Accounting For Small Business: How Much Does An Accountant Cost Your Small Business

Accounting For Small Business: How Much Does An Accountant Cost Your Small Business

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Michael Schwartz

As a small business owner, you're probably juggling many different roles and responsibilities to keep your business running smoothly. One of the most important aspects of your business is financial management, which is where accounting comes in. In this article, we'll explore what accounting is, how much it costs to hire an accountant, the benefits of hiring an accountant, how to decide between an accountant or bookkeeper, and whether accounting software is a viable alternative to hiring professional accounting services.

Accounting for small business

What is accounting and why is it important for small businesses?

Defining accounting for small businesses

Accounting is the process of tracking, analyzing, and managing financial transactions and records. This includes everything from bookkeeping to financial statement analysis to tax preparation. Specific accounting tasks for small businesses may include managing expenses, tracking cash flow, creating financial reports, paying bills and business taxes, and filing tax returns.

Why accounting is important for small businesses

Accurate accounting allows small business owners to make informed decisions about their business. By understanding their business's financial health, small business owners can identify areas where they need to cut costs, increase revenue, or adjust their business strategy to better meet their financial goals. Poor financial management can lead to cash flow issues, missed opportunities for growth, and even legal problems.

The role of accountants in small businesses

Professional accountants can offer a wide range of services to small businesses, from tax preparation and filing to financial statement analysis and consulting. By hiring an accountant, small business owners can focus on running their businesses instead of trying to manage their finances themselves. Accountants can save small business owners time and money by ensuring their business is in compliance with tax laws, recommending cost-saving measures, and providing sound financial advice.

How much does it cost to hire an accountant for your small business?

Factors that affect accountant cost

The cost of hiring an accountant for your small business can vary greatly depending on a number of factors. These include the accountant's experience and qualifications (such as being a certified public accountant), the complexity of your accounting needs, the size of your business, and your geographic location. Accountants may charge by the hour or offer monthly or yearly accounting packages.

Average cost of hiring an accountant for small businesses

According to a survey by the National Society of Accountants, the average hourly rate for an accountant was $152 in 2020. However, this cost can vary widely based on location, with accountants in large cities often charging higher rates than those in rural areas. The average cost of monthly accounting services for small businesses was $435 per month, while annual accounting packages ranged from $1,200 to $5,000 per year.

Ways to save money on accountant costs for small businesses

While hiring an accountant can be a significant expense for small businesses, there are ways to keep costs down. For example, consider outsourcing specific accounting tasks (such as bookkeeping) to a lower-cost provider, or using accounting software to manage your finances. Additionally, current tax laws allow small businesses to deduct accounting fees as a business expense on their tax return. Read here for more tips on keeping accounting costs down.

Accountants analyze financial data

What are the benefits of hiring an accountant for your small business?

Expertise in tax preparation and filing

One of the biggest benefits of hiring an accountant is their expertise in tax preparation and filing. This includes understanding current tax laws, deductions, and credits that your business may be eligible for, as well as preparing accurate and timely tax returns. By working with an accountant, small business owners can avoid costly errors and penalties, while ensuring they are taking full advantage of all available tax benefits.

Improved financial management and decision-making

By having access to up-to-date financial statements and reports, small business owners can make informed decisions about their business. Accountants can help identify trends, analyze financial data, and provide insight into areas where the business may need to focus its resources. This can help small business owners make better decisions about everything from inventory management to marketing strategies.

Reduced risk of errors and penalties

Accountants can help small businesses avoid costly errors and penalties by ensuring compliance with tax laws and regulations. Additionally, working with an accountant can help small business owners avoid financial mistakes that could negatively impact their business's cash flow and growth.

If you're convinced about hiring an accountant, you can find here some information on what you should look for in an accountant.

How to decide if you should hire an accountant or a bookkeeper for your small business?

Differences between accountants and bookkeepers

While accountants and bookkeepers both work with financial data, there are some key differences between the two roles. Bookkeepers are responsible for recording financial transactions, managing accounts payable and receivable, and producing financial statements. Accountants, on the other hand, take financial data and turn it into actionable insights for small business owners.

When to hire a bookkeeper for your small business

If your business has relatively simple financial needs, such as tracking expenses and invoicing, a bookkeeper may be sufficient to manage your finances. Bookkeepers typically charge less than accountants and can provide valuable support for small businesses with limited financial resources.

When to hire an accountant for your small business

Small businesses that have more complex accounting needs, such as payroll, tax planning, and financial analysis, may benefit from hiring an accountant. Accountants have a deeper understanding of financial management and accounting principles, which can help small business owners make better-informed decisions about their business's finances. For Amazon sellers looking to find an accountant online, read here for more information.

Accounting software

Should small business owners invest in accounting software or hire an accountant?

Pros and cons of using accounting software

Accounting software can be a cost-effective way for small businesses to manage their finances, especially for those with simpler accounting needs. The software can often automate many bookkeeping and accounting tasks, reducing paperwork and data entry for small business owners. Additionally, the software can be more efficient and accurate than manual bookkeeping practices.

How accounting software compares to hiring an accountant for small businesses

While accounting software can be a helpful tool for small businesses, it cannot replace the expertise and guidance offered by a professional accountant. Accountants can provide valuable advice and insights into a small business's finances that software cannot. Additionally, accountants can help small business owners make strategic financial decisions that can help them grow and expand their business.

Combining accounting software and professional accounting services for small businesses

Small businesses can combine the strengths of accounting software with professional accounting services to get the best of both worlds. By using software to automate simple bookkeeping and accounting tasks, small business owners can save time and money. They can then work with an accountant to get expert advice and guidance on more complex financial matters, such as tax planning and financial analysis.

In conclusion, while hiring an accountant can be costly for a small business, the benefits and expertise they bring to your financial management can ultimately save you money and help your business grow. Consider the factors and options available to you, such as bookkeeping services or accounting software, to make the best decision for your business's accounting needs.

Frequently Asked Questions

How much does an accountant usually cost?

The cost of hiring an accountant varies depending on the type of services you need and your location. On average, a small business can expect to pay anywhere from $100 to $300 per hour for accounting services.

What goes into the cost of accounting for my small business?

The cost of accounting for your small business will depend on the specific services you require, such as bookkeeping, tax advice, or financial reporting. The complexity of your business also plays a role in determining the cost of hiring an accountant.

Do I need a CPA or can any accountant help me with my small business accounting?

While any accountant can assist with basic bookkeeping and financial reporting, a Certified Public Accountant (CPA) has more advanced training and can provide a wider range of services, including tax planning and preparation.

How much does a CPA cost compared to a regular accountant?

CPAs generally charge more per hour than non-certified accountants due to their advanced training and credentials. The exact cost will depend on your location and the specific services you require.

How do I know if my small business needs an accountant?

If you are struggling to keep up with your bookkeeping, are unsure about tax laws and regulations, or need assistance with financial planning and forecasting, it may be time to hire an accountant to help run your business.

How much should a small business expect to spend on accounting services per month?

The cost of accounting services for a small business can range from a few hundred to several thousand dollars per month, depending on your business needs, the complexity of your financial situation, and the services required.

How do I find an accountant that fits my small business budget?

Research and compare different accounting firms, ask for recommendations from other business owners, and be upfront with potential accountants about your budget and financial needs.

What type of accounting services do many small businesses need?

Many small businesses need assistance with bookkeeping, financial reporting, tax planning and preparation, and financial forecasting. Some may also need more specialized services, such as audits or business valuation.

Is it worth it to hire an accountant to help with my small business taxes?

Yes, hiring an accountant to help with your small business taxes can certainly be worth the cost. They can help ensure that you are taking all the deductions and credits available to you, and can help you avoid costly mistakes or penalties.

How can hiring an accountant help me grow my small business?

An accountant can provide valuable financial advice and insights that can help you make more informed business decisions, improve your cash flow, and identify opportunities for growth and expansion.

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Michael Schwartz
Michael is the CEO and co-founder of taxomate, one of the leading ecommerce accounting integration software solutions.