How To Start A Bookkeeping Business, How To Calculate Your Rates

How To Start A Bookkeeping Business, How To Calculate Your Rates

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It is interesting to see when someone is starting a bookkeeping business, that often the thought of their rate is left until last and decided upon quickly at the last minute. This is where the business can be in danger from day one. The choice of rate should be one of the first things that are considered.

You will need to understand your rates to be able to create a cash flow and budget and incorporate these items into your business plan. Without having clear rates, it will be difficult to ascertain if your business will even be a success if you get enough clients.

Once you start to think about your rates, it will be important to factor in many of the components you might not have considered. For example, as an employee you might have had annual leave, sick leave, superannuation and study leave. Additionally you might have had your professional memberships paid or even income protection insurance.

If you select a rate just a few dollars more than your employee rate, it will not be large enough to cover those expenses listed above and it certainly will not generate a profit. When you are setting your rates, it is important to factor in any of the hidden costs that you might now be responsible for as a business owner.

Take for example your professional development. Not only is your business going to grow based on your ability to service clients by staying up to date with the bookkeeping industry, but now you will need to pay for that professional development. You will also need to take the time out from billing clients when you undertake your development. Not only do you pay to attend but you pay again with the lost revenue from attendance!

It is also important to factor into your rate the time off you will require during the year. No one can work 52 weeks in a year, or 8 hours a day every day. It is important to look at the total time you have available, being realistic about the time off you will need.

If for example you want to earn $50,000 per year, you will need to work that out over the realistic available time, such as 48 weeks in a year, working 30 hours a week. That is far more realistic than $50,000 over 52 weeks of 40 hours per week.

There are other additional costs which were non existent as an employee which now will need to be catered for as a business owner. Insurance for equipment, professional indemnity insurance and printing and stationery costs just to mention a few. I know these things are all tax deductible; however you will need enough cash to be able to pay for these expenses along the way.

It is also important to remember that a business owner is also trying to make a profit, not just barely cover costs and then earn the same money as that of an employee as a bookkeeper. The cost of business increases and your running costs will need to be adjusted and reviewed periodically, in turn so will your rates need to be monitored very closely and increased at the appropriate intervals.

Keep in mind, if you are starting a bookkeeping business, do not be trapped into starting on a very low rate, just to win clients. It will not be a long term sustainable business model and the type of clients that will select your services based on rate alone, may not be the type of long term clients you are looking for.

About the Author:
Julia Nitschke is an Accountant, business consultant and author of My Bookkeeping Business, how to Start, Run and Grow your Bookkeeping Business. Visit http://www.mybookkeepingbusiness.info for more information and for a free bookkeeping e-course. Or if you want detailed bookkeeping business plan information visit http://www.mybookkeepingbusiness.com/businessplan.html



Article Originally Published On: http://www.articlesnatch.com


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