How to charge: Navigating Software Costs in Bookkeeping & Accounting Services

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March 27, 2024

Software has become indispensable for accountants and bookkeepers, streamlining processes, ensuring compliance, and safeguarding finances. However, as software costs rise and pricing models evolve, professionals are confronted with a crucial decision: how to integrate these costs into their services.

Traditionally, software expenses for accounting firms hovered around 7% of annual turnover. Recent data suggests a steady increase to approximately 10%. Compounded by fluctuating vendor pricing, the question shifts from whether to charge for software to how to charge effectively.

Taking bulk payments software as an example, partners (accountants and bookkeepers) have the option to be invoiced for Telleroo, or clients can be billed directly.

We bill just 12% of partners' clients directly, meaning that the remaining 88% we bill to accountants/bookkeepers who we know are then recharging this (or not) in a variety of ways.

88% may seem like a clear winner, and make you think you should opt to be billed on behalf of clients but how do you determine what's best for you and your clients? Let's dive into three crucial factors to help shape your decision:

Assessing how you benefit from software

Firstly, it's essential to pause and assess each tool in use for its objective. With Telleroo and other apps, accountants and bookkeepers often aim to achieve one or more of these three goals through their usage:

Introduce new services: By rolling out the app as an added service line or as an incentive to upsell clients onto a higher package. For instance, introducing a payments service and charging clients £250 per month for up to 100 supplier payments or wrapping payments into an outsourced finance function.
Save time: By using the app to automate a time-consuming task, and covering the cost internally. With costs typically lower than chargeable hourly rates, this approach not only saves money but also frees up time for accountants and bookkeepers to be able to take on more clients.
Make a small margin: By rolling the app out to clients, and offering them some limited help and support. Charging them the direct pricing, whilst paying the discounted partner pricing, makes a small margin that increases with scale.

Assessing how clients benefit from software

Owning vendor relationships

Let's begin at the start of your client's journey. They reach out to you and instead of your client needing to juggle conversations with various software vendors, you're owning those relationships and there is value in that.

By reducing the time/energy spent on researching technology, they not only save time, but also gain reassurance that the research has been expertly handled by you, ensuring the best choice is made for them.

This impacts your approach to software costs. As the vendor relationship sits with you, particularly if you want them to use specific softwares, clients often anticipate that the software costs are included in the service fee rather than being an additional charge.

Impact on service delivery

There are two key elements to how technology shapes service delivery. Clients reap the rewards of the software's functionality and the possibilities that technology unlocks. Let's use Telleroo as an example.

How clients benefit from Telleroo's functionality:

Payment confidence: Peace of mind by ensuring payments go to the correct recipient. Telleroo alerts you of any changes to payee details, cross-checking the information to help you identify and rectify mistakes before they escalate into costly errors.
Faster payments: You can process payments in minutes using Telleroo - available 24/7.
Easy International Payments: Telleroo not only facilitates quick and secure GBP transactions but also allows you to make international payments to suppliers or employees, individually or in bulk.
Outsourcing simplified: Clients receive notifications when they need to approve pay runs, see when you add contextual notes to each run and more. They can stay informed efficiently, avoiding lengthy email threads and preventing bottlenecks.

Click here to view how accountants and bookkeepers are using Telleroo.

Pricing services to include software and its value

Once you understand the value offered by the software, it's vital to effectively communicate this value to clients. This involves pricing the software as part of your services and presenting it in a way that clearly highlights its benefits.

Here are a few pricing strategies:

Add on service: Charge the client a flat/flexible monthly fee for managing the payment process. For example, charge the client £250 for up to 100 payments a month.
Build into existing packages: Add payments service offering into your existing monthly/annual accounting packages. For example, you could add this in at no extra cost to the client to incentivise them to select a higher package. Or include up to 100 payments a month and lift the monthly cost of the package by £150 (£40 for software + £110 for doing the work).
Charge the client on a time + cost basis: Pass on the flexible monthly software cost plus the time taken for you to complete the payments. For example, £40 for 100 payments + 2 hours of time at £80 = £120.

Ultimately, the approach taken should align with your business model, value proposition, and client expectations. As the accounting and bookkeeping industry continues to evolve, staying adaptable and client-focused will be key to navigating decisions like these effectively.