Charting Your Accounts - NonProfit Version

It seems like a good time to talk about the chart of accounts.

Oh, I know it's not sexy.  And it's not really that fun.  Personally, I  try to have a career goal of never changing a chart of accounts again.  Yet, if you plan your chart of accounts properly, it really can be used for a long time to come.

I have to admit, since I started serving non-profit organizations almost exclusively, I have struggled with the allocation of costs.  There are allocations that are required for grant reports, for tax returns, for financing compliance, for management reporting and sometimes just because a Board member wants to know a random bit of information.

I have spent hours on the phone with colleagues trying to determine if I was really doing these allocations right, when I am making entries that have $0.20 in them.  I am.  Unfortunately.

I have learned, however, the more allocations you can do through initial transaction entry, the better off you are.  And a flexible chart of accounts consistently used aids that process.

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Lets take a look at the basics of a chart of accounts.  Note that this is a discussion of the actual account numbering; it is not about categorizing the chart into revenues or expenses or what have you.  I consider the categorizing a function of reporting and it is beyond the scope of this post.

NATURAL - Your first numbers should match the natural expense categories.  This is expected and necessary if you have to file a tax return or undertake a financial audit.  A natural expense would be Salary.  Or insurance.  Utilities, etc.  It is common for people to use four or five numbers for this category.  Example:  Repairs - 6120.

SUB-NATURAL - This category is not used often, but I have worked with it before and I really love it.  This is when you take a natural expense and give it a sub-category.  Two numbers is generally sufficient for this category.  Example:  Carrying on with Repairs, you might have Repairs on the HVAC System - 6120.02.  Note that you could now do reporting on all repairs or just on repairs related to HVAC.

PROGRAM - This is where you start breaking out different departments or functional areas of expense.  In non-profits, this could be administrative, fundraising and various programs.  Having this segment allows you to report by functional expense and accumulate your administrative or overhead costs for allocation purposes.  Most small and medium size businesses are okay with two numbers here.

Example:  Repairs on the HVAC system at the administrative office would look like this - 6120.02.99.  Repairs on the HVAC system related to a program could be - 6120.02.05.

A note about QuickBooks: 
QuickBooks is a common accounting software that has a some very frustrating limitations to its chart of accounts structure. You can't add dashes or dots in the basic versions and the most numbers you can use is seven. Seven.

With only seven numbers and no breaks, it is hard to properly separate programs (departments) and funders.  In QuickBooks, I generally use classes to track programs, since I am already up to 5 or 6 of the allowable account numbers. However, classes add a complicated element to data entry, as they must also be used consistently to work properly.  If you have too many, you risk errors and "messes."

ACTIVITY - Activity and program could be the same, but it might be used as a sub-program.  For example if you are a theater arts business, your program could be Plays and an activity would be The Taming of the Shrew.  It makes sense in this case to track activities, but unless you are going to recycle charts of accounts (which is not recommended), you will need a lot more number spaces here - three at a minimum, but more likely four.  Example:  Repairs on the HVAC system at our play, the Taming of the Shrew (keep an open mind here as I try to keep my examples consistent) - 6120.02.05.1420.

You will notice that we have gone way beyond QuickBooks limitations at this point.

LOCATION - Location may be more important to your business than activity or it may be an additional area of interest.  Location notifiers are probably sufficient with two digits.  Example:  Repairs on the HVAC system at our play, the Taming of the Shrew, which is held at the downtown community theater - 6120.02.05.1420.06

SOURCE - And finally, we reach the really important area.  Source is when you might want to track funding sources for a program or activity.  This is vital for grant reporting, but is similar to activities in that you may need a large number of digits - I would say at least three.  Example:  Repairs on the HVAC system at our play, the Taming of the Shrew, which is being shown at the downtown community theater and which was funded by the National Endowment for the Arts - 6120.02.05.1420.06.150.

I use customers in QuickBooks a lot to track this information, but it does cause problems as it is very hard to keep it consistent.  Others find job tracking to be helpful here, but again, there are limitations.

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Let's see what we have ended up with, assuming we want everything:  6120.02.05.1420.06.150

Okay, I admit that this account number has gotten a bit ridiculous, but if you look at it, you could run reports on several different aspects just from a download to Excel.

All of these segments are sortable!  It's the Holy Grail of accounting reporting!  You can report on any of the following:

Repairs
HVAC Repairs
Plays
The Taming of the Shrew
Any plays held at the Downtown Community Theater
Expenses funded by The National Endowment for the Arts

It is amazing!  But...

Let's get back to reality.

You likely do not need all of these segments, but you do need some of them.  Regardless of how many you do use, any account separation will give you flexibility as your organization changes and grows.

I beg you - don't just randomly accept the canned chart of accounts that comes with the accounting software.  Take some time, approach it thoughtfully.  Look at your current reporting needs and structure your accounts accordingly.

It will be worth it in the end.

Instant CPA - Just Add Coffee

There is nothing instant about finding a CPA that both understands your business and that, ahem, you can afford.  Well, I am going to let you in on a little secret, from the CPA side, there is also nothing instant about getting the good referrals - the clients that match your personality, your skill set and that, ahem, want to pay you.

CPA's are continually targeted by people that want to help them market - they say we need to advertise, do mailers, do monthly newsletters, etc.  I think there is value in a newsletter when there is news and we really don't need to become part of the noise that fills your inbox each day.

And ultimately, is your financial information something you generally trust to a name that shows up on a postcard in your mailbox?

I don't think so...

Well, then how do people find their perfect CPA?  And how do CPA's find their good clients?

I am not sure that there is an easy answer to that, but I would like to propose the idea that it starts with coffee.  Coffee with a friend in your industry.  Ask them who does their work and do they like them?  Coffee with a mentor, same questions.  Get a couple names from friends.  Call those names.  See who calls you back.  Meet them for coffee, pick your favorite and begin the relationship. 

I believe that financial services is still an industry that works best through personal referral.  There are good on-line matches, but one should not overlook the personal relationships.  I am not saying finding a CPA is like getting married, but I suspect that your CPA (the right one) will understand and communicate about your finances better than most spouses.

By the way, when I choose to market, and I do choose to market, I do it through community events - a table at a non-profit event; a hole on a golf course for charity, a sponsorship of a festival for kids who don't have festivals. I calculate that I get about as much return on this marketing as I would get on sending out mailers (nearly none), but at least I feel a whole lot better about where the money went.

I have written a companion piece to this called How Much Should You Pay for Bookkeeping if you would like to read more (much more - it was a tad wordy).

I Suffer From Depreciation

Some time ago, I was speaking briefly with a Board Member of an organization and he mentioned that “we don’t ever record depreciation during the year.  Do whatever you need to get the books in shape, but don’t ask or make us look at depreciation.”

“Depreciation doesn’t matter.”

“GAAP entries?  Oh, you mean like depreciation.”  (Big sigh follows.)

Depreciation is technically the recognition of a capital expense over the life of the asset.  In other words, if you buy a building for 3.6 million dollars and you believe it will last 40 years, then each year, you will have an expense of $90,000.  Ninety thousand dollars that you have to cover with support, revenues or some other offset on your way to positive net assets.  Ninety.  Thousand.  Dollars.

Oh, and you are probably paying debt service on that building in which the interest is also creating an expense.  Another expense (this time real cash) that you have to cover with support, revenues or some other offset.

Depreciation can cause confusion among non-financial Board and Leadership people in the organization.

Every good cash analysis and operational/management tool adds back depreciation in the first step.

EBITDA – Earnings BEFORE interest, taxes, depreciation and amortization.

Depreciation, depreciation, depreciation – I suffer from depreciation.

So, why do we record it?  Why do we make you look at a large number that represents money already spent?  Why do we set you up to have to explain you have a net loss, but only because of depreciation?

There are some good reasons to record depreciation:

First and foremost, it IS generally accepted accounting principles and if I know that you are handing out “board approved” interim statements for Grant applications or financing or whatever, then I am going to make sure that those interim statements are as close to accurate as possible within an accounting framework.  And that includes depreciation.  This just protects you.

Second,  it can loosely represent future capital needs and if you are covering it with your support in this year, theoretically, you are increasing your cash to meet those needs.

Third, if you are doing a tax return, depreciation is actually the law for certain listed assets.  (Note that tax depreciation and book depreciation can vary widely – one is legislated and one is based on estimated actual life).

Finally, well…  I can’t think of any other reason to record depreciation because, I also don’t like depreciation.  I also add it back at the earliest opportunity. And I also generally think it doesn’t matter.  For my clients, I often take it out of the main expenses and give a net income before depreciation – it is still there, but it is way below the operational data.

BUT, I work with service entities, arts based and community services organizations.  These organizations do not have large capital expenditures for production.  The number one cost on most of my financial statements is payroll – not inventory, not production cost, not warehousing.  There is a place for depreciation in the world of manufacturing, etc. and for those, please carry on.

In the meantime, we will keep recording it because we should and then we will add it back to find our important ratios – debt coverage, operating cash, income from operations.

Tax Exempt Bond Financing and Mortgages

Note: This post is technical in nature and not necessarily intended for the accounting faint of heart.

In today's finance world, developers of affordable housing often leverage LIHTC projects with other forms of public financing. (For more information on LIHTC's see previous posting "What the Heck is LIHTC? (Lie-Tech)".)

One form of financing that is commonly used it the tax exempt bond. Tax exempt bonds are issued by government agencies as a means of underwriting affordable housing. There is normally a series of bonds issued to cover both the construction and permanent loan phases of a project (approximately 30 years on average). The construction loan phase is paid at or near "conversion" to permanent financing with equity contributions from the LIHTC investor and the permanent bonds are paid off in phases over the life of the debt service. Interest rates will vary for each of the bonds depending on the length of the bond terms.

Being involved in a bond financed project comes with additional costs, including but not limited to annual Trustee fees, regular arbitrage calculations, state agency monitoring fees and remarketing fees. Not all issues have the same fees, but it is important to understand that interest and principal are not the only period costs incurred in the case of bond financing.

Despite the underlying debt being composed of bond financing, it is becoming more typical to structure the debt service on the Project in the same manner as an amortizable mortgage to cover all of the interest, principal and related fees. It is at this point that the accounting can get tricky.

When a servicer is used for the purposes of collecting the "mortgage payment", the Project will often get a monthly mortgage statement which covers debt service and monthly additions to the required reserves. Sometimes this statement will break out all the fees and reserve payments in addition to the interest and principal and sometimes it won't (believe me, I have seen everything!); but either way, that mortgage payment is not recorded in the same manner as other mortgages.

For a very basic example, here is what’s happening:

1. The Project pays the mortgage and escrow payments to the Servicer.
2. The Servicer transmits payments to the Trustee under some schedule they have and you don’t. Sometimes they keep a portion for their fee (called “interest”) and sometimes they don’t.
3. The Trustee puts the payments in reserve accounts typically labeled as follows: Replacement Reserve, Debt Service Reserve, and Operating Reserve.
4. The Trustee pays interest earnings on the Reserve accounts and sends statements to the Project.
5. On January July 1st, the Trustee makes interest and bond pay downs as required on the face of the bond coupon.
6. Throughout the year, the Trustee either makes payments or sends invoices to the Projects for payments on fees.

If you were following this narrative above, you might consider the fact that the Project has paid its mortgage, but it has ended up in bank accounts on the Project’s books (the Trustee accounts). And because bond pay downs are typically made around January 1; at a December year-end, a number of accountants would show large cash balances held by the Trustee (confirmed) and a large accrued interest and bond payable (due to the bondholders the next day).

If you are already lost on the accounting technology, turn back now!

Now consider this: the Project has paid its mortgage payments on time. There should be at most one month of accrued interest for January's payment in accordance with the mortgage agreement (if the servicer keeps a portion of the interest, none if they don’t). However, the bondholders are still owed their interest, so there would be up to 6 months of accrued interest according to the bond documents.

Both these statements are true, but you have a conflict if you try to account for both since you can’t have both one month and six month’s of accrued interest. That would be weird. So, here is how I have handled this situation in the past (with auditor blessing):

Assuming the servicer is not being paid out of the mortgage payment, the accrued interest is zero. The bond principal (debt) should be reduced to reflect the payment that the Trustee will make the next day. Interest expense should equal the amount paid to the bondholders on July 1st and January 1st (of the next year). The offset for this entry would be a contra-account to the Trustee balances for the amounts due to bondholders. The entries would look like this:

Monthly Mortgage payments:
Debit Trustee Accounts
Credit Cash

Debit Interest Expense
Debit Bond Payable
Credit "Due to Bondholders" (Contra to Trustee Accounts) in accordance with the bond pay down schedule (yes, you need this schedule)

January 1 and July 1 Bond Payments:
Debit "Due to Bondholders"
Credit Trustee Accounts

Monthly Trustee Statement:
Debit Trustee Accounts
Credit Interest income

Debit Any fees (Note: Fees should be analyzed for prepaid accruals as needed)
Credit Trustee Accounts

At year-end, there should be no accrued interest, the balance on the bonds payable should be reduced by the next day's payment, and the Trustee accounts should be shown net of the payment of principal and interest due January 1. This reflects that the required payments have been made by the Project, and there is no other period expense to the project requiring operating cash. This also reflects that the money paid, while still in the Project's name at the Trustee, is not under the Project’s control and is therefore reduced by the TRUSTEE'S obligation to the Bondholders.

I would like to say that the preceding example covers all situations, but alas, each one is slightly different, so you will need to use your noggin. My general advice would be – make sure you get activity statements regularly from both the Servicer and the Trustee. Once you have those, you should FOLLOW THE CASH.

Before submitting financial statements for audit, step back and do a reasonableness test – does interest expense make sense based on the underlying debt obligation and the mortgage payment? If no, go back to the statements and trace it through again until it does make sense.

Next time: Why you should sweep cash from the management company and how you should record it.

Strategic Planning - Not Just for the Shower!

How often does your organization perform strategic planning? How much of it happens in the shower in the morning? If you run a small or even medium sized business, you are probably in a constant state of strategic planning, at least in your head. I am here to plug making time to formalize this process.

At least annually, I have connected with a marketing professional that has helped me think through several areas of running a business. He assists me in writing a plan and a calendar for the next period for the growth and expansion of my business and my thought leadership aspirations. In addition to the written plan, I also take time to budget my projected revenues and expenses and to put my dreams into numbers. I am pretty good with the numbers part and my consultant is pretty good at framing my numbers into words.

I usually start by telling him where I think things are going. I tell him about the previous year's successes and failures and what my thoughts are on how to either repeat or avoid them going forward. Then we separate as he starts writing his piece and interestingly enough, that is when my real thinking begins. And before you know it, I am calling him back and saying, "Well, I thought about it and what I REALLY want to do is this." It is that second call that sets me off in the next/right direction. But I never would have crystallized my thought process if I hadn't talked to him in the first place.

Now for the follow-up: much like my original business plan, my annual marketing plan gathers dust on the server; but I truly believe that the value of writing things down absolutely translates into action. Each year when I come back to last year's plan, I find that I accomplished 80-90% of it. In fact, this process happens annually because each year around November or so, I find myself feeling restless, disjointed in my efforts in the community and downright hectic. Then I make a new plan and I am off and running again.

My advice for what it's worth: Figure out what you are good at, find someone who is good at another piece and who can talk you through the crazy jumble in your head and invest the time and money to formalize your strategic plan... It doesn't have to be a lot of either, but without it, what are you doing? Trying to run a business? Or just trying to avoid working for someone else?

Business Plans - it's the Journey not the Destination

There is some question about whether business plans are a good use of your time and energy. They do eventually go on a shelf and there they gather the dust. I don't know all the answers, but I can share my story. I started my firm on October 15, 2007. For the months of July and August, I spent every spare second working on a business plan. I started with a template from http://www.score.org/ and went from there.

I have always been a creative writer, but the template I used would not let me skip around the parts where I was most weak. Marketing, marketing, marketing. I can sell a client on what I do, but can I identify who that client is and make them come to me? Truth be told, I have been fortunate in referrals, but without the plan, I would have been less focused and really gotten myself in trouble early on with some work that came my way that was not in the "plan". As it was, I turned some of those jobs down, and actually earned some respect from my peers who thought I was really "brave". I look back now and laugh - it was a risk, but I had a plan, and it is in my head and I stick to it. As an aside, I did end up hiring a marketing consultant who was really helpful and who kept me on track. Hire to your weaknesses!!!!

I think the point of the business plan is the process of figuring out what you can do and what you are going to need to buy. I also believe that the discipline required to write the plan is an important indicator of your commitment to the business. Running a business is not easy - I often consider it my second marriage. In the business plan stage, I was planning the wedding - with so many things to think about and do, and yes, a lot of trepidation about what this type of commitment would mean going forward. But on the day I left my "job" and woke up, I knew what to do first because I had the plan. And just like in my marriage, we just went forward and did it. And we keep going.

Oh, and the important information - I did secure funding with my plan, and the loan officer relayed his supervisor's words, "They have to have a comprehensive plan or they have NO chance." I am not sure that is true, but it sure helped me.

Employee Turnover - Only Cost or Possible Opportunity?

I was at lunch today with my husband who works for another CPA firm as their IT Director. As often happens when we lunch, our discussion turns to firm management (yes, we are an exciting couple). One of the things we discussed was the companies we know that appear to be "overpaying" for audit and tax services. In each of those cases, the CFO at the company is alumni from a Big Four firm that "gave" the work directly to their old firm. Sometimes without a bidding process. I wondered aloud how many firms are seeing a return on their former employee's new companies?

There are many reasons that former employees are so loyal to Big Four firms. One is the clubbish atmosphere that there are certain things only a Big Four firm can accomplish. Even large local and regional firms can successfully push this atmosphere. In real life, there are small firms everywhere that specialize in various industries and transactions that can also get the job done, but until you have seen that in person, it is easy to believe that if you want quality service you have to go to a Big Four firm. (I am not going to get into all the reasons that your actual experience may differ from this assumption - under-trained staff, inadequate supervision, etc. Conversely, in some cases, it may absolutely be true.)

Another reason the big firms engender loyalty is the on-going offering of CPE to alumni, the alumni phone books and the general attitude that once you are family, you are always family. Whether or not they do it on purpose, these firms seem to plan that people will leave and work towards having them as walking marketing people even after they go. You can hate public accounting, but you don't hate Deloitte. Ever.

Other large firms that I know of don't do this well. When they turn over their staff, for whatever reason, they choose to be wounded that the individual would choose to leave the firm and they "cut all ties". Firms like that do not seem to pick up as much business from former employees as they should or could. The lesson here seems to be that public accounting, as great as it is, is not for everyone and in your marketing plan, you should determine how you can turn the employees that leave into future business for your firm. Turnover is always a cost, but I believe that there is also opportunity for recovery in future business.

10 Rules to Surviving Your First Year in Public Accounting

The first year for a public accountant can only be described as extremely difficult. (It sucks!?!?!?) An over-acheiver with excellent grades and superior intellect is the type of person that is going to land in public accounting. And then they are going to find out that they don’t know much. And they are not going to like that part. And even if they are doing really well for a first-year professional, they are going to become depressed, stressed and angry. They will question their intelligence, their career choice and the sanity of all these other idiots who have somehow risen to the top of this “profession”.

While the profession is attempting to change the “hazing” of the first year, unfortunately there are people like me. My heart is in the right place, but unfortunately, in the middle of busy season (aka tax season), there will be a stressful moment. And in that stressful moment, I might revert to how I was taught. By screaming, irrational idiots who didn’t think I knew anything. Hey, it made me good at what I do, didn’t it? No excuses, it is just tough to turn that ship around and behave better in the heat of the moment. Sorry.

Which brings me back to my original point. You have decided to enter the public accounting profession. Maybe you are just here to get a license and get out. Maybe you think this is your career. Maybe you have no idea why you are here and you are looking for a quick exit. The stress, drama and trauma your head and physical body are experiencing may be helped by taking some time to understand the term professional. You are in a world that requires a lot of education AND a lot of experience. You have the education part done and done well and we are truly excited to have you in our profession, but now you have to dig in and get the experience. You will succeed if you learn how to get along with who you are working for and who you are working with and work will be rewarding. Both spiritually and financially.

Here are 10 rules that will help you to not only survive your first year of public accounting, but to succeed:

1. Use last year’s workpapers. If they found the number last year, you can find it this year. (This rule will be reversed in a later year.)
2. Do not try and finish the whole project perfectly. This is an unattainable goal and will only keep it from ever getting finished.
3. Do EVERYTHING you know how to do, even if there are other items on the very same workpaper that you don’t know how to do.
4. If you have reached a question that is stopping you in your tracks, let your in-charge know. Trust me, if you can get a hold of 50 friends at any moment in time, you can get a hold of your in-charge if you are truly stopped.
5. If you have reached a question that is not stopping you in your tracks, put it on a list.
6. Check in every day and let someone know what is going on.
7. Do not check in with every single thing that you do.
8. If you have questioned a client on a complex accounting transaction or some such item, document it immediately. You will not remember it in one week or even the next day. You will not have time to write it next week or even the next day.
9. Shut up and listen when someone with more experience is sharing information. Sorry to be so blunt, but over-acheivers are usually pretty bad at this one, myself included.
10. If that person is telling you something and you have absolutely no idea what it has to do with anything, write it down! You will need that information later.

I believe these 10 rules will get you through the first and most of the second year in public accounting. Before you know it, 3 or 4 years will have passed and you too will be the idiot who somehow managed to rise up through the ranks to make life miserable on first years. Hopefully, you will do a better job than I am doing. And hopefully I am doing a better job than those who came before me.

A final note (warning): If you do really well or even kind of well, you will not get an A as you are accustomed. No, you will only get more work. Good luck!

NOTE: Originally written in October 2006.

How Much Should You Pay for Bookkeeping?

How much should you pay for a bookkeeper? And how do you find a good one? A quick look at Craigslist will show a "million" bookkeepers with rates from $25 per hour to $50 per hour. In my mind, I think $35 per hour is average. But there are a lot of factors here.

First of all, you know you can hire an employee for a rate of between $12 and $20 per hour for basic bookkeeping services. This is less, but the other costs of an employee have to be factored in - basic employer payroll taxes will average about 11% (in Oregon), if you have benefits that has to be added in, but you also should not forget the other costs of an employee. They take time off, some of which you pay for - they need to be trained; you need to be available to deal with whatever comes up in their lives and if you turn over the position regularly, well, it starts all over. This is all time consuming and your time is definitely worth more to your business than $12, $20 or even $35 per hour.

Now, contractors have their problems also - the most important one being accountability. I can not even count the times I have gone into a new client and heard their prior bookkeeper/accountant say, "No one told me about that, so I did not book it." Another draw back to a contractor is that you are subject to their schedule - you may not get something done today, but rather when the next bookkeeping packet goes out. Finally, are your records at your location, at their location or a mix of both? Who knows what is really going on in your business from the dollars side? And which software are you going to have to use?

Okay, back to the $35 per hour average. I think it is important to point out that you get what you pay for. Right now, the better bookkeepers that I have sub-contracted with from time to time are actually charging $50 per hour. I have one that I pay $65 per hour and at this point, you are probably thinking, WHAT??? $65 per hour??? Well, frankly, she is really fast, really good and I very minimally have to supervise her. She gets it done and she is worth every penny. 2 hours of work at $65 per hour is $130. Another less efficient, less experienced bookkeeper might take 4 hours to do the same work, which would be $140. And I still have to spend time answering basic questions and providing extensive supervision. This exponentiates as the job gets bigger.

Having said all of that - we have all been burned by an accounting person during our careers. We have overpaid for someone who just sold themselves but have no practical ability. There is just no way to tell who "gets it" and who doesn't. Experience, education and/or personality don't seem to actually factor in to the person who just understands numbers. When I hire bookkeepers for my staffing needs, I have actually gone to "working interviews", so that I at least know what I am getting into in terms of software capabilities and accounting knowledge. That has really helped and I recommend it if hiring an employee is your preferred method of getting the books done. See one man's perspective on this at http://www.arboristsite.com/showthread.php?t=31486.

Okay, let's switch over to what you can do. I think billing by the hour is actually really tricky and not very useful when dealing with regular bookkeeping activities. It is much more useful to use a "value" billing approach that contemplates what this work is actually worth. Bookkeeping is a fairly consistent activity. There are busier times - usually in January when 1099's have to be prepared and other times that your business may have natural cycles, but it is much easier to forecast cash flow if you know what you are going to pay each month. It is also easier for the bookkeeper to deal with cash flow if they know how much they are going to receive - less billing headaches and a consistent flow of cash - a win for everyone.

Let's take an example: what if you were to pay $1,000 per month for a bookkeeper? Does that sound like a lot? That works out to $12,000 per year, all in all, less than an employee, but maybe more than you wanted to spend. But what if you get an amazing person that takes accountability seriously and who really gets how numbers work? What if your experience with your tax accountant is both much more timely and much less stressful? What if your tax fees actually go down? What if you never had to worry about finding another accountant again (no transition pains)? Would it then be worth $1,000 per month? What about $500 per month? What price makes sense when you actually get the headache of bookkeeping off your plate in a competent and useful way?

Pricing is always negotiable and when I come to this point in the proposal process with a new client, I try to find a price point that gives the client value and at which I can still make money. Because that is my job. To figure out how to make money at the price the client is willing to pay. Isn't that your job when you set prices for your products and services? We are all running businesses here.

Value billing lets you know that you are getting what you are paying for and not worrying about how many hours someone is working and what their rate may be. Try this out with your contractors and see how it works. Understand that you will be billed separately for extraordinary activities, but that the regular work just is what it is. And enjoy the feeling that you can actually call your advisors once in a while without pausing to think about how it impacts your monthly bill. Wow.