to cover preparation of financial statements and a monthly (or quarterly) meeting with you to discuss your financial results.
It usually works out to a minimum charge in the $125 to $175 range for bookkeepers who use a fixed fee structure, again for a very basic business with minimal transactions...
... But the advice they can provide, if you let them, by having an ongoing relationship with them, usually repays your fee in actual money savings and use of your time (that is only if you feel your time is actually valuable and worthy of placing a dollar value on.)
Flat fees are the way to go for "backwork" ... backwork is bookkeeping for prior years that are past due.
Often times, a bookkeeper will charge a one-time administration fee to set up the books. This fee covers setting up your chart of accounts (after discussions with you) and inputting your opening balances on the balance sheet and if applicable, payroll. Intuit's 2011 survey results say this is charged as a flat fee averaging at $286. The figure most commonly used was $250.
The bookkeeping industry has slowly been moving toward some form of payment before service ... due to many small business owners not paying their bills after the work has been completed.
It is now normal practice to request a deposit up front and in advance of processing. This fee can vary but is usually between 25% to 50% of the estimated bill. The worse you are at paying your outstanding bill, the higher the deposit requirement.
Many bookkeepers only work on a 100% estimated payment up front as they do not extend credit of any kind ... or they may request a retainer which is applied to your final bill.
If you are wondering how much to budget for bookkeeping services, I'd say $3,000 including taxes annually for a set of audit proof books. That would include a onetime setup fee, monthly bookkeeping for 40 transactions or less per month, monthly conversations and management reports, year-end, internal financial statements, and T1 tax preparation for sole proprietors.