Accounting/Bookkeeping Fees as a percentage of a clients gross receipts.

[kpangelinan]

I was wondering if anyone had any standards or ideas on what businesses (not accountants, but our clients/customers) would normally pay for bookkeeping/accounting.

I know it'll be different for each industry, but am negotiating fees with a client now (I know, I know....but it's a friend and a long term relationship, so we're just talking...normally, my fee is my fee, but this situation requires a little different handling because we have history; a good history, but friendship is mixed in there as well) and as we were talking, we were wondering what an industry standard would be as he was offering me a percentage of his as one of his offers. If they had a bad year, I'd weather it out with them....if they had a great year, I get bonused so to speak. Not something I would ever work out from a professional stand point with any other client than this one.

Anyways, I tried to google some info and only came up with a few blogs and such that were saying about 5-7%.

Thanks in advance for any thoughts or help.

[Nashville]

Variables

KP, I'll try to go down the road on this a little bit - you've already admitted it's normally not a sound practice.

I don't think the factor is gross receipts as much as it is other logistical variables. I understand the gross receipts represents the mitigation of risk and can go in either direction.

But there is the perception, especially on the part of clients, that the amount of work is proportional to the number of transactions, or dollar size of the transactions. This is almost never the case.

Is your client's spouse involved in the operation? This can open a thousand Pandora's, or it could be very good also. But it can be major.

What kind of accounting system? If it's quickbooks, you may spend as much time correcting the client's mess than it had been accounted for from scratch. Does the client have any clerical support with a modicum of training?

Is the client himself (herself) have a management style that steamrolls any accounting system or data? For example, does the client write checks without making a record of them, or cash checks and stick the money in his pocket? Keep in mind that this person can still be your friend and do these things.

These are just some of the things that can make the engagement worthwhile or a disaster. I think if you read these, you'll realize just how little your compensation depends on gross sales, and how much more it depends on logistic factors such as these.

[kpangelinan]

KP, I'll try to go down the road on this a little bit - you've already admitted it's normally not a sound practice.

I don't think the factor is gross receipts as much as it is other logistical variables. I understand the gross receipts represents the mitigation of risk and can go in either direction.

But there is the perception, especially on the part of clients, that the amount of work is proportional to the number of transactions, or dollar size of the transactions. This is almost never the case.

Is your client's spouse involved in the operation? This can open a thousand Pandora's, or it could be very good also. But it can be major.

What kind of accounting system? If it's quickbooks, you may spend as much time correcting the client's mess than it had been accounted for from scratch. Does the client have any clerical support with a modicum of training?

Is the client himself (herself) have a management style that steamrolls any accounting system or data? For example, does the client write checks without making a record of them, or cash checks and stick the money in his pocket? Keep in mind that this person can still be your friend and do these things.

These are just some of the things that can make the engagement worthwhile or a disaster. I think if you read these, you'll realize just how little your compensation depends on gross sales, and how much more it depends on logistic factors such as these.

The owner of the company is an older single male with no spouse or significant other to consider, however, his son is part owner, but the funny thing there is the son is telling him to stop negotiating and pay what was originally offered by me.

The client uses Quickbooks and I enter everything in and have been for the past 8 years. I also do the clients corporate and personal tax returns. I am simply requesting that my fees be brought up to par with 1) what I want, but also 2) what I've seen as reasonable BK fees from experience, which I haven't been getting, and like I said, I was ok with that for many years....things are changing for me and there really is a lot to this story.....

The client has "0 - ZERO" clerical support and I have been going once a week to do everything; payables, receivables, budget, balance the checkbook, payroll (through a provider - I don't do the processing, just handle the hours and checks), etc......when I say everything, I mean everything that has to do with the fiscal part of their business, I do. The client (a friend of mine, yes) does everything by the books based on what I tell them based on the laws. I tell them, this is what we need to send to the IRS for estimates, and he says, ok.

I agree with your last statement.......which is why I've been doing what I've been doing for the past 8 years.....I have decided that I am not going to do it at the rate that it's at....and while we were discussing it, the fees to gross within an industry came up and he needs something to reference and I guess I'm affording him the opportunity.

Thanks for taking the time....I really appreciate it.