Prices for bookkeeping services are expected to continue falling over the next three years as competition intensifies and input costs remain stable.
Los Angeles, CA (PRWEB) January 10, 2014
The bookkeeping services market has a buyer score of 4.2 out of 5. The buyer score represents the recent positive pricing trends that allow buyers to negotiate from historically low prices. According to IBISWorld analyst Erick Delgado, other factors that positively affect buyer power are low supply chain risk, low market share concentration and a high level of competition. However, a lack of substitute services and the risks involved with switching providers negatively affect buying power.
The market for bookkeeping services is highly fragmented. Low barriers to entry combined with external providers adding bookkeeping to their service offerings have intensified competition during the three years to 2013. As a result, prices have been pushed down even as demand for bookkeeping has increased. A growing number of established providers have had to cut prices to prevent their customers from switching to a lower-cost provider or in-housing their bookkeeping, says Delgado. This trend favors buyers' ability to negotiate prices. Wage costs are expected to increase over the next three years, shrinking supplier margins even further. However, because providers have control over their main input (i.e. labor), there is a low level of supply chain risk, which helps to protect buyers from large price fluctuations. Low price volatility is conducive to buyer power because it allows them to accurately budget and evaluate service prices. Prices are expected to continue falling over the three years to 2016 due to increased external competition, which will sustain the buyer's ability to negotiate.
The price range for bookkeeping services is extremely wide because each bookkeeping contract is negotiated on a case-by-case basis. Several factors affect the way a bookkeeper sets their rates, which weakens the buyer’s bargaining power. A typical bookkeeping service includes posting transactions, bank reconciliation and financial reports; however, providers will charge the buyer more for accounts receivable collection, accounts payable bill pay and reconciliation of inventories because of the extra time to be devoted. Furthermore, the number of monthly transactions affects how frequently a bookkeeper must perform updates. Updates are typically done on a monthly or quarterly basis, but can be completed more or less frequently at the request of the buyer. As a result, performing more transaction per month or requesting more frequent updates is more expensive. The provider’s experience level also determines the price of bookkeeping services. Because it is difficult to otherwise measure the quality of suppliers in the market, buyers pay a premium for a certified bookkeeper or a provider that specializes in an industry.
Because of the limited ability of buyer's to measure service quality beforehand, there are inherent risks involved with switching providers. Buyers should seek to include performance options in their contracts to protect themselves from a poor-performing supplier. Although bookkeeping is an unspecialized service, it is labor intensive and requires training to ensure quality. As such, there are limited substitutes to outsourcing other than having an in-house accounting department, which can be far more expensive for buyers. These factors ultimately limit a buyer's negotiating power. For more information, visit IBISWorld’s bookkeeping services procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist the buyers of bookkeeping services. This service mainly involves recording all financial transactions a business makes, chiefly purchases, sales and other payments.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.