As a small business owner looking to save costs, you may hesitate to decide if you should hire an accountant. With the various business accounting software in the market, you might feel like you can definitely avoid the cost of accounting services.
However, even if you’re an expert in using accounting software for small businesses, there could be other valuable financial insights that your business is missing out on—that an accountant could offer.
Now the big questions; how do you know whether you should hire an accountant for your small business? Is hiring an accountant worth it? And importantly, how much does an accountant cost? There are many factors to consider before you can answer those questions.
We’ll take you through those factors and how they relate to the average cost of accounting services for small businesses—so that you’ll know when you need a business accountant, how to find a small business accountant, and how much of accountant fees to expect.
Hiring an Accountant: When Does Your Business Need One?
Firstly, let’s consider what your small business can benefit if you hire an accountant. A business accountant or certified public accountant (CPA) can offer a range of services, including:
- Setting up bookkeeping and accounting systems
- Maintaining financial records
- Tax planning advice
- Preparing and filing your business taxes
- Generating audited financial statements or auditing your business’s books
- Offering business advice to help run cost-effectively
- Creating a personal financial plan
Although there are chances that you can do some of these tasks by yourself, or with the help of your accounting software for small businesses, there are other valid reasons to employ an accountant. Some of the most common reasons are for business taxes and audits.
These processes can be difficult, time-consuming, and there are instances where you don’t want to make errors. Deciding to employ an experienced certified accountant can be a life-saver.
Furthermore, an accountant can help you, not only with the physical accounting tasks but also with planning and wise financial advice for business growth and expansion. You may not need to hire an accountant all through the year, but don't hesitate to work with one when you do need their expertise.
Whether you need an accountant just to set up your accounting and bookkeeping software as your business commences operation, or you want help with yearly business taxes, there are valid endless reasons that you would consult with a professional for accounting services.
By outsourcing your important accounting responsibilities to an accountant, you will have more time to spend on other parts of managing and growing your business.
So how much does it cost to hire an accountant?
Now that we’ve discussed the services an accountant can offer and reasons why you might consider hiring one, It is time to answer the question—How much does an accountant cost?—and analyse what kind of overall costs you can expect and what small business accountant fees look like.
It’s very difficult to come to a conclusion on a definitive number and say: “this is how much an accountant costs per year for a small business.” The highest cost of an accountant will depend on a lot of factors, namely;
- The fees of the individual accountant you hire,
- The specifics of your business and its needs,
- How often you need accounting services.
How much should I pay an accountant for my small business?
As with most service-based professions, accountant fees depend on the individual accountant. Most accountants charge their fees on an hourly basis or at a per service rate.
This simply means that your accountant could charge you an hourly rate irrespective of the service he/she render, or they could charge for a specific task, e.g taxes, at one rate regardless of the time it takes to do the job.
The exact average for accountant hourly fees is difficult to identify and the number you find may be different based on the source. According to the U.S. Bureau of Labor Statistics, the average accountant hourly fee is about $40. However, this number can be higher or lower depending on site and the accountant’s experience.
Also Read: How to become an accountant
Generally, an accountant with business-specific experience might charge more than an everyday personal accountant. CPAs also might have higher fees because of the additional qualifications they obtained before they are certified.
Similarly, an accountant with 20 years’ accounting experience might have higher fees than someone just starting out in their career without any experience. Furthermore, fees will be higher if you need access to industry-specific expertise or if you run your business in a mega city.
As we’ve mentioned, the total cost for accounting services will not only depend on your accountant’s individual fee but also the services your business requires. If your business needs assistance with simple, more routine tasks, the cost is going to be less than if you require help with longer, more complex accounting tasks.
Additionally, if you hire an accountant, your yearly cost, is probably going to be more than if you hire an accountant for a one-time project.
Furthermore, it’s necessary to remember the other costs associated with this process, besides the actual cost of the accountant themselves. You should invest time in finding and hiring the accountant, getting your books ready, and working with them to get started.
If you’re trying to budget accounting services into your business finance plans, you’ll also want to remember to include the cost of any accounting or bookkeeping software you use as well.
How to Find a Business Accountant
One of the most important ways to make sure you’re utilizing the cost of accounting services is to ensure you find a good accountant and suitable one for your business.
If you don’t know how to go about it, asking for referrals from other business professionals you patronize and trust is a great way to find different accountants to talk to. You can also visit the American Institute of Certified Public Accountants for a directory of CPAs and some accounting firms near you.
If you’re meeting with different business accountants, you might wonder how to know if the accountant is good. To determine this, you’ll want to be sure that the accountant has some years of experience working with small businesses or start-ups.
The accountant should be transparent about how they charge for their services and what specific services they offer. Make sure you talk to several different people and compare their services and prices.
Many accountants offer a free consultation to potential clients—which is something worth participating in to know if they’re the right fit for your business.
Should You Hire an Accountant? A Cost-Benefit Analysis
If you’re still doubting whether you need to hire an accountant, if you can afford the cost of small business accounting services, a cost-benefit analysis can be helpful. A cost-benefit analysis is an accounting concept where a business owner lists and estimates all the costs of an action, in this case, hiring an accountant.
You’ll also list all the benefits of that action, assign a dollar value to each, add up the two columns, and subtract one from the other to determine whether the action is financially feasible. Generally, you assign a time frame to the costs and benefits—in this case, a three-year period might be reasonable.
For instance, you manage an IT consulting firm in Houston, Texas, and handle all the bookkeeping yourself using QuickBooks Online. However, you’re busy that you don't have enough time to do your bookkeeping.
As a result, you’re late sending out invoices to clients and cash flow is declining. Now the big question, should you hire an accountant? How much does an accountant cost in this situation?
Before calculating the cost-benefit analysis of hiring an accountant, you should analyze these informations.
Also Read: Top 6 Richest Accountants In The World
1. Check what services you need. In this case, you probably want everything that will grow your business, from bookkeeping to advice.
2. Get price quotes from several accountants. As we said earlier, many accountants charge per hour, but some work on monthly retainers. Also, enquire if the accountant uses lower-cost help (such as a bookkeeper) to perform some of the functions; if yes, those rates may be lower.
3. Get an estimate of the hours per month it would take to provide what you need and the total monthly cost.
Think through all the possible long-term costs and benefits, not just the short-term. Here are some you might put into consideration:
How much does an accountant cost a month?
The accountant’s wages. Find the average hourly rate for a certified public accountant in your city and start from there.
Cost of your time interacting with the accountant. You’ll still need to give necessary records, get documentation together, and meet with the accountant periodically.
Cost of any new software demanded by the accountant. A new accountant might ask that you invest in particular accounting software that they prefer over the one you still use.
Consider the opportunity costs. What could you gain by using the same amount of money for something else? Would hiring another IT employee or buying equipment generate a better return?
The Monthly Benefits of a Business Accountant
The monthly amount of time you saved when you stopped doing your small business bookkeeping tasks. For this benefit, you should multiply the hours you spend on bookkeeping by your hourly pay rate, make sure you include the overhead costs of any benefits.
The potential new clients you could get using that time. Assuming you spend 20 hours in each month on accounting and Bookkeeping, and could spend those 20 hours on business development after you hired an accountant.
If it takes you an average of 60 hours to get a new client, and your average client accounts for $80,000 of revenue annually, the dollar benefit of the accountant would be 20 x 12 (or 240) divided by 60, which = 4 new clients. Multiplied by the average account’s fee, that’s 4 x $80,000 or $320,000 annually.
Potential financial gains you could make based on the accountant’s planning advice. You can find average rates of return for various types of investments online.
Benefits of avoiding costly tax filing mistakes or fines. Tax filing problems can be a big blow to your finance. If you’ve ever had tax problems, you will understand how much these can cost.
Some costs and benefits are easier to quantify than others; in some cases, you’ll be using estimates or averages. By following this process, however, you’ll not only have a better sense to answer to the question “How much does an accountant cost,” but you’ll also have an answer that’s specific to your firm.
Moreover, you’ll learn about the kind of accounting services you need, how it will affect your average accountant fees and overall costs, and how working with an accountant will (or won’t) benefit your business on the long run.
Hiring a Small Business Accountant: The Bottom Line
It is a big decision to hire an accountant to work with your small business. Unfortunately, this decision is made difficult by all the different factors involved in answering “how much does an accountant cost?”
At the end, it’s best to carefully think about your options and evaluate the cost-benefits. By thinking about your business specifically—what kind of accounting services you require and how often you need them—you’ll be able to decide if the cost of hiring an accountant will be of great benefits to your small business.
If you decide to hire an accountant, you have to be diligent in your hiring process to choose the right one for your business—putting specific fees, services, and experience into consideration. Although it might be difficult to make a final decision, but the time and hassle you save, plus the benefits the accountant offers, will definitely outweigh the costs.