Accounting service pricing: from hourly rates to value-based fees

How you price your services is one of the most important decisions you’ll make as an accountant or firm owner. It directly impacts how much money you’ll make. It also affects how you position yourself in a competitive market and the type of clients you’ll work with. 

Pricing your accounting services is a tricky business, however. There are different pricing structures to consider, as well as different pricing levels, which can vary wildly. In the US, an accountant can cost anywhere from $50 to more than $800 per hour, depending on a range of factors. 

So how do you strike the right balance between being profitable and competitive? In this article, we’ll help answer that question. Read on to explore effective strategies and best practices for pricing your accounting services right. 

Common pricing challenges

Accounting firms face several challenges when pricing their services. The first and most obvious one is balancing cost and value. 

Your pricing should be a fair reflection of your experience and expertise, as well as the complexity of the services you offer. You want to maximize revenue, but not at the expense of client acquisition. If you aim too high, you’ll potentially lose some market share to cheaper competitors. If you aim too low, you’ll be selling yourself short and limiting profitability.

Then there’s the inherent complexity of accounting services, which makes them hard to price. Often, no two jobs are the same. Different clients have different needs. Some jobs are relatively straightforward while others are highly complex. Factoring in these differences can be tricky when pricing services. 

This is made more complicated by the fact that clients often want pricing to be as transparent and simple as possible — and rightly so. They may even want to know exactly what they’ll be charged before you start on their job. If you don’t get it right, you can end up overcharging or undercharging for the work you do. 

Pricing strategies for accounting firms

The right pricing structure for your firm will largely depend on the services you offer, as well as your personal preferences. In this section, we’ll look at four tried-and-tested pricing strategies that you can use. Each has its advantages and disadvantages. 

1. Hourly billing 

Hourly billing is one of the most traditional pricing strategies for accounting firms and professional services in general. While it has some clear advantages, it’s not the ideal choice for all accounting services.

Advantages:

• Price relates to effort. Clients pay you for the amount of time you spend working on their projects. This makes hourly billing one of the most relatable pricing structures for clients.
• Reduces the risk of undercharging. Hourly billing ensures that you are fairly compensated for the time you spend on a project. It accounts for any unforeseen complexities or issues along the way.
• Flexible scope. With hourly billing, you can easily adjust the scope of an accounting project while ensuring fair payment. Clients can add additional services, and accountants can be flexible, without needing to negotiate terms.  

Disadvantages: 

• Unpredictable costs. While hourly rates are easy to understand, clients never have certainty about how much they will be charged. As a result, some may prefer to choose accountants that offer fixed fees.
• Disincentivizes efficiency. Compared to fixed fees, charging per hour may subconsciously disincentivize accountants to work as efficiently and productively as possible. This ultimately hampers firm growth.
• Potential for disputes. There’s a lot of trust involved in hourly rates. Charging per hour can result in creeping costs, which increase the risk of disputes and damaged client relationships. 

When it works well:

Hourly billing can work well for non-standard tasks or ad-hoc services where it’s difficult to predict time requirements.

2. Fixed-fee pricing

Fixed-fee pricing is the simplest, most transparent pricing strategy from the client’s perspective. Clients know exactly what they’ll pay upfront, which makes them more likely to commit. 

Advantages: 

• Cost certainty. Clients understand what they’ll be charged before work commences. This eliminates the stress associated with creeping costs.
• Encourages efficiency. Revenue isn’t tied to time spent, which encourages accountants to optimize workflows and improve internal processes. Increased efficiency drives more revenue. 
• Improved client relationships. Fixed fees are transparent and simple. They leave little room for disagreements, pricing disputes, or uncertainty. This encourages long-term client relationships. 

Disadvantages: 

• Difficulty calculating prices. Fixed-fee prices are notoriously difficult to calculate. You need to factor in the time a project takes on average, consider industry benchmarks, and understand all the other factors that can impact service delivery. 
• Risk of undercharging. If you don’t get your fixed fees right, there’s a risk you’ll end up severely undercharging for your work. In the long run, this can impact your business model and motivation. 
• Limited flexibility. Sometimes the full scope of a project cannot be known at the start. If the scope expands, you may need to renegotiate terms — or risk undercharging for the work you do. This freelancer on Reddit recommends being as clear as possible about the scope of a project at the outset to avoid such issues: 

When it works well:

Fixed-fee pricing works well for routine, predictable services that tend to take a similar amount of time from client to client. Examples include tax preparation, payroll processing, and bookkeeping.

3. Value-based pricing

Value-based pricing is an alternative to the more traditional pricing models on this list. It’s also by far the most conceptual. Instead of pricing services based on the time they take to complete or what your competitors charge, you price them based on the value they bring to your clients. 

Advantages: 

• Price is aligned with outcomes. In many ways, this is the fairest strategy for pricing services, as clients pay in proportion to the value they receive — not how long the work took to complete.  
• Command higher fees. Accounting firms that take this approach can charge significantly more for certain value-driven services.
• Focuses on quality and client success. Value-based pricing aligns the incentives of accountants and their clients, with both fully invested in achieving the best possible results. 

Disadvantages: 

• Difficult to price. To use value-based pricing effectively, you need a deep understanding of client needs and the value difference services can bring.
• May put clients off. The conceptual nature and high price points of this model might dissuade some clients from working with you.
• Puts pressure on accountants. If your services are priced based on the value they bring, there’s added pressure to deliver tangible benefits for your clients.  

When it works well:

This model only really works for high-impact services that result in significant and measurable benefits for your clients. Examples include advisory services, tax planning, or major corporate restructuring. 

4. Subscription-based pricing 

Subscription-based pricing involves charging clients a recurring fee for ongoing access to services and support. Think of it like the accounting version of a Netflix subscription or software-as-a-service (SaaS) license.

Advantages: 

• Provides stable revenue. Subscription-based pricing allows your accounting business to bring in predictable and stable revenue each month, quarter, or year. This improves cash flow management and makes budgeting easier. 
• Builds long-term client relationships. This model naturally lends itself to long-term client relationships through ongoing engagement. 
• Incentivizes efficiency. A bit like fixed-fee pricing, this model is based on work produced rather than time spent. So the more efficient your workflows become, the more clients you can take on. This lifts the ceiling off your potential earnings, as this Reddit poster explains: 

Disadvantages: 

• Requires consistent service levels. To meet client expectations, you must deliver consistently high service levels and support over time. A dip in quality could lead to disputes.
• Potential for overcommitment. The more clients you have on a subscription model, the more stretched your resources will become — particularly if you underestimate the effort required for each subscription client.
• Lacks flexibility. As clients’ needs change, subscription models may lack the flexibility to adjust to significant shifts in service demand without renegotiating terms.

When it works well:

Pricing services on a subscription basis works for ongoing or repetitive services, such as financial reporting, payroll, or bookkeeping. It also works for firms offering bundled services, providing more comprehensive accounting coverage. 

Steps to develop an effective accounting pricing strategy

Creating a pricing strategy that helps you achieve maximum profitability while meeting client expectations can be a tricky process. By following the steps outlined in this section, you’ll be well on your way to striking the perfect balance. 

Conduct market research

The first step is to look at what your competitors are doing. This will give you a feeling for industry standards and client expectations, giving you an acceptable range within which you can pitch your services. Here are some tips for doing this:

• Researching firms of a similar size and stature, and with similar service offerings
• Look at accountant rates per hour, per project, and other pricing models
• Factor in differences in locations, experience, and expertise when comparing prices
• Consider how you can outmaneuver competitors in terms of service pricing and quality

To help you get a feel for what accountants, CPAs, and bookkeeping professionals typically charge, check out these articles: 

• How much does an accountant cost? A comprehensive guide to accountant fees and charges
• How much does a CPA cost in 2024? Understanding CPA fees, rates, and pricing
• How much does a bookkeeper cost in 2024? An ultimate guide
• The average cost of payroll services in 2024: a comprehensive guide

Position yourself correctly

Once you’ve got a feeling for what the market looks like, you can consider where you want to position your accounting business in relation to the competition. Here are some questions to ask yourself: 

• Do you want to undercut your competitors or aim for a more expensive, premium offering? 
• What are your unique selling points? What can you offer in terms of experience, expertise, or services to justify higher pricing?
• Who is your ideal client and what are their expectations around pricing and service quality?
• How does your pricing align with your brand image? 

Assess your costs

The first rule of price-setting is that it enables you to cover your costs and drive a profit. With this in mind, the next step is to understand your outgoing. To help you set the right pricing strategy, make sure you: 

• Calculate your break-even point by looking at any operating expenses and overhead
• Consider the time and resources needed to deliver each service efficiently
• Establish a healthy profit margin that will allow you to achieve your goals

Define service tiers

Consider offering tiered pricing. This way, you can appeal to a broader range of clients. Think of it like SaaS pricing, where more expensive plans unlock more advanced features and support levels. For example, you can offer: 

• Basic tier — covers essential services at an entry-level price. This is ideal for smaller businesses or startups on a budget.
• Standard tier — includes more comprehensive accounting solutions, such as monthly bookkeeping or financial reporting.
• Premium tier — offers high-value services that are tailored to the client, with regular hands-on support.  

Ensure flexibility

While rigid pricing provides transparency and simplicity, no two clients are the same. In some cases, a one-size-fits-all approach to pricing won’t suit your clients. Consider offering flexible pricing that adapts to the unique requirements of your clients. You can do this by offering: 

• Custom packages that allow clients to mix and match services
• Seasonal adjustments for clients with cyclical needs
• Scalable pricing, allowing clients to upgrade their packages as their needs evolve

Best practices for setting and adjusting prices

Pricing your accounting services effectively requires a mix of strategic planning, regular adjustments, and leveraging the right technology. Here are some best practices to help you get it right:

• Align pricing with value. To gain client buy-in, communicate how your pricing reflects the value you deliver. Provide client stories and testimonials that demonstrate the impact your services can have. The more measurable and tangible the outcomes, the better.
• Regularly review and adjust. Chances are your pricing strategy won’t be perfect from the start. Over time, you can gather feedback from clients, track time spent and profitability, and identify services that might need repricing. You should also be prepared to adjust your strategy based on market conditions and client demand.
• Communicate pricing transparently. While it’s not always possible to let clients know exactly how much a service will cost upfront, you should be clear and transparent about how service fees are calculated. Provide clients with detailed breakdowns of what each service includes and how pricing is structured. This will help reduce misunderstandings and build trust.
• Benchmark against competitors. Conduct periodic research to see how your pricing models and levels compare with those of your direct competitors. This will help ensure that your rates are both competitive and reflective of your value. 
• Automate your workflows. With practice management software like TaxDome, you can automate entire workflows, including everything from client communication to invoicing, document gathering, task management, and more. This enables you to take on more clients, scale your practice, and squeeze the most value out of your pricing strategy — for both your firm and your clients.

To learn more about how TaxDome works, check out this article: Accounting practice management software in action: explore TaxDome in this explainer video. 

To sum up

Determining the right pricing strategy is one of the most critical decisions for any accounting firm. The pricing model you choose will significantly impact how profitable your firm is — and how satisfied your clients are. The key is to find the right balance between value, profitability, and transparency, all while positioning yourself competitively in the market.

We hope the information in this guide has answered any questions you had about how to price accounting services. By following the tips and best practices outlined here, you’ll be able to create an optimal pricing strategy that positions your firm for long-term success. 

While pricing strategy has a major impact on revenue and client satisfaction, so does the technology you use. With comprehensive practice software like TaxDome, you can ensure maximum efficiency and an incredible client experience. 

To see our award-winning software in action, request a demo today!