How much should a small business pay for accounting services?

The Milestone Team August 3, 2021
small businesses pay accounting services

Every business regardless of its size has to think about accounting. From recording credit card receipts to sending customer invoices to preparing financial statements, businesses of every size and type have to handle the accounting function of the business. Even small, family-owned businesses require regular bookkeeping to ensure accurate record keeping, financial reporting and tax compliance.  

As small businesses grow, owners often find themselves wondering “should I hire an accountant for my small business?” Having a dedicated bookkeeper provides small business owners the freedom to focus their efforts on growing and maintaining a successful business, but the uncertainty around the costs of bookkeeping services for small business often delays or prevents owners from making the decision to hire bookkeepers. If you’re wondering whether you should hire a bookkeeper to maintain your business finances, you’re in the right place.

How much does an accountant cost for a small business?

The first thing to understand when trying to determine how much an accountant will cost for your small business is what services an accountant will provide. Accountants can cover a wide spectrum of services from basic bookkeeping (vendor invoices, credit card transactions, bank reconciliations, customer invoices, collections etc), to more complex things like cash flow forecasting, financial statement preparation, and financial projections. 

To break down the costs of bookkeeping services, it’s important to first understand the difference between basic bookkeeping and monthly accounting services.

Bookkeeping services

In general, bookkeeping refers to the function of maintaining basic financial tasks, like invoicing clients, paying vendor bills, recording and posting transactions, and reconciling accounts. These are basic, albeit important, duties that any business needs to maintain regardless of who is doing it. Bookkeeping is often performed by a bookkeeper with entry-level financial skills. Although bookkeeping is the basic level of accounting service, it also provides the foundation for good information. If your bookkeeping isn’t accurate, then all other financial reports  and forecasts are going to be off. 

How much does a bookkeeper charge for a small business?

The cost of bookkeeping services for a small business can vary depending on your location, but often ranges between $40 to $100 per hour. While many bookkeepers charge by the hour, it is becoming increasingly common for outsourced accounting firms to quote a fixed fee based on the volume of transactions and complexity of the work involved. Basic bookkeeping services can start as low as a few hundred dollars a month, but can increase to as much as several thousand dollars a month as the workload increases. Be careful not to jump at the lowest cost provider.  Often you get what you pay for and will end up disappointed because your books are a mess.  

Monthly accounting services

Monthly accounting is the next step up from bookkeeping. It involves closing the monthly books and providing insights about the current financial health of the company. Although bookkeepers help business owners record transactions and keep things organized, they don’t typically interpret the results. This is where an accountant or controller comes in. Accountants use the records a bookkeeper provides along with their expertise to help prepare reports, build budgets, and provide the analysis required to make good business decisions. A good outsourced accountant will not only reconcile your accounts and prepare reports, they will conduct regular financial review meetings to go over your operating results, explain variances to budget, and explore ways to improve efficiency and profitability.  

How much does an accountant cost for a small business?

Higher level accounting services are performed by a Controller or CFO, and the average cost of accounting services for small businesses can range $100 and $400 per hour.   That’s a big range, but it’s often due to the level of services provided, the years of experience of the provider, and the local market; services in large cities like New York might cost a lot more than services in smaller markets.

Should you hire an accountant for your small business?

The answer is often a resounding YES. The right accountant will provide real value to your business and often pay for themselves in the savings they find or the suggestions they help implement that can drive improved efficiency and greater profitability. A good accountant is worth their weight in gold.  

The other significant benefit to hiring an accountant is that it allows a business owner to focus on running their business. While you may think you are saving money by not hiring an accountant, the truth is that you are probably hurting the business in the long run. There is an opportunity cost associated with the do-it-yourself path. Even if you have the skillset, doing your own accounting is probably not the best use of your time.  

The other important point to realize is that you don’t have to hire a full time accountant to see these benefits. Often, companies engage an outsourced accounting firm to provide a cost effective alternative to a full time hire. A good outsourced accountant will help you get better and more timely information to make smart decisions and free up your time to focus on growing your business. There is a reason that outsourcing has become very popular with small and mid-sized businesses. It just makes sense.  

Hire a financial partner with Milestone

There are many reasons small business owners choose to outsource their bookkeeping and accounting needs to dedicated professionals. At Milestone Business Solutions, we believe in true business partnerships with clients to make their lives easier, provide direct access to critical information to make smart decisions, and help business owners build more successful companies. Interested in learning more? Click here to learn more about the Milestone difference. Let’s chat!

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