The Economics of Hourly Billing: Why Efficiency Can Reduce Revenue

For decades, hourly billing has been one of the standard pricing models for accountants and bookkeepers.

Record the time. Apply an hourly rate. Send the invoice.

It's simple, familiar and easy to calculate.

But there's a fundamental problem with the model:

The better you become at your work, the fewer hours you may have available to bill.

For a profession investing heavily in technology, automation and more efficient ways of working, that's an increasingly uncomfortable contradiction.

And accounting firms appear to be recognizing it.

The 2025 AICPA/CPA.com National MAP Survey found a continuing shift toward value and fixed pricing and away from traditional hourly billing. AICPA linked that movement to factors including client expectations, investment in technology and greater recognition of the value and types of services firms provide.

This isn't about declaring hourly billing dead. It isn't.

It's about asking whether time should continue to be the primary determinant of price.

The Hourly Billing Paradox

Consider a hypothetical engagement.

An accounting firm performs a piece of work that traditionally takes 10 hours. At an hourly rate of $150, the client is billed:

10 hours × $150 = $1,500

Now imagine the firm improves its processes.

It introduces better software, standardizes the workflow and automates some of the repetitive work.

The same outcome can now be delivered in six hours.

Under the same hourly billing model:

6 hours × $150 = $900

The firm has become 40% more efficient.

Revenue from that engagement has fallen by 40%.

Those numbers are deliberately hypothetical, but the underlying economic problem is real.

CPA Randy Hughes has described efficiency as one of the reasons traditional hourly billing didn't make sense for his firms. His concern was straightforward: becoming better at the work and completing it faster shouldn't result in lower income.

That is difficult to argue with.

Of course, a firm can attempt to replace the four saved hours with additional billable work. It could also increase its hourly rate.

But neither changes the underlying relationship:

Revenue is still being determined primarily by the amount of time consumed rather than the value of the service delivered.

This Is Already Changing in the Accounting Profession

The movement away from hourly billing isn't purely theoretical.

The 2023 AICPA/CPA.com National MAP Survey reported that hourly billing had fallen from 70% of firm revenue in fiscal 2020 to 65% in fiscal 2022, while the use of value pricing, including subscription-based services, continued to increase.

Interestingly, hourly rates themselves were increasing at the same time. The survey reported that the median hourly billing rate increased from $137 in 2020 to $159 in 2022, a 16% increase.

So this isn't simply a story about firms abandoning hourly rates because their rates are too low.

It points toward a broader change in how accounting firms think about pricing.

The 2025 MAP Survey continued to identify movement toward fixed and value pricing and away from traditional hourly billing.

That suggests something more fundamental is happening.

What Exactly Is the Client Buying?

When a client hires an accountant, what are they actually buying?

Usually, it isn't time.

A business owner doesn't particularly want three hours of tax planning, five hours of management reporting or seven hours of advisory work.

They want the result.

They might want confidence that their tax affairs are properly managed.

They might want accurate financial information delivered on time.

They might need to understand why cash is disappearing despite reporting a profit.

Or they may need help deciding whether they can afford to hire another employee, open another location or make a significant investment.

The accountant's time is an input. The client is interested in the outcome.

Yet hourly billing makes the input the basis of the price.

That can create a disconnect between how the accountant calculates the fee and how the client perceives the value.

Efficiency Should Be an Asset

Technology makes this issue increasingly important.

Accounting firms now have access to cloud accounting platforms, integrated applications, automated workflows and increasingly capable artificial intelligence tools.

Used properly, these technologies should allow firms to produce some work faster and more consistently.

That's good for the client.

It should also be good for the accounting firm.

But consider another hypothetical example.

Suppose a firm invests in technology and process improvements that allow a recurring piece of work to be completed 25% faster.

Under an hourly model, the firm must either:

• find additional billable work for the time saved;

• increase its hourly rate;

• accept lower revenue from that engagement; or

• find another way to capture some of the value created by the efficiency improvement.

Operationally, the firm has improved.

Commercially, the result isn't necessarily an improvement.

That's the problem.

A good pricing model should allow an accounting firm to benefit from becoming more efficient, not automatically penalize it for doing so.

The Billing Model Can Change Client Behavior

The issue isn't limited to revenue.

Hourly billing can also influence the relationship between accountant and client.

Intuit has highlighted a practical problem with time-based billing: clients don't necessarily know whether asking their accountant a question will create 15 minutes or 15 hours of billable work.

That uncertainty can discourage communication.

A client may hesitate before calling.

They may postpone asking for advice.

Or they may tell their accountant about an important transaction only after it has happened.

That's particularly problematic as accounting firms try to move further into advisory services.

The most valuable conversation may be the one that happens before the client makes the decision.

If the pricing structure inadvertently discourages that conversation, both sides can lose.

Clients Also Value Certainty

Hourly billing creates another form of uncertainty.

If a client agrees to an hourly rate but doesn't know how many hours will ultimately be required, they don't actually know the final price.

That creates friction.

The client worries about the eventual bill.

The accountant worries about whether all the time incurred will be accepted.

Then the invoice arrives and both sides can end up discussing hours rather than outcomes.

A clearly defined fixed or recurring price changes that conversation.

The client knows the financial commitment.

The accounting firm has greater visibility over expected revenue.

And both can concentrate more attention on the service being delivered.

Fixed Pricing Isn't Automatically Better

There is an important warning here.

Moving away from hourly billing does not mean taking your estimated hours, multiplying them by your hourly rate and calling the result a fixed fee.

Suppose you calculate:

10 estimated hours × $150 = $1,500

and simply quote the client $1,500.

You're still effectively pricing by the hour.

You've just hidden the calculation from the client.

Worse, if the scope isn't properly defined, the firm may perform substantially more work without receiving additional revenue.

This is one reason moving beyond hourly billing requires more than changing the way an invoice looks.

It requires thinking differently about:

Scope. Packaging. Client needs. Value. Risk.

Research published in The CPA Journal makes a similar point. Value pricing requires firms to understand what clients actually value, design appropriate service packages and recognize that there is no single pricing methodology that works for every firm, service or client.

That's important.

Value pricing shouldn't become another pricing religion.

Hourly, fixed, value and subscription models all have strengths and weaknesses. The objective is to understand those economics and choose deliberately.

From Selling Hours to Pricing Services

A more strategic approach starts with the service rather than the timesheet.

What does the client need?

What problem are we solving?

What is included?

What isn't included?

How frequently will the service be provided?

What level of access and support does the client receive?

What risks are we accepting?

What alternatives does the client have?

And what is the service worth to both the client and the accounting firm?

Those questions create the foundation for fixed-fee packages, tiered service options and recurring subscription-style arrangements.

Time doesn't suddenly become irrelevant.

Accounting firms still need to understand capacity, staffing, utilization and the cost of delivering their services.

But there's an important distinction:

Time can help you understand your cost without having to determine your price.

That's a very different way of thinking about pricing.

Predictable Revenue Changes the Model

For many accounting and bookkeeping firms, the logical progression isn't simply:

Hourly → Fixed Fee

It may be closer to:

Hourly Billing → Strategic Pricing → Predictable Revenue

Recurring services can be packaged around an agreed scope and an agreed monthly price.

The client gains greater certainty about what they're receiving and what they're paying.

The firm gains greater visibility over recurring revenue and future capacity.

And improvements in systems and processes have the potential to contribute to better margins rather than automatically reducing the invoice.

Subscription pricing isn't risk-free.

Poorly defined scope can destroy margins. A firm can underestimate the amount of work required. Client needs can change. Packages have to be reviewed and repriced.

Those aren't reasons to reject the model.

They're reasons to price it properly.

The Subscription Accountant

This is the thinking behind what I call The Subscription Accountant model.

It isn't about putting every client onto an identical monthly package.

And it isn't simply replacing an hourly invoice with a monthly invoice.

It's about moving the commercial model away from selling units of time and toward clearly defined ongoing services and client relationships.

That requires understanding what clients need, packaging services appropriately, defining scope and establishing a price that makes commercial sense for both parties.

One Question Worth Asking

If your accounting or bookkeeping practice still relies heavily on hourly billing, ask yourself this:

If I stopped recording billable hours tomorrow, how would I decide what my services are worth?

If that's difficult to answer, that's useful information.

It suggests that time may have become a substitute for a pricing strategy.

Moving beyond hourly billing doesn't require abandoning everything overnight.

But it does require separating two ideas that the accounting profession has traditionally treated as closely connected:

the cost of delivering a service and the value used to determine its price.

Once those are separated, a much broader conversation about pricing becomes possible.

Sources & Further Reading

AICPA & CPA.com — 2025 National Management of an Accounting Practice (MAP) Survey. The 2025 survey included information from more than 1,400 CPA firms, with 1,073 completing the survey. AICPA reported a continued movement toward value and fixed pricing and away from traditional hourly billing.

AICPA & CPA.com — 2023 National MAP Survey. The survey reported that hourly billing declined from 70% of firm revenue in fiscal 2020 to 65% in fiscal 2022, while value pricing, including subscription-based services, continued to increase.

Intuit — Elevating Firm Pricing. Includes the experience of CPA Randy Hughes and his reasoning for using value-based and subscription pricing rather than traditional hourly billing.

Intuit Tax Pro Center — Getting Started with Subscription Pricing. Discusses how uncertainty around hourly charges can affect client communication and how subscription pricing can change that relationship.

The CPA Journal — “How Accountants Can Implement Value Pricing,” Derrick Bonyuet, PhD, CFA, CFP, CPA (2025). Examines cost-plus, competitive and value pricing approaches and the practical considerations involved in implementing value pricing in a CPA firm.