While it is important to make sure that you find the right kind of accountant for your business, you also need to determine what the best way is for you to pay your accountant. After all, both parties have goals that they need to achieve for a successful relationship between the accountant and the business.
You as the entrepreneur don’t want to overpay for accounting services, which happens if you set fixed fees too high or underestimate the time required for an hourly project. You also don’t want to be charged for periods of non-productivity.
The accountant, on the other hand, needs to work sufficient hours at a certain average hourly rate to hit his target income. After all, an accountant is selling his time, not any one specific product. So each accountant knows how many hours they need to work in a month and at what rate they need to charge. When they overestimate their time requirement on projects and end up working too few hours or charge too low a billing rate for a project that goes on too long due to unexpected tasks, their income will suffer, just like when you don’t charge enough for your business.
There are many kinds of arrangements you can work out with an accountant, and they all have their place. Depending on your business situation and specific accounting needs, you’ll need to find the arrangement that will work best for you. Here are a few of the options you have, and situations that we have found they work best in:
- Monthly Retainer. Paying your accountant a monthly fee works well when you need routine bookkeeping services on a regular basis. This is also a good option for periodic evaluations and critiques of your operations.
- Standard Hourly Rate. Paying the standard hourly rate works best when you need to consult with the senior partner on a critical issue for your business.
- Fixed Fee. For some projects, you should negotiate a set fee up front. One example of this situation is a first time audit or review, as well as one-time projects like systems implementation.
- Negotiated Discount. Some companies are not yet in a position to pay the full rates for their accountant. An early stage company that has realistic growth potential, though, might be able to negotiate a discount from the standard rates, since it has hopes of being in a much better position in the future.
- Reduced Fee for Equity. If the independence of your business is not an issue, it might also be an option for you to pay a fixed fee for a project partially in cash and partially in company stock. This is a good option when you are hiring an accountant to help develop and implement your business plan.
By finding the right payment method for each accounting project, you can save your business money while also meeting the needs of your accountant. Developing this strong business relationship can pay huge dividends down the road, giving you a trusted resource and help.