The Cost of Accounting Services for Small Businesses

Keeping accurate financial records is crucial to the success of any business, regardless of its size. However, accounting can also be time-consuming and complex, and many small-business owners struggle with managing their finances. Even when they have the knowledge and can do it themselves, their time is split into too many roles. Accounting and financial reports should be outsourced if business owners find it challenging to keep up with it.

Hiring an accounting service can help the financial health of your business by streamlining the process and ensuring accuracy, but it also comes at a cost. In this article, we’ll explore the factors that affect the cost of accounting services for small businesses and provide tips for finding affordable and reliable accounting services.

The cost of accounting services for small businesses can vary depending on several factors, including:

Types of accounting services: Your specific accounting needs, such as bookkeeping, accounting tasks such as bill pay, billing or invoicing, collections, managerial accounting, tax returns, payroll processing, cash flow assistance/monitoring, and financial statements preparation, will impact the accountant’s cost. Financial planning is a whole different sector of financial services and does not fit into typical bookkeeping and accounting. You must research financial planning separately. If you do your own financial planning, then the above services will work for you. 

The complexity of Your Business: The more complex your business is, the more time and expertise a professional accountant will need to manage your finances, which can increase the total accountant cost. We all know the adage “You get what you pay for.” In my opinion, financial and accounting professionals, along with legal services and attorneys, are two of the most important costs your business should spend on. Most businesses focus on marketing, and of course, that is very important to bring customers or clients. However, if your infrastructure is not set up correctly to handle the various situations your business will come across, it could mean failure of your business structure and losing all you’ve worked for.

Think of it as a landlord who rents an apartment or house to a tenant. They’re obviously paying for advertising and marketing to get the tenants to find the rental space. Let’s say the landlord doesn’t pay for the upkeep of the place, how does that affect the chances that the landlord will succeed in renting to the tenant?

All professional services are extremely important for a business. These professionals are an extension of you working on ensuring your business succeeds. Plus, no one knows it all. It’s best to have experts around you to consult with in all the different departments.

Size of Your Business: Larger companies will have a larger amount of work to be done, which can increase the cost. Keep in mind also that a small business can be very complex as well, depending on the type of business and how they conduct business. A lot of owners make things more complicated than they need to be. At Yari Solutions, we’re efficiency experts who always keep up to date with the best accounting software. We “hack” traditional systems and frameworks to make things simpler, not more complicated.

Location of Your Business: The location of your business can also impact average accounting costs. The cost of living and local competition can affect the pricing of different accountants. 

Experience and Expertise of the Accountant: The experience of the accountant will determine the total cost of the accountant. An experienced and knowledgeable accountant will cost more than a less experienced accountant or a bookkeeper. Again, “you get what you pay for.” 

I find that a lot of business owners don’t view finance professionals (and possibly other professional services) as entrepreneurs, or as businesses for profit. A lot of us have teams to direct and lead, and selling time creates a limit on the revenue we’re able to earn, therefore, we must grow by means of hiring or contracting a team to be an extension of us. We are not employees when we’re in business for ourselves. We are contractors, freelancers, or a professional service provider providing relief and expertise while freeing up the time of business owners. The myth and treatment of hiring a professional service in the same way an employee is hired is outdated and counter-productive. When professional services expand beyond a one-person operation and show signs of growth, this demonstrates that we know how to run a business and, therefore, can help you even more with running yours. Seek a professional that shows signs of growth while they have been in business with excellent client references.

Bookkeeping: Bookkeeping services can typically be a monthly cost between $30 and $75 per hour or $200 to $750 for ongoing services for small to medium-sized businesses. The lower rates are charged by less experienced professionals.

Tax returns- Preparation and Filing: Tax preparation and filing services can cost between $200 and $500 per return or a yearly cost of $1000 and $5000 for ongoing services.

Financial statements preparation: Financial statements preparation services can be a yearly cost between $1500 and $5000, depending on the business structure. 

Payroll processing: Payroll processing services can have a monthly cost of between $50 and $200 plus an additional fee per employee.

Other services: Other accounting services, such as audit and assurance services or business valuation, can cost more, depending on the complexity of the project.

When it comes to accounting services, pricing models typically come in two forms: hourly rates and flat fees.

Hourly rates are based on how much time it takes to complete a project. The advantage of hourly rates is that you only pay for the time it takes to complete the work. However, hourly rates can be unpredictable, and it’s challenging to budget for this type of pricing model. I also invite you to consider that just because a professional is charging less, that it means it will cost you less. A person with less experience will take longer and, thus, charge you more hours for the same task that can be done in less time by a very experienced professional for a higher hourly rate. 

A flat fee, or a flat rate, is a set price for a particular service or project, regardless of the time it takes to complete. The advantage of flat fees is that they are predictable and allow for better budgeting. However, flat fees can be higher than hourly rates, and if the project takes longer than anticipated, you may end up paying more. It all comes down to what’s more important to you: that the project is less expensive or that the job is done well no matter how long it takes, by a savvy professional.

Choosing the right accounting service for your small business is an important decision that can affect your financial decisions short term and long term. Here are some considerations to keep in mind when selecting an accounting service:

Expertise: Make sure the accounting service has experience in your industry and the accounting services that qualify with your specific needs. Accounting is one of those fields where most times, the professional doesn’t necessarily need to have experience in your industry. Accounting is accounting and bookkeeping is bookkeeping no matter the industry. Where it makes a difference sometimes is in compliance and taxes. That requires a professional knowledgeable in taxes. They will prepare your tax return during tax season and provide tax advice if they offer tax strategies. 

A bookkeeper or accountant doesn’t need to be a CPA or work in a CPA firm. Just like in other professions, there’s good and bad in everything. CPA is a state certification. It doesn’t ensure the professional knows your industry or has the knowledge or experience to meet your needs. This is where I see a lot of businesses paying way more than they need to just because they think they need to have a CPA firm. I’ve heard bad scenarios with a CPA firm just like it happens in any other profession.

If you’re looking for day-to-day accounting an accountant with real-life experience will do. Read more below on how to make sure they know what they’re doing. If you’re only looking for a bookkeeper, someone to track your income and expenses, an experienced bookkeeper will do. Trade certifications are great as I consider them the hack to a master’s degree. If the professional is self-educated and studies their trade and obtains certifications, a bachelor’s degree is not even needed. Again, if they have real-life experience, that’s sufficient. It’s like lawyers who go to law school vs. lawyers in California who learn from mentors as opposed to needing a law degree. In every profession, intelligence, passion, determination, and hard work is all that is needed. Confirm their work ethics, professionalism, and knowledge by contacting their client references, looking at their online presence, and finally talking to them to go with your gut. There are ways to not give an accounting professional full access to your bank accounts and credit cards. You don’t have to risk your money or sensitive data to test an accounting professional. You may contact Yari Solutions any time to educate you on how you can do that. 

Services: Consider the accounting services you need and make sure the accounting service offers those services. Some accounting firms specialize in certain areas, such as tax returns preparation or bookkeeping with financial reports, while others offer a wider range of services. Year-round support requires managerial accounting experience. Identify what you need and find a professional that focuses on that area.

Communication: Good communication is essential in any business relationship. Make sure the accounting service is responsive to your inquiries and questions, and that you feel comfortable communicating with them.

Technology: Technology is an important part of modern accounting. Make sure the accounting service uses up-to-date technology and software that will help streamline your accounting processes. Apps must work for your business structure. 

Reputation: Do some research on the accountant costs before engaging. Look for reviews and testimonials from other small business owners, and ask for client references as most are not usually listed online. A good accountant will have reference letters from their clients.

Once you have narrowed down your options, it’s important to ask potential accounting service providers some questions to help you make a final decision. Here are some questions to ask:

• What accounting services do you offer?
• What experience do you have in my industry or with my type of company?
• Can you provide references from other small (or medium-sized) business owners you have worked with?
• What are your average accounting fees and how are they structured?
• How will you help me during tax season? 
• How do you ensure the security of my financial information?
• Can we do a trial for a month, a quarter, etc to see if we’re a good fit for each other?

Tips for finding affordable accounting services:

• Look for accounting firms that offer flat-fee pricing or package deals for multiple services.
• Even if they don’t, they might start hourly (like we do) to gauge your activity and the support you need to come up with a service package specific to your needs. Ask, and you shall receive!
• Consider working with a virtual accounting service, which may offer lower fees than traditional brick-and-mortar firms. We’ve been doing this for 18 years! We will save you a lot of time, headaches, and money!
• Look for accounting services that offer scalable pricing, so you only pay for the services you need as your business grows.
• Consider working with a freelance accountant or bookkeeper running a small operation instead of a larger firm, as they may offer more reasonable and average accounting fees and more specialized attention.

The cost of accounting services for small businesses can vary depending on several factors, including the types of services needed, the business structure, and the location and expertise of the accountant. It’s important to carefully consider these factors and choose an accounting service that fits your business’s needs and budget.

When looking at accountant costs, consider their expertise, the services they offer, their communication, technology, and their reputation. Ask potential accounting service providers questions to help you make a final decision, and look for ways to find average accounting costs, such as flat-fee pricing or working with a virtual accounting service.

By taking the time to find the right accounting service for your small business, you can ensure that your finances are in good hands and that your business is on the path to financial success.