To Fix Rate or Not to Fix Rate – That is the Question

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contemplating lifeI don’t know if in your business you typically charge hourly or by the project, but I imagine it’s likely a policy decision you’ve wrestled with.

While many creative professionals such as graphic designers and writers charge by the project, more traditional professions such as law and accountancy tend to favour an hourly rate.

This latter category would also include bookkeeping services, something that my company provides. We tend to be unique in this industry with our fixed price billing model. I feel it’s not just to our advantage to use this pricing policy, but more importantly it’s to our client’s benefit as well.

No unexpected billing surprises.

If you are billed by a fixed price then that is what you pay – the fixed price. There are no billing surprises once the job is complete. Regardless of when you’re billed – weekly, biweekly, monthly – you know you will pay exactly the same amount each time. If your service provider takes more time doing the project, that’s a problem for them, not an added expense to you.

Better for your budgeting.

When you know the price going into an agreement it helps your budgeting. Again, whether it’s a one time project or ongoing, you can easily plug the number into your budget forecast knowing the number won’t change. An hourly arrangement could change and can easily fluctuate from billing period to billing period. To you a fixed rate equals a fixed cost and it’s so much easier for both short and long term budget projections.

You don’t get nickel and dimed.

Have you ever received a phone call from a supplier like this: “Okay I’ll answer your question, but you know Marsha, this call is going to cost you?” Don’t you just hate hearing that? Who likes to hear the clock ticking every time you make a phone call or type an email to your supplier knowing that the clock is ticking and it’s going to cost you more? With a fixed rate, you know that every communication isn’t going to be added to your bill.

Fixed Rate May Cost You Less.

Sometimes an hourly rate may appear cheaper, but it can often cost you more. If you are being billed by the hour and they aren’t very efficient – who pays the price for that? You would. A fixed rate billing model encourages us to always find the most efficient and affordable way to work. This almost always results in better and faster results for our clients.

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Juliet Aurora

About the Author:

Juliet Aurora is the President and CEO of AIS Solutions. She has been in the Accounting and Finance space for more years than she will ever admit. When she isn’t acting as the Sensei for her team of Bookkeeper Ninjas, you will find her working tirelessly to advocate the accreditation of bookkeeping in Canada. Her vision is for AIS Solutions to become the standard against which all other bookkeepers and bookkeeping firms are measured. Juliet can be contacted by email or by calling 1 888 575 5385.
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Comments

  1. Jonathan Nesmith  July 15, 2014

    Great post! I also agree that working with fixed prices rather than going hourly is the way to go. The tricky part is coming up with the number that is best for both parties. It can sometimes be a trial-and-error situation.

    reply
    • Juliet Aurora  July 16, 2014

      Thanks Jonathan! And I absolutely agree that it can be a trial and error process. Sometimes to limit the repercussions, you can always set it as a flat fee to be reviewed after 90 days. That way you certainly will limit any long term repercussions.

      reply

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