You’ve shopped around and found yourself a good accountant so you can finally hand over the financials and focus on other important business matters. It’s a solid, money-saving, time-saving investment.
But have you considered the best way to pay that accountant? Should they be on an hourly rate? Fixed billing? Or should they be on a retainer?
Paying your accountant on an hourly rate
Ask up front how much they charge per hour because quotes can vary wildly — from $100 per hour to many times that amount. It all depends on their experience, skills, qualifications, and target market and perhaps also on the particulars of your business requirements.
The hourly rate option may suit you if your business requirements are less than what is being offered under the fixed billing schedule. Remember that a lower hourly rate may not necessarily be the best value, as a more experienced or efficient professional may charge more but probably works faster (therefore costing you less) than someone charging a lower rate who operates at a slower pace.
Paying your accountant by fixed billing
On the other hand, fixed billing means that a set amount will be charged for an agreed timeframe — usually weekly or monthly. This will be the same amount, regardless of whether more or less work is completed. There are several benefits of this format for the business owner, including eliminating worries about cost blowouts. It also emphasises efficiency.
Paying your accountant on a retainer
Some accountants can be secured on a retainer. While this works a little like fixed billing, it does differ in one important way: obligation.
In the fixed-fee model the accountant usually issues invoices for the agreed-upon service after it has been completed and there is no further obligation to work together. With retainers the fee is billed first and the accountant has a time and monetary obligation to the client to provide any required service on an ongoing basis. Think of retainers as deposits for future services.
So which form of payment do I pick?
In the first few years of business it can be hard to decide which payment method will best suit your needs. It’s worth remembering that when your accountant is on a retainer or fixed fee, you will be less likely to hesitate when you need their advice. Perhaps build flexibility into your model at the start and, once you have a feel for how often you need them, settle on an agreed annual fee. Ask your accountant if they will accept monthly payments if that’s easier for you to budget. You may even discover you don’t need a year-round professional on speed dial.
Also, ask around. Your business peers will have plenty of advice on how they work with their accountant and will be able to help you avoid the mistakes they made.
And one last thing!
Make sure you are organised before you meet your accountant. It doesn’t matter which payment method you choose, if you turn up with a shoebox filled to the brim with unlabelled receipts, you’re going to use up a lot of your accountant’s time and waste a lot of money.
If you need help organising your financial records for both you and your financial professional, try out Reep – contact us today for more information.