TMA determines our regular fees based on a formula we’ve developed that considers the volume and complexity of the work to be performed. This approach enables us to provide a fixed-fee quote for services. Fixed fees are generally more appealing to small business owners than the open-ended “billing-by-the-hour" approach used by nearly all “traditional accounting firms”.
We’ve been helping small businesses with accounting, bookkeeping, payroll, and taxes for nearly 25 years. During that time, we have learned a lot about what it takes to provide excellent service and value.
This part of our pricing formula is pretty simple. We review a few of our client’s historical records – bank statements, credit card statements, payroll records, etc. This helps us determine the number of transactions occurring within each unique business client.
Our pricing formula also accounts for the accounting complexity of each client. A relatively simple business client may have one owner, one bank account, one business location, a few employees, and no debt/loans. A more complex business may have multiple owners, bank accounts, business locations, credit cards, debt, and other liabilities. Some complex businesses may have more employees and need additional payroll-related services such as tracking retirement plans or employee timekeeping.
Based on this information, we can provide a fixed-fee quote for bookkeeping, payroll, and tax preparation services. Generally, that fixed fee would apply until the business experiences a significant change in the volume and complexity of services or until we make a pricing adjustment related to changes in our costs to provide the service. We review each small business client’s pricing at least annually.
Nearly all “traditional accounting firms” determine how much to bill their clients using an old-school “hourly billing” model. The hourly rates may range from $125/hour for an inexperienced bookkeeper to $300+/hour for an experienced CPA. In theory, these professionals will track their time closely and charge the appropriate amount of time to the right client. After completing the project, billing rates are applied, and the client receives an invoice reflecting the actual cost. In our view, this approach makes little sense for small businesses.
TMA is also a small business. We know the importance of understanding the costs associated with a service before the service is rendered. Completing a project for a client may take a little or a lot of time. In a “traditional accounting firm,” the client doesn’t know how much it will cost until after the project is completed. Few things in business are more frustrating than being surprised by an unexpected expense. Small businesses need these costs to be more transparent than that.
The old-school “bill-by-the-hour" model doesn’t encourage the accounting firm to make processes more efficient. In fact, hourly billing rewards the exact opposite. Our fixed fee model enables us to be resourceful to continually improve our process and to help our clients do the same.
Fixed fees result in more value for our clients. Hourly billing arrangements only reflect the time required to complete a task. They do not reflect the value received by the client. Worse still, the amount of time needed to complete any given task and related fees often bear little relationship to the actual value of the service provided.
A good example is how traditional accounting firms bill their small business clients for tax preparation services. Of course, preparing and filing tax returns is important, but rarely does the act of filling out tax forms create much real economic value for the client or their business. In almost all cases, we do not bill separate fees for preparing and filing business tax returns.
If you’re curious about how our fixed fee model might work better for you and your business, please feel free to call us. We would love to have an opportunity to discuss your needs.
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