Bookkeeping Ethics and Fair Pricing

Episode 51

I am still working on a date for the live webinar, either on Zoom or a live YouTube event, so stay tuned for that. Also, a quick announcement: This podcast is on a list of the top 80 accounting podcasts, and it’s #35!  The link is in the notes.  

Today’s episode will be a bit of a ‘tax season rant’.  But don’t worry, I won’t get personal or use inappropriate language (well, that’s the plan, anyway).  Promise, I’ll behave myself, although I’ll have to take breaks when writing this to assure that I do.  I’m (Just for today) ‘ranting’  Paul Rosenblum. 

I am a member of some bookkeeping groups on Facebook, one of which is a large group of mostly very good bookkeepers answering questions from people who join the group for information or if they are a beginning bookkeeper looking for information.  Many of the questions that have been asked in the last few months have really been well thought out and well-articulated (and I’ve answered several questions on the forum along with others). 

However, recently, during tax season, some of the questions have been asked by obviously new bookkeepers who really haven’t been trained in what they need to know. Questions like – “Do I give myself a 1099 if I made over $600.00 and do I tell the client about it?”   (YES, and YES, by the way).  Other questions about gift cards and how to account for them were good questions, and at one point in the past, I didn’t know the answers to those either.  But the good questions or the beginning questions being asked are not what this episode is about.  

This episode is mainly about pricing.  In the fast-food episode (episode 42), I talked about pricing of fast food and how that has gotten out of control. (FYI – since then, the fast-food industry has kind of figured it out – many fast-food chains have come out with value pricing, even if the burgers and sandwiches are smaller), so that people can afford fast food again. 

January is “1099 month” for accountants and bookkeepers.  Since I charge an hourly fee all year as part of my overall services, including entering the W9 information into the accounting software, when I upload and E-file the 1099’s, the service charges me a fee for each form, I put that on my own credit card, and always looked at that as an admin fee.  So, I mark up what the service charges me by around 20%.  So, I made a small profit for that particular service but have never charged by the form. This year I am marking up quite a bit more for this important service.  There was a question on one of these bookkeepers’ groups as to ‘what do bookkeepers charge for 1099 filings?’   And the answers blew me away.  One bookkeeper said that they charged $75.00 base fee, and then $10.00 per form.  I just e-filed a large clients’ 1099’s for 2024, and there were 80 forms that I uploaded.  With $10.00 per form, am I really supposed to charge $800 plus $75.00 base fee for 10 minutes of work?  That would be about 1/3 of what the client pays me for bookkeeping for the entire year!  (in this one case). However, after I read that and a few other answers that were a bit more in line, I decided that this year I would be fairer to myself by filing my clients’ 1099 forms and marking them up more.  Not just an admin fee, but for the expertise on how to do it, my knowledge of what software to download and what service to use and saving the client their own time.  I’m not being greedy, but I am charging a more reasonable amount for the stress that I am enduring for my clients.  

I understand that bookkeepers need to pay rent and bills just like anyone else (and taxes, for that matter), and prices must go up.  But $875.00 to e-file 1099’s?  Really?  I am marking up the total price that the service charges me and adding around $100 to it in most cases. And I have 50 sets of 1099’s to do, possibly more when it’s all said and done.  

Making a living and being greedy are two different things.  There are several professions that one needs to be a generally ethical person --   

People associated with a court – judges, lawyers, clerks, etc.  Anyone who handles other people’s money (accountants, financial advisors, bookkeepers)Anyone who fixes cars or trucks (auto mechanics, etc.) (you can’t have shotty mechanics who’s lack of thoroughness could cause accidents)Anyone who works in a bank (among other professions)

Unfortunately, both being ethical and making oodles of money at the same time, is diminishing quickly in this country and around the world.  If you want to make a million dollars a year, don’t go into bookkeeping.  You won’t make that much money. And if you somehow do, you will have to give up integrity, honesty, and general ethics. Don’t go into teaching, retail store management, or driving cabs, Ubers, or Lyft cars. 

DO go into pharmaceuticals, join a powerful union after getting some training in what kind of worker the union represents, or go into politics.  

But you can’t have both.  When I started my business back in 1994, I thought of pricing.  I didn’t have any experience, so I had to charge on the low side of what other bookkeepers were charging.  And I didn’t raise my hourly fee for at least 3 or 4 years, when I thought, the experience was starting to show. I have always lagged behind in my pricing.  Many of my clients, even today, are below what they should be paying. But with age, comes wisdom. (That’s what they tell me, anyway).  

So, I started sending out emails to clients raising my hourly fee in the 4th quarter of last year, explaining that when I start working on their 2025 books, the fee will go up.  I am now, finally, in the range of what I should be charging, and I feel good about that.  I’m not overcharging.  But I will NOT charge $800 for 80 1099’s being uploaded to a website.  That feels unethical and just plain wrong --  to me. 

I’ve spoken about ‘value pricing’ before, but that feels unethical as well.  For $299 a month, bookkeeping firms will do the monthly bookkeeping, provide 2 reports, not answer the phone after 5pm, and allow a certain number of phone calls per month, as well as using every shortcut in the bookkeeping field.  How much ‘quality’ can that be?  I send several emails every month to every client asking them questions about particular transactions.  I call many clients every month, text many clients every month, and even think about sending carrier pigeons with questions, that they can write the answer and send them back to me (just kidding on that one). The idea of value pricing gives me a stress headache.  “Value pricing “isn’t about the client, it’s about the bookkeeper.  If the charge is $299 a month to complete the books, then, at $75.00 an hour, the bookkeeper can’t spend more than 4 hours a month. If they spend less time than that, they make more profit and move on to the next client.  Doesn’t work for me. 

So, I’ve adjusted the number of clients that I have to do the bookkeeping for.  As I talked about last episode, I’ve walked away from the stressful clients, still have more than enough work to do, but with less stress, so I can make sure that the quality of work is still there. That’s the value.  Quality, not quantity.  Not charging for every little extra thing that one can think of.  

Just a little something for you small business owners to think about when hiring a tax preparer.  What services does the monthly retainer cover?   What services does it NOT cover? Yes, unfortunately, some bookkeepers and tax preparers try and charge as much as they can possibly get away with. It’s supply and demand.  Especially with A.I. coming into the picture, and with the projections of the human accounting field diminishing in the coming years. 

Talking about unethical --  A large software company charging up to $200 a month for software that doesn’t consistently work or has accounting quirks in it all of the time, AND providing (for a price, of course), their own bookkeepers to do the bookkeeping for the client using their own software.  I recently talked to a bookkeeper who told me that they worked for this software company for 2 months and left because it was obvious that nobody else was trained and that they were not doing good bookkeeping. And I have seen first-hand TWICE how bad bookkeeping can be by hiring a software company bookkeeper to get your books done.  It was just a money maker for the software company.  

I would love to make a million dollars a year, but it’s just not in the cards for me. I am unwilling to give up ethics or morals in order to do that. So, I’ll just continue trying to do the right thing for clients to the best of my ability.  Ethically.  Morally. And fairly – all for the client.  

I used to have so much patience with slow payers, but I’ve changed in that respect too.  I start calling people much sooner now (friendly calls) to see when I’ll get paid, but I still won’t push too much. But as I said, with age comes wisdom. Not all the time, though. I did blow up with a client last year, for good reason, but I did blow up, which is very rare for me. I don’t look back at that one at all. They were demanding, really didn’t understand the value of good bookkeeping, didn’t help me when I needed answers from them, but wanted me to give answers as soon as they emailed or called me with a question or a problem. Bookkeepers traditionally have been human punching bags, but no more, for me. Age brings wisdom. It also brings death, but I’ll leave that one alone! (at least for now)

One more rant: Clients who occasionally come to me to tell me that they understand what I am doing, but they want to take over the bookkeeping.  In one or two sentences, they are disrespecting me and my work, my profession, and -- their business.  Yes, the business must be nurtured and taken care of as well. You can add 25 + 32 without a calculator?  Be a bookkeeper! NOT!!!  

The beginning of that mentality started in 1994 when Intuit started a huge ad campaign saying how easy QuickBooks was to set up and use. People believed it. Until some didn’t. And came to their senses and hired a real bookkeeper, not their admin assistant or front desk person who had time on their hands. 

With all of that said, I now have much more control of my practice these days and reevaluating the business in other ways as well. I’m busy, but less stressed, much happier with my pricing, and in some ways enjoy going to work more than I have in quite a while.  Yes, tax season is stressful, but it seems this year, so far anyway, it’s less stressful because of the sub-par clients who are now sub-tracted from my practice. 

Fair pricing, good clients, paying clients, ethics, morality, and a touch of age, maturity and wisdom goes a long way.  

A shoutout to my Canadian bookkeeper friend, who rants to me with the same general complaints and stressful situations as I have in NY.  We’ll both get through the next few months, Promise!

Feel free to send me email with your rants – I’d love to read all about them and let me know if I can mention them on this podcast or on the live webinar some time in February if (when) I survive January!  

I hope YOUR 1099’s are/were going smoothly this tax season --- Feb. stories are coming up next episode --- I’m Paul (1099)  Rosenblum