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#1
zl28  
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Have a sub who gets 33% of the fee.

She spent 2 hours @ 150/hr

I spent 2 hours - 1 hr reviewing, another 1hr answering questions and researching a topic
$175/hr

Total bill $650

She's getting $214.50.....that's $107 per hour.

really alot...but need her help and can she work remote.

anyone else have this type of arrangement

or

have suggestions for a better arrangement.

Granted some times she gets a shorter end of the stick

and she does have 20 years experience.
 

#2
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Somewhere out there...
Does billed hours equate to less hours “worked”? If she was on payroll, would you have 3 + hours of wages to cover?
 

#3
zl28  
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she just got $112.25 per hour

that's steep

and let's say she spent 3 hours and billed for 2...that's $71.50

ok good point...$71.50 isn't nuts....but that presume she spent 3 hours on a return i billed her for 2 hours

and there were mistakes.

for that rate should be basically perfect.

oh well.

it's expensive to live today...

just seems like alot of $ b/c let's say she worked 2.5 hrs

and i billed for 2

she just got $85.60....that's pretty up tyhere
 

#4
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I hear you, it's a big number, one way to look at it would be the overall relationship and your total billings vs. sub fees. It looks like you have some margin for your subs time, and you're billing your time at a higher rate (no idea if you've got some margin there as well based on your profit goals)...it's a tough balance for sure. For someone with 20 years of experience, if they were on your payroll their hourly rate would easily be pushing $50-$75 / hr, plus 25-35% for benefits/overhead...and they'd be on your payroll year-round. Many CPA firms don't view someone at that level as a profit center for routine tax compliance, that level drives profits by managing lower-level staff where the margin is greater.

Ways to manage - you might want to increase the billing rate for your sub, or have have your sub take on the administrative work for preparing billings, etc. (that could be a huge value-add and free up more of your time, and the sub would be incentivised to maximize billings, especially out-of-scope time, and you wouldn't need to pay for that admin time since the sub is earning based on the client billings). Another option would be to have your sub manage a lower-level person (where there is better margin), and structure a different payment system for review work.

Just some thoughts...
 

#5
zl28  
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That's a good point - that i am having a person with advanced salary sometime work on lower level returns. Though some of the returns are higher level as well. I can't employ someone year round, and the worker needs to eat too. Not easy to find someone smart, knowledgeable, trustworthy to work for you just 4 months per year and they be satisfied.

One thing i did do was have her deal directly with clients and cc me on the emails.

That's a time saver.

Appreciate all the good insights - i think you are right about raising her rate for clients since i'm at capacity right now.

I'm heavily feeling the repercussions that you need a 5 year degree to get a CPA....real shortage of workers out there.

One thing i'd like to do is grade the returns - give out an a,b, or c

a- 1 mistake or less gets a certain percent like 33% of fee

b. 2 or more mistakes get 28%

c. your fired :)

thanks again for thoughts!!
 

#6
zl28  
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Looking at sjrcpa post: i would only do onshore...and it's pretty costly there as well......now you have to pay a middleman and the middleman's workers.. base price $140...plus addl fees....that's up there...wonder how the quality is.

We use SurePrep for organizing documents. It creates a slick "binder". We did not consider outsourcing tax returns. When we signed up with them, late 2019 early 2020 I believe they said the outsourcing was fully booked. I also think I saw they shut down the foreign outsourcing due to the current crisis. I just looked for the pricing for outsourcing but I guess they didn't give it to us since we weren't interested.

I just found some pricing for outsourcing 1040 and 1041. Onshore base price $140 plus $46-250 for various levels, plus $30-$60 for tax software fee plus....
Off shore base price $40 plus $23-$125 for various levels, plus $15-$30 for tax software fee plus...
 

#7
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Tough to "grade" on a return-by-return basis...one of the weird things with tax prep / accounting is that everyone is prone to making mistakes, no matter how experienced they are (hence the concept of a reviewer). In many offices, no returns go out without a second set of eyes, and invariably there are always mistakes caught last minute.

Since you're billing using a billable hour metric, if the sub spent 2 hours and you spent 1/2 hour (no errors to correct, just flipping the return and finalizing), would you have billed only $388? in that case, the sub would have made $128, and you would have kept $260... is that better, or worse for you overall? Part of the issue is that you're paying the sub a percentage of your time as well, so it's creating a confusing result.

I'd suggest an overall bonus structure instead, where the full tax-season results translate to $ to the sub (based on performance), rather than on a return-by-return basis.
 

#8
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It's interesting because the sub is really getting a blended rate of her billable hour and your's, as noted by Henry.

Could you possibly structure this as a flat hourly rate to her for billable time, plus a "bonus" as long at she meets or comes under time targets for engagements during a time period?

An observational note...$150/hr for the preparer and $175/hr for the reviewer/partner seems rather...compressed. Usually there's more disparity between the two. i.e. I'd probably expect to see the reviewer bill at least $250/hr here. You're implying you provide roughly the same level of value to the client as your preparer?

Agree with Henry. For a billable rate of $150/hr, you'd probably be paying her a $60-80k salary if she was an employee, as well as benefits (insurance, 401k, etc). At least, those are the numbers in my area. Is she worth that to you? Maybe, if she has 20 years of experience and does work that reflects that.

Sounds like she might provide more value to you as a reviewer rather than a preparer. Could you move her to that capacity and get a less experienced employee or sub in the prep role?
 

#9
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Some simple advice might be to be candid and honest (politely) with correcting the sub's behavior reference the mistakes and lack of admin help. I've found that I often get VERY positive results when taking the time to tell workers where they are not meeting my expectations.

Teach them how to do a better job for you.

Otherwise it will never change and you will always be brooding about it.

Do your job and lead/manage. :)
 

#10
zl28  
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That is interesting...$150 and $175 not much of a difference...i work out of the house in the suburbs so i can do the $175. If i were in a city with market rate rent it be impossible. Aren't many of you having trouble with staffing, or at least getting extra staffing during tax season? I dont' recall it being this hard.

I will mention the mistakes to the sub; at this rate work should be at least 95% accurate, otherwise it's not worth it financially to have the help. Having a jr, then having this 20 year experience person, and then me wouldn't work so well.

a. juniors i find cost more than expensive experienced people....though i did have a great intern in the past with a 3.98 gpa

b. the 20 year experienced person has his own practice also, so i[m not as sure about the thoroughness

c. there's only so much i can bill that a client will pay - though since, i'm out of space, i will start raising fees more.

And i really need to get the bigger returns to go on extension more....there's not htat many days in tax season, and these bigger returns that insist on pre 4/15 filing hurt.

I"m sure many of you most have the same issues?
 

#11
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zl28 wrote:
I"m sure many of you most have the same issues?


I certainly do.

The only area in which my mentor (with 60 years of practicing) feels like he failed was not being able to train and retain tax preparers. He was able to do everything very successfully, except that.

In my humble 10 years, I've found his advice to be mostly true, and I spend a plethora of effort and time in hiring, training, and guiding. Also self-improving to be better at those things.

My results have been limited with several complete failures.
 

#12
smtcpa  
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Richmond, VA
Same here!

ItDepends wrote:
zl28 wrote:
I"m sure many of you most have the same issues?


My results have been limited with several complete failures.
 

#13
ATSMAN  
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A lot of this depends on your business model and workflow setup. When I first got in this business solo, I was subbing for another experienced accountant for certain types of returns. Basically they were the run of the mill 1040 with itemization, some sch C and E, F and a few simple 1041s. I was doing the whole thing. From initial meeting to going over the completed return. I did NOT sign the return, he did. I was paid 50% of the billing. I used a separate room in his office and his phone system, though I had my own computer and printer and tax software.
 

#14
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The now-deceased Death&Taxes once posted a story about one of his clients, a roofer who didn't understand why he was so busy but always losing money. The roofer billed $20 per hour plus supplies and paid his five employees $8 per hour. And then it hit him, that he needed to bill $20 per hour for each of the 5 people, not just $20 per hour total. This thread just reminded me of that amusing anecdote for some reason.


Overall, the issue is with the 33% of total fees setup. In this case, your sub would not deserve 33% of total fees because the sub didn't do 100% of the work that derived those fees. You did 2 hours and she did 2 hours; why is she being paid the full labor component of the price based on the (higher value) work you did?

Also, 1 hour review on a 2 hour prep seems high. Perhaps she's going too fast, leading to the mistakes, or she might not be leaving a clean review workpapers package?
 


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