2018-02-27 14:03:04 Tax Professional English Learn the difference between services and hourly methods of invoicing. Understand the upsides and downsides of each, and how a particular... https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2018/02/21221009/Female-accountant-invoices-clients-by-hour-and-by-services.jpg Invoicing Clients: Charge by Services or the Hour?

Invoicing Clients: Charge by Services or the Hour?

3 min read

If you’re self-employed or run your own accounting firm, the question of how much to charge each client is one that you probably encounter quite frequently. But what about the method by which you charge your clients? Is it better to invoice clients a flat fee for your services or to charge by the hour? The answer depends as much on your own preferences as those of your clients.

When You Charge for Services

Charging for services usually means charging a flat rate that’s calculated based on the value of the services you provide to a client. That value can be calculated in a few different ways. One common way is to set an hourly rate, and then figure out how many hours you spent performing a particular service. For example, if you’re charging $30 an hour to review a client’s quarterly revenue, and it takes 40 working hours to complete the task, that service is worth $1,200. Add up the total value of all the services you perform during a contract, and you get a flat rate to quote to a client.

The services method of invoicing is popular among freelancers. Pricing accounting services with a flat fee requires a solid understanding of your own work habits and the scope of the client’s needs, but it’s often much easier to negotiate a fixed price with a client than it is to figure out an hourly rate.

The downside to invoicing for services is that because it’s so popular with freelancers, you may find it forces you to take on more of a consultant role. You agree to help your client only with the specific tasks your fee is designed to cover. Your contract may not allow you to expand the scope of your duties, even if you notice other areas where your accounting expertise might be of use.

When You Charge by the Hour

Billing clients by the hour is easy. You simply keep track of how many hours you’ve spent working for a client, and bill at the end of an agreed-upon cycle, whether that’s weekly, bi-weekly, or monthly. An hourly invoicing method might also mean you get to stick to a more traditional accounting role, working on whatever needs to be done to keep your client’s books up-to-date.

Hourly billing works particularly well if you tend to work in-house for a client during your contract period. If a client can see that you’re physically in the building, working for it like any other employee, there shouldn’t be too much cause for dispute. That said, not all accountants work this way, and hourly billing can be very difficult if you’re working remotely, on projects for more than one client at a time. If you’re a master of multitasking and working from home, you have to be extremely organized and vigilant to keep an accurate count of how many hours you spent on each project.

It’s also worth mentioning that a client may be less eager to agree to an hourly rate if it hasn’t worked with you before or isn’t sure of exactly what it needs you to do. It’s often easier for a business to budget for a set rate and selection of services than it is to hire a short-term employee.

When determining how to invoice your clients, think about whether you’d rather work independently or in-house, and whether you prefer a traditional accounting role or the role of an independent accounting consultant. There may not be a correct answer to the question of how to invoice for accounting services, but you can certainly find the method that works best for you.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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