Hourly service charge

Posted by Tara-sha Wilson in Sep, 2014

What is an Hourly service charge?

An hourly service charge is the fee which a business charges for their time. The fee includes most costs or expenses that the business must incur to supply this service i.e. Rent, advertising fees, software expenses, equipment costs etc. An hourly service charge can be used by bookkeepers, lawyers, tradesmen and accountants.

What is an Hourly service charge like?

An hourly service charge is like the “bread winner of the family”. The husband used to be called the bread winner of a family as he used to bring the sole income into the house, resembling an hourly service charge which is your main income source.

What is the purpose of an Hourly service charge?

An hourly service charge is used to ensure your client is charged for each billable hour and to make sure your business is making a profit.

What are the different types of Hourly service charges?

The different types of hourly service charges include:

Variable rate: Variable rates don’t have all of the expenses accounted for in the pricing, meaning that the fee is able to vary. Clients are advised that prices in the rates can change.

Fixed rate: A fixed rate has all of the expenses accounted for meaning that the rate is unlikely to change.

What’s involved with setting the Hourly service charge?

The factors that all businesses should consider before setting a price for their services include:

• Cost-plus pricing – The first step is determining the cost of providing the service. Additional amounts are then added to represent the desired profit the business wishes to make. To determine cost, you need to figure out direct costs, indirect costs, and fixed costs.
• Competitors pricing – Businesses must be aware of what their competitors are charging for the same or similar service. This will give an idea of whether or not you are under or over pricing your services.
• Perceived value to the customer – Customers don’t look at the amount of time you have spent to get the job done, they look at the value of the service you provided and how experienced they believe you are. So when making n hourly service charge, take into consideration what the customer would perceive to be an appropriate price that they would be willing to pay.

Where does setting the Hourly service charge fit into the sales process of a business?

An hourly service charge needs to be set up at contract stage when the business is first beginning or quote stage which is prior to commencing the work.

How does setting Hourly service charge impact on different areas of the business?

Setting an hourly service charge can impact on your cost of sales and profit and loss. You need to make sure that your incomings are higher than your outgoings so your business is making a profit, not a loss. The cost must cover your expenses plus earn extra to make a profit.

What terms are used when setting Hourly service charge?

• Expenses: The economic costs that a business incurs through its operations to earn revenue.
• Competitors: Any person or entity which is a rival against another
• Market analysis: the process of determining factors, conditions, and characteristics of a market.

Where can I find more information about setting the Hourly service charge?

• http://www.sitepoint.com/how-to-calculate-your-hourly-rate/
• http://www.marketingprofs.com/articles/2013/11414/how-to-create-your-hourly-rate-for-digital-marketing-services
• http://www.inc.com/guides/price-your-services.html
• http://www.freshbooks.com/blog/2012/11/20/pricing-strategy-hourly-rate/

Who would most benefit from this knowledge?

• A person with no experience in this area
• Senior managers
• Australian Commonwealth Government laws
• No cultural influence
• No
• Startups, small to medium enterprises, corporations, government departments
• Relevant to all industries