How Much Should Accounting Cost a Small Business?

How Much Should Accounting Cost a Small Business?

Running your own business can be a hectic and chaotic ordeal. Putting up with employees, catering to customers, and devising business plans will make it seem, some days, like you simply do not have time for anything outside of your work life.
If you’re a small business owner, managing your financial books is not an expense you want draining your bank account. But, it can be difficult to know if your accounting costs are on track. Having to keep your own finances is almost impossible for the small business owner, but the average cost of accounting services for small businesses are sometimes prohibitively high. How much should accounting cost a small business? The answer is not as simple as it might seem.

In this article, Orange County Bookkeeping Pro will look at bookkeeping services fees and small business accountant fees to help small business owners understand the cost of average accountant fees. 

What are the different types of accounting costs?

Accounting costs vary widely. Companies that are the same size and industry can pay different amounts for accounting depending on their need. But before we get into dollar figures, let’s discuss the types of expenses that go into small business accounting.

Bookkeeping & Bank reconciliation

This type of accounting service involves keeping records of the financial accounts of the business. The bookkeeper updates financial systems by recording a hard copy of the financial data or use financial accounting software on the network. The bookkeeper also ensures accurate bookkeeping of financial records and helps to find any discrepancy .the accountants help in providing the business cuts down on expenses and protect fraud.

Tax accounting

This deals with income tax and other taxes that are placed on the business. The tax accountant ensures that they give the best advice when it comes to claims and protects the company from paying unnecessary taxes. The tax accountants also help in fixing issues related to filling of returns.

Accounting auditing

Auditing gives detailed financial information about the business. The auditors are involved validating and ensuring the accuracy of financial statements and reports. You may need this service if you are looking to borrow a loan against your assets, looking to sell your business or going public.

Accounts payable & receivable

These services modify the payment system of the business by managing financial transactions, coming up with expenditure solutions, excluding duplication, and managing financial documents. They also help in boosting the collection rate of a company, reduce the period of payments, and ensure fast processing of invoices.

Payroll processing

This service ensures accuracy in tax rates and regulatory information. It provides the maintenance of financial records of employee’s income, deductions, and bonuses.

Fractional CFO consulting

A fractional CFO is a consultant who provides financial strategy services on a part-time or project basis. They provide high-level financial strategy, systems analysis and design, and operational optimizations. A fractional CFO can also help a company resolve challenges such as cash flow issues, raising capital, solving tight margins, implementing more efficient systems, or preparing for growth.

Accounting fees for a small business generally depend on what you need

Your accounting costs largely depend on how often you use bookkeeping and accounting services as mentioned previously. The average accounting fees for a small business depend on the kind of financial professional used and experience and your geographical location. Generally, the more advanced services you need, the more you are going to pay. 

For example, a bookkeeper helps with tasks like recording transactions, processing payroll, invoicing customers, and balancing your books. Accountants and CPAs help with more advanced tasks, such as filing small business taxes, generating statements, analyzing costs, and giving advice. Since bookkeepers do less-involved tasks, their rates are often cheaper than accountants.

You can obviously, keep accounting costs down by taking care of some financial tasks yourself. For example, you can record transactions and process payroll using online software. You enter amounts into the software, and the program computes totals for you. But you have to be aware that accounting and bookkeeping software solutions come in all shapes and sizes. You can spend a lot of money or pay a small monthly fee. The more features you add to the software, the more expensive it will be.

For small business, you do not need an elaborate program to manage accounting. Basic accounting software streamlines the process and lets you record transactions quickly. Periodically enlist the help of a financial expert for difficult accounting tasks as needed.

As your business grows, you will probably need an accountant more often. Michael Gerber, nest-selling author and entrepreneur, stressed this point:

You can't be the accountant in your accounting firm. You can't cut the grass in your landscaping business. You can't work on the vehicles in your auto repair shop... And you really can't spend all of your time managing those actions, either.

Michael Gerber

How much should accounting cost a small business?

The average salary for a bookkeeper in Orange County, CA as of December 2021 is $50,361 or roughly $28 per hour. For an an in-house accountant, you’ll pay more depending on their responsibilities. You can find yourself paying $60,000 -$80,000 or $33 -$45 an hour. 

In addition to the hourly charges, state & federal laws will also likely require you to pay for the employee’s benefits such as health insurance and vacation time. These benefits add a significant amount to the annual cost of an in-house bookkeeper.

The associated costs with in-house bookkeeping has led many companies to outsource their bookkeeping needs to an external agency. The fees are considerably lower than in-house bookkeepers, which can start at $400/month and go up depending on quantity and complexity of services involved.

If you are a smaller company with 100 or less of bank and credit card transaction, then you may pay even less. 

 

The cost of accounting depends on your business’s size, industry, and bookkeeping methods. Though every company is different, there are average small business accounting fees and costs. 

The data is broken down like this per SCORE:

  • 23% spend $1,000 or less
  • 31% spend $1,000 to $5,000
  • 18% spend $5,000 to $10,000
  • 12% spend $10,000 to $20,000
  • 16% spend $20,000 or more

The typical accounting fees for a small business fall between $500 to $1,500 in Orange County. If you’re a new business owner, don’t forget to factor accounting costs into your budget. If you’re a veteran owner, it might be time to re-evaluate accounting costs.

Are you paying above average for accounting? 

Other costs to consider

Administrative costs and accountant fees aren’t the only accounting expenses. Think taxes, administrative costs, compliance costs and legal costs. You should also consider the effects accounting will have on you and your time.

While you might think your attitude towards bookkeeping is trivial compared to cold hard cash, it affects your business. If accounting makes you miserable, the issue can spread to other parts of your operations. Your ability to lead employees, serve customers, and make decisions could suffer.

Your time is also valuable and should be considered when looking at accounting costs. The time spent on accounting tasks does not generate profit. The less time you spend on bookkeeping and taxes, the more time you have to grow your business.

You don’t want to spend the majority of your workday on accounting tasks. But, you should make the time you spend on accounting count. Use a simple software solution to record transactions quickly. For difficult tasks, hire an accountant to help you. Finding the balance between time and money spent on your books will help you keep accounting costs on track.