I have recently taken a client from a large accountancy franchise which I was really happy about. This morning I have received the old accountants working papers and associated paperwork.
What has really shocked me is that my quote is half the price of their old accountants. I will still make a profit on the job that fits with my business model, but it got me thinking whether I really am too cheap or if mine is actually a fair cost and the old firm are too expensive.
The client is a small limited company and I have charged £ 350, I anticipate the job will take a maximum of two days.
Any views or opinions would be great.
Ben
-- Edited by woody88 on Tuesday 19th of June 2012 10:32:21 AM
I would say that you you are bit cheap to quote £350 for a limited company job that will take 2 days.
Unlike a sole trader you need to build in costs for accounts and tax software to prepare the accounts. Whatever you pay for this divided by the number of limited companies you have should be the base cost before you then include other overhead costs eg rent, stationery, H&L, PII, professional fees, telephone etc. This will then give you a total cost of overheads which should be charged to the job before you add on your own time.
The minimum i charge for a Ltd company is £400 so for something that takes a couple of days would be looking to charge somewhere between £750 - £1k.
But at the end of the day it depends on what you are happy with. If you are going to make a profit after deducing your overheads and time on the job then that the main thing.
I think that is a bit cheap. Surprised you didn't find out when you quoted, clients usually say something like "wow, that's half what I'm paying!", at which point you say "doh!".
If you are charging £350 for 2 days work then that assumes that £175 is your normal daily charge out rate. Over a week that is £875 (5 x £175) and over a year is £42k (48 x £875 assuming you take 4 weeks holiday). You wont of course be able to bill for every hour you work so say your chargeable time is 70% of your total. This will mean you raise fees of £29400 (70% x £42k). Take off costs of say £7400 (for rent, PII, professional fees, advertising, computer/software costs, telephone, stationery, H&L etc) this will leave you with £22k (£29400-£7400). Then take off corporation tax of 20% will leave you with post tax profits of £17,600 (80% x £22k) or £1467 per month. This is then the maximum that you can take without going into a loss position. This assumes of course that the cash is there and you customers are paying in time.
Personally i would work to having a pre tax profit of the year of £40k or otherwise you may as well work for someone else and let them take the burden for the risk that things dont turn out the way you hope.
I work full time at the moment but have a small accounts practice of about 30 or so clients. I am currently in my first proper year as previously i only had a few clients that i dealt with. I am projecting annual fees currently of about £19k with costs of about £4k. This will give me pre tax profits of £15k or post tax of about £12k. On my thinking about this would mean i could justify 2 days working in my own business per week but i am going to give it a year or so to see if things pan out as a project. As there might be people who i have signed up who change their mind (already had one of those), cease business (had one of those also) or not pay on time.
1) I doubt you are making a profit if you take into account a notional salary for your time based on how much would it cost to employ someone to do this type of work for you. Let alone the management time.
2) Two days is one day too long...improve the bookkeeping and/or get better systems.
3) The previous firm was cheap....£350 is ridiculous. This comment is based on you are doing everything including submissions and tax advice.
4) If year-end accounts is all you want/can do then you will probably attract clients looking for a better deal than the previous accountant. That means a lower price.
