Main Street Launch is excited to feature a guest post from Rachel Blakely. Rachel Blakely is a content writer for Patriot Software, LLC, a provider of online accounting and payroll software for small business. At Patriot, she enjoys providing actionable, growth-oriented information for small business owners.
Most small business owners would agree that managing financial records isn’t their favorite task. Using accounting software can alleviate the stress of managing your books by hand. But, there are some difficult tasks you might hire an accountant to do.
Handing your books off to an accountant is a decision that can save you time and energy. Before doing so, understand how much hiring an accountant could cost you.
Benefits of hiring an accountant
Whether you’re starting, running, or growing your business, having an accountant in your court can be beneficial. Accountants can help with a wide array of business-related tasks to save you time.
Before you budget small business expenses, it’s important to know how an accountant will benefit your company. Hiring an accountant can have a heavy influence on your day-to-day processes and the overall financial health of your business.
If you are just starting your business, you might need help choosing a business structure (e.g., sole proprietorship). An accountant can explain tax structures, registration requirements, and more. You can also hire an accountant to help you create your business plan, a necessary asset for decision-making and investments.
Accountants can also help you with financing your business. They can point out the best course of action for funding your venture and help you select small business loan services if needed. If there are problems with cash flow in your company, an accountant can provide their financial expertise.
Your books are simplified and accurate when you use accounting software. But, what happens if you enter a number incorrectly and don’t notice it? An accountant can catch problems with your numbers, helping you avoid penalties.
Cost of hiring an accountant
The cost of hiring an accountant varies by industry, business, and your specific needs. One 2015 report by SCORE broke down the overall annual cost of accounting tasks:
- $1,000 or less: 23% of small business owners
- $1,000 – $5,000: 31%
- $5,000 – $10,000: 18%
- $10,000 – $20,000: 12%
- $20,000 or more: 16%
Nearly half of small business owners pay more than $5,000 each year on administrative costs, internal expenses, and legal fees involved with accounting.
Although there is no standard accounting fee, here are some factors that influence the cost of hiring an accountant.
In-house vs. outsourcing
You can choose to hire an in-house accountant, or you can outsource recordkeeping. The type of accountant you hire will impact your accounting expense.
An in-house accountant can be part-time or full-time, depending on your business needs. This would be the most expensive option, as you would pay the individual a salary and add them onto your business’s payroll.
Outsourcing means the accountant would be a freelancer. They might come to your business location, or you might meet with them at their office. The outsourced accountant would not be on your payroll. Instead, you would work with them periodically as needed.
Your costs will also vary depending on how outsourced accountants structure their pricing. According to the National Federation of Independent Businesses, there are three common fee structures accountants use: hourly, proposal-based, and fixed-fee structure.
With an hourly pricing structure, the accountant charges an hourly rate for their work. This rate could range from $150 – $400 or more per hour.
Proposal-based means the accountant gives you a rate for the project. They determine how long they will spend working on it and give you the estimate beforehand.
Fixed-fee structure pricing is where you pay a monthly fee for ongoing projects.
Accountants’ rates vary based on their experience and skill level. Some accountants charge more than others, depending on the type of work they do and their background. Look around and compare prices while finding an accountant for small business.
Keep in mind that some accountants who have higher prices might be able to complete tasks in less time than accountants with lower prices, which could save you money if they charge hourly.
Another factor that influences the cost of hiring an accountant is what tasks you need them to do. If you need the accountant to do more, you will pay more. And, more difficult, time-consuming tasks are typically more expensive.
For more simple tasks such as balancing accounts, you could hire a bookkeeper as opposed to an accountant. A bookkeeper might cost $30 to $40 per hour, whereas an accountant could charge hundreds of dollars per hour.
If you don’t already, using accounting software can help you cut down on the cost of hiring an accountant. Managing books on your own significantly decreases the amount of work and time an accountant needs to spend. Keep records accurate and organized without pouring hours into your books. Then, hand over your records, and your accountant can fill in from there.
There are many tasks you can do on your own when it comes to running your small business. Managing your books with accounting software is simple when you use a system made for non-accountants. Looking for loans on your own is possible when you find a lender who focuses on helping small businesses, like Main Street Launch. But when you need further financial expertise, reaching out to an accountant can be a good decision.
Accountants help take the pressure off of analyzing your accounting books and making decisions that affect cash flow. You can reduce the cost of hiring an accountant by doing some tasks on your own.
Before hiring an accountant, take the above points into consideration when budgeting your cost. Look around and compare rates, ask questions, and hire an accountant who specializes in helping small business owners.