Fixed price or hourly rate for accounting – which should you choose?

The difference is about who carries the risk for the time spent. A fixed price suits predictable workloads and a stable monthly cost. An hourly rate suits unknown scope – putting things right, one-off work, a brand new business. For most, a combination works best: a fixed price for what happens every month, an hourly rate for what does not.

The only real difference

With an hourly rate you pay for the time actually spent. If the job takes two hours, you pay for two. If it takes five because the documentation is missing, you pay for five. With a fixed price the price for a defined deliverable is agreed in advance. Everything else follows from one question: who carries the risk that the work takes longer than expected? With a fixed price it is the accounting firm. With an hourly rate it is you. That is also why a fixed price almost always contains a margin. Whoever carries the risk prices it in.

Are you paying too much in quiet months?

This is the most common objection to a fixed price, and the answer is rarely yes. An accounting engagement almost never has the same workload every month. Some months have VAT reporting. Some have more payroll work. The year-end close sits in an entirely different part of the year. A fixed monthly price is therefore the cost of a combined continuing service spread evenly, not payment for the minutes spent in that particular month. Compare the total over twelve months, not one invoice against one month.

A fixed price is only fixed while the scope is

A business gets a fixed price based on 300 records a year and no employees. The following year it has 900 records and four employees. That is no longer the same engagement. A good fixed-price agreement therefore makes it easy to see what the price rests on: the expected volume of records, which tasks are included, whether VAT and payroll are covered, how many employees the payroll covers, whether the year-end close is included, how much advice is built in, what you will do yourself, which system costs come on top, and how extra work is priced. These are agreed assumptions, not statutory limits. No rule says a fixed price has to cover a particular number of records.

What the rules actually require

Section 5-2 of the Accountants Act requires a written engagement agreement for every accounting engagement. It has to specify which tasks are to be carried out and for what period. Good accounting practice also requires the division of work and the deadlines to appear, and requires the firm to keep the agreement describing the actual engagement. But note what is not there: the duty to keep the agreement up to date gives no right to raise the price. How the fee can be adjusted follows only from what you have agreed. What else belongs in the agreement is in The engagement agreement with your accountant

Can you demand to see the hours?

Yes – but with an important nuance that surprises many. Under good accounting practice the firm has, on request, to be able to explain how the fee was calculated. The explanation does not necessarily have to show every minute each employee spent, but you should be able to get an understandable account. With a pure fixed-price agreement that does not apply in the same way. GRFS says expressly that there is no need to explain the fee calculation for fixed-price agreements, because the fee follows directly from the engagement agreement. That is a reason to read the agreement carefully before signing a fixed price: that is where the price is justified, not in a timesheet afterwards.

When an hourly rate is the honest answer

Where old accounts have to be put right, nobody knows whether the work takes five hours or fifty before someone has looked at it. A fixed price then has to be set with a substantial safety margin or limited so carefully that it becomes an hourly rate with extra steps. An hourly rate therefore suits putting things right, one-off assessments, help during an audit, reorganisations – and a brand new business where nobody yet knows how extensive the accounts will be. What putting things right actually involves is in Accounts missing for several years

The hybrid model covers most people

You do not have to choose one model for everything. A fixed price for bookkeeping, bank reconciliation, ordinary quality assurance, periodic reporting and ordinary VAT reporting. A separate fixed price for the year-end close and payroll, because both are defined deliverables that can be priced on their own. An hourly rate for putting things right, extensive advice, reorganisations, help during an audit and other extraordinary work. The business then gets predictability on what happens all the time, without the firm having to price in the risk of work that may never arise.

Seasonal trading is not an argument against a fixed price

A tourism business can have almost no activity in winter and a great deal in summer. An hourly rate then seems the obvious answer. But a fixed price can work just as well: the accountant estimates the expected workload for the whole year and spreads the total over twelve months. What matters is not whether every month looks alike. It is whether the annual volume is predictable. Where it is, a fixed price can give an even cost on uneven trading.

What to compare between two quotes

Never just the monthly figure. Go through these ten: what the accountant does and what you do yourself · whether there is a volume cap or other assumptions · whether payroll and the a-melding are included · whether ordinary VAT reporting is included · whether the year-end close is in the monthly price or comes separately · whether you can ask questions without the meter running · who pays for the system, the bank integration and the licences · what the hourly rate is for work outside the agreement · when and how the fixed price can change · what notice period applies. Compare on the same basis too. Prices for services to businesses are normally quoted excluding VAT, but it is worth checking that both quotes do. A quote of NOK 1,500 a month where the year-end close, payroll and the system come on top can quickly cost more than one of NOK 2,500 where more is included.

Check that the firm is approved

Keeping accounts for others as a business is regulated. The engagement has to be carried out through an approved accounting firm, and each engagement has to have a responsible state-authorised accountant. The approval can be checked in Finanstilsynet's register of undertakings. Note at the same time that Norwegian law does not require every accounting firm to hold professional indemnity insurance. If cover matters to you, you have to ask – it does not follow automatically from the approval.

What Greenleaf uses

We use a fixed price for the ordinary continuing bookkeeping and an hourly rate for work falling outside it. Payroll, the year-end close and system subscriptions are priced separately. Where the business changes materially, we settle any price adjustment in advance rather than sending a higher invoice. Current prices, what is included and what comes on top are on Accounting prices

This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.

Is it urgent?

We can work out what actually has to be done, what documentation exists and how quickly it can be sorted. You can also reach us in the evenings and at weekends.

GET IN TOUCH