Are You Charging Enough?

Source: Accounting Today

L. Gary Boomer, CEO of Boomer Consulting in Manhattan, Kansas, says CPA firms devalue their hourly rates if they fail to account for the cost of technology. The average investment in technology is $7.54 per hour. If this were marked up like labor rates, it would be more than $26 per hour. And since only 50 percent of all hours for all personnel in CPA firms is chargeable, it would take over $52 per hour of charge time to recoup the cost of the investment. A technology surcharge may be in order. An alternative is a fixed-price arrangement. Boomer recommends the following:

• Calculate your own costs. Compare them to those of your competitors.
• Create fixed-price arrangements with clients. Engagements should be specifically defined. Provide for change orders.
• Obtain payments on projects before the start of work.

Here are some highlights from the 2006 Boomer Survey from which, apparently, the technology cost results were derived:

• The average hourly rate for CPA firms did not increase until 2005, when it went to $125 per hour. In 2006 it increased to $136.
• Chargeable time is 50 percent of total hours of all employees.
• Cost of technology as a percentage of revenue has declined (even though telephones, copiers, and scanners have been added to the definition of technology).
• There is one IT person for every 32 people in the firm. This suggests a lack of innovation.

From Accounting Today, September 24, 2007, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809. For the complete article click here, then select the article Firms May Not Have Broken the $100-Per-Hour Barrier.