CaptCook wrote:Whenever providing estimates of cost for entity returns, I make it clear that this is the cost for preparing the return and NOT for the bookkeeping to support the numbers (save, obvious entries like depreciation). There is enough work that goes into reviewing information for proper tax treatment that cost will rise quickly if the debits and credits aren't in the right spot.
The most key part of this dynamic and keeping pricing appropriately categorized between tax prep and bookkeeping is to push records back to the client when it's discovered they are out of line. This starts a conversation that helps them to recognize where the bookkeeping issue is, but also draws a line in the sand where you can bill bookkeeping separately and maintain a high value price on the tax prep portion of your work.
What does this actually mean in practice? How do you distinguish between tax prep and bookkeeping? Does tax prep become purely the mechanical process of typing the numbers into your tax software? And everything else - reviewing the client's bad worksheet that he typed into Word instead of Excel; pulling apart the $50,000 of expenses grouped under "business expense" into the various categories you want to list on the tax return; trying to figure out how he has some number for salaries that doesn't come close to matching what's on the W3 and 941s... all of that is bookkeeping?
And then how do you bill for that bookkeeping work? Is it a hourly charge? a charge based on the number of transactions?
Do you then say to the client.. . I bill a flat fee of $xxxx for the preparation of your return, and i bill an hourly rate of $yyy for the bookkeeping work which includes reviewing the books, classifying and categorizing expenses, and reconciling payroll accounts. So if you want to keep your fee down, you should pull together an income statement using the categories I've laid out here on this attached excel worksheet, making sure you've reconciled your salary and payroll tax accounts to your payroll tax reports.....