When you are thinking about running your own bookkeeping service, one of the main questions you need to answer is how much you will charge. There are a number of aspects you need to consider when working out an hourly rate. This is how I work it out.
Firstly, you need to find out the rate you would be paid if you were an employee working for someone else. This is your base rate. You then need to think of all the other benefits you would get as an employee that you won't get as a contractor.
If you live in Australia, you would be receiving superannuation from your employer on top of your base wage. Add this to your base rate. Make sure though, that you do put this amount into your super when you are working for yourself. Any money that you personally put into your super fund is a tax deduction and the government is also rewarding people who pay into their own super by adding to it at the end of each tax year.
Workers compensation also needs to be included in your calculation. Although you may be working at the business premises, if you re not an employee you will not be covered by the businesses workers compensation. It is a simple matter of ringing Work cover and they can give you an estimate of what your yearly fee would be to be covered. Whether you decide to take out this cover or not is up to you.
The last real cost you need to consider is income protection insurance. As a contractor, you do not get sick pay so if you are in an accident that is not work related you could find yourself being unable to work and therefore have no income. This insurance should also cover you if you do not have workers compensation cover. Contact your insurance agent for a quote and make sure you find out what you will and won't be covered for.
Now that you have these four figures, you will need to add the yearly amounts together, divide that by fifty-two to get your weekly rate, and then divide that by 40 to get your hourly rate. This rate is what I would class as "mates rates", the amount you would charge your friends and family. I then add $5 per hour to this rate for people that I don't know personally.
You now have a rate that is a little more than what you would get as an employee. The next step is to phone other bookkeepers in your area and find out what they are charging. If they are charging more than your calculated rate, great! This mean you can increase your rate and remain competitive. If they are charging less, you can reduce to your rate to stay competitive or keep your rate as it is and rely on businesses hiring your for your expertise rather than what you charge. If you reduce your rate below your calculated "mates rate, then you may as well work for someone else.
You are a professional, so your hourly rate is the same whether you are doing data entry or taxation. Think about what your accountant charges. Does he have different rates for different levels of accounting? I haven't found one yet that does.
How Much Do I Charge For Bookkeeping? - To learn more about this author, visit Glenda Lange's Website.
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