Bookkeeper for Private Investigators

Where does the money come from?

Most investigative work is paid by the hour, but you also get flat fees for background checks and retainers for longer cases, and those three home different places in your books.

Hourly revenue is earned as you work and you invoice after the fact. A flat fee is a fixed price for a defined deliverable and you can book it as revenue when that job is done. A retainer is money in advance, and it's not yours until you've done the work it covers.

• Hourly rates in the industry run roughly $100 to $150 an hour, depending on the case and your region.
• Surveillance day rates tend to run $500 to $2,000 per day.
• Background checks often go for $100 to $600 a report.

Your books need to keep these three streams separate so your net income actually tells you which work pays your mortgage and which work just fills time. A quick look at your revenue lines per type does that better than a single lump.

What expenses should you track?

The expenses that eat a private investigation business are the same once you've covered the software and insurance: you have your own hours, your subcontractors, your vehicle, and the license and liability costs that don't blink.

Direct costs are the ones that depend on each case: the hours of your staff (or you) and any advance you pay a subcontractor. Then you have fixed costs every month, licensing, insurance, advertising, and the case management software. You also have vehicle costs, either as mileage or as using the car for work.

Don't forget the second set of direct costs on a big case: the database searches, the GPS units, maybe the night-vision gear and the parking permits. If you don't tag those to a job, you're seeing the P&L the way you drive a car with the brakes off.

How do you handle retainers?

A retainer is a liability, not income, until you have worked the hours it was set aside for.

In the accounting, the moment you receive a retainer you deposit the cash and hitch the opposite side as unearned revenue. Then as you work that engagement and bill your hours against it, you move the earned portion into service revenue. At the end, you've earned all of it, and your unearned balance goes to zero.

Here's the trap: if you dump the entire retainer into income the day it hits, you're telling yourself you have more profit and more cash you can spend than real. That is exactly how a freelancer ends up bankrupt. The cash is already spoken for, but the work is still ahead of you.

What do you track per case?

Each job is its own little business, and it needs its own little P&L.

Track the the the revenue you billed for that case, and the costs that feed it: your own hours, any case, the subcontractor fee, mileage, database run, and any equipment rental. When you add those up, you don't need anything to produce the margin on that case.

• The hours you and any employees have put in on that case
• Anything you paid another investigator to cover or process
• Any database search, parking, or other direct expense
• The invoice you sent and the amount that is still coming in

Once you see two or three months of those per-case numbers, you'll have something no national average can give you: which type of work actually pays the bills. It's the difference between knowing your rate on a daily basis and knowing that surveillance is drowning the whole thousand later when you needed to stop taking it.

How do you set your hourly rate?

Your hourly rate shouldn't be based on what the guy in the forum or the average table says. It's based on what your own business needs back to cover costs and give you a life after the mortgage and what an accountant calls a profit.

The math is straightforward: add your monthly rent, insurance, admin, anything you have to pay, your vehicle, plus the salary you need to live on. Then you add a target profit margin on top of that. That total needs to be covered by the hours you actually bill in a month.

Let's say you need $12,000 a month. If you can bill 80 hours a month, then you're $150 an hour just to break even before you've built in any profit. That's why the average hourly market is closer to $100–$150: it's very hard to run a real firm for less than that without burning out.

Which reports give you the truth?

The standard P&L says how much revenue your books show, but it does not tell you if that revenue has been earned, or how much sits held in a retainer. These three reports work together.

• A job cost report per case, so you see which type of work is covering your total and which takes the margin
• A retainer or unearned revenue schedule, listing every outstanding prepayment and what you still owe a client
• A cash flow statement that shows month of actual cash in and out, not just profit on paper.

Reading a P&L alone, you'll see a big top line and you'll never know if it came from retainers that haven't been earned yet. The job cost report tells you if you have any margin left and the schedules tell you who you owe. The cash flow tells you if you can pay the rent. That together is the whole lesson of good books.