I’ve been wrestling with the pricing of remote controller services for small businesses. I had, on my own, established a ‘rule of thumb’ that any business that does not spend one percent of its gross revenues on internal and external accounting will likely hit legal or financial disaster. The cost is closer to two percent of gross revenues, as a general average, to meet all legal accounting requirements. This doesn’t include customized work, extra management support services like forecasting and meetings. We see that generation of customized required operating reports or accountant’s independent attestation on internally generated reports, especially for nonprofits, commonly prices in the 3% or 4% range. The highest I handle personally is a small nonprofit where accounting services run about 15% of gross receipts.
Today I attended a webinar that used an entirely different approach but wound up with the same result. I felt vindicated. The only problem remaining is that the smaller the business, the tougher it is to control the minimum costs of financial and accounting services. Businesses with under a million revenues typically must make choices to bypass some financial controls.
Of course we know that accounting, representation, advocacy, and advisory services that make up the controller function vary greatly from one engagement to the next but still I felt that a generalized starting point would be valuable. I don’t see any apparent need to alter the basic pricing model for type of organization, profit or nonprofit or location of the owner(s).
Also, I’m aware as I write this that some will say that it is impossibly low and others will say it is high and unaffordable. That reaction is outside of my control. For this purpose, I’m happy with the 1%, 2% model as a starting point of discussion.