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Net Investment Income Tax (NIIT)
22 October, 2021

Small Business Accounting Costs

For many small business owners, the accountancy duties are often the bane of their existence as it requires specialty financial management skills and consumes valuable time that should be dedicated to running the business. It is the rare business owner that relishes managing the financial side of the company.

Some business owners look to financial management software to compensate for their lack of expertise and time. But even this option has its limitations when it comes to handling more sophisticated money matters that could affect a business’s bottom line.

Hiring a trained and experienced accountant could save you time and money and help to ensure that the books are in capable hands.  You also want to know how much you can expect to pay for this important core service that is so integral to the operation of your business.

It comes down to the question:  how much will hiring an accountant cost my business?  In this article we will look at the various relevant factors that affect how much of an expense bringing in an accountant will be to your business.

Expense of Hiring an Accountant

How much an accountant will cost your small business will depend on the exact size of your business – factoring in size of payroll, annual income, and expenses, etc. – as well as the industry you are in, and the bookkeeping methods used.

The small business nonprofit organization, SCORE can shed some light on how much approximately you might expect to pay for professional accounting services. For example, the vast majority of small business owners figure to spend at minimum $1,000 a year on accounting administrative costs, internal expenses, and legal fees.

Here is what else SCORE reveals about the accounting expense for small businesses nationwide:

  • 31 percent spend $1,000 to $5,000

  • 23 percent spend $1,000 or less

  • 18 percent spend $5,000 to $10,000

  • 16 percent spend $20,000 or more

  • 12 percent spend $10,000 to 20,000

The average accounting fees for small business owners will be between $1,000 to $5,000, according to this poll.  You should keep in mind that you need to allow for accounting costs in your operations budget.

Pricing Framework for Accountants

The costs associated with hiring for accounting services will be largely based on how outsourced accountants structure their price points.  According to the National Federation of Independent Businesses, there are three typical fee structures accountants utilize:  hourly, fixed-fee structure, and proposal-based.  .

With respect to an hourly pricing set up, an accountant charges an hourly rate for their work provided. This rate might range from $150 to $600 or more per hour.

Fixed-fee structure pricing typically involves a business paying a fee every month for ongoing projects.

For the proposal-based scenario, the accountant puts forward a rate for a particular project. They figure out the value of completing the project and then let your business know the estimate before commencing work.

In House or Outsource Accounting Services

As a small business owner, you have the choice to hire an in-house accountant, or you could acquire the services of an accountancy firm. The type of accountant you opt for will affect your accounting expense. 

There are two ways to go with an in-house accountant – full-time or part-time – based on the financial needs of your business.  Because you will be paying the accountant a salary and adding her to the business’s payroll. Depending on the workload an in-house accountant may be the more expensive option.

 When you outsource this service, that means the accountant will serve as a freelancer. An outsourced accountant will not be on your payroll.  Rather you will work with the accountant on an as-needed basis.

Type of Work Accountant will Perform for Your Business

The amount and type of tasks you need your accountant to do will impact the costs associated with their services. For example, more complex and difficult jobs mean a greater expense for the accountant.

 If their work entails simple tasks like balancing accounts, you will pay less for an accountant.

 If you are looking for ways to reduce the costs of accounting services, using accounting software is a viable option. For example, managing the books among your existing staff will significantly cut down on the amount of work and time your accountant needs to invest to handle your financial matters.

 Conserve more resources and money by maintaining accurate financial records and keep them organized. You can then provide these records to the accountant, who will handle the more sophisticated and advanced financial tasks.

 With the aid of accounting software, you can go a long way toward managing your own books if you use a version designed for non-accountants. Then when you require further financial expertise, you can look to your accountant. An experienced accountant can help you set up your bookkeeping software and teach you how to use it.

 It is smart to have the accountant be charged with analyzing your accounting books and making decisions that impact cash flow. But, as previously noted, you can cut the costs of hiring an accountant by taking on the more basic accounting tasks.

 When Your Business Needs an Accountant

 Among the more common reasons for a small business to hire an accountant are business taxes and audits. These particular processes tend to be complex, time-consuming, and extremely important to have done by a competent accountant.

 Drilldown Solution Can Help Your Small Business Accounting Needs

Our accounting services are designed to reduce your administrative and bookkeeping burdens and provide you with valuable financial benchmarks for your business. This results in keeping you updated and informed.

Our seasoned, highly skilled full-service accounting team at Drilldown Solution will remove your financial pain points with bookkeeping to make managing your money easier. DrillDown Solution has the important tools you require to track expenses, oversee cash flow, and discover financial trends so you can effectively plan for the future of your business.

We have the expert team to help any small business thrive, even under the current COVID-19 pandemic circumstances. We accomplish this with a three-part system comprised of patient-experience excellence, financial focused operations, and accountability.

Our goal at Drilldown Solution is to put your small business in the best financial position possible, utilizing proactive processes and personal care!

Heather Porter

DrillDown Solution was founded in 2004 and has helped thousands of people save on taxes and achieve their best financial position possible.

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