For a new business owner, doing your own finances is not unusual in the beginning. But as your business starts to grow, wherein your financial needs and obligations become more complex, you need to consider hiring an accountant and bookkeeper.

This can be challenging territory for small business owners. Some don’t necessarily know how much bookkeeping and accounting costs because these services are often outsourced or not transparent.

And while it’s completely natural to be unaware of the costs for these services at first, it’s imperative to be proactive in doing your own research once your business gets going.

Be diligent in finding and comparing bookkeeping and accounting prices online. Study the pricing models and the value of experience you’re paying for. The cost of these services will also depend on your business’ size, industry, and bookkeeping and accounting methods.

Finding the right accountant and bookkeeper (and paying exactly the right amount, no more and no less) ensures efficient financial processes. It also boosts your productivity because it allows you to focus on other aspects of business development.

Being knowledgeable about how much accountants and bookkeepers charge will help you better budget your finances in the long run.

What’s the difference between accounting and bookkeeping?

Before diving into the service fees of accountants and bookkeepers, it’s essential to understand the distinction between the two. To an inexperienced entrepreneur, accounting and bookkeeping seem one and the same. But they’re actually different but equally important financial processes that play vital roles in a business.

Bookkeeping in a small business

Bookkeepers are in charge of recording and organising daily business transactions. They collect documentation (e.g. receipt, invoice, purchase order, etc) for those transactions and then file them in the business accounting journal.

They also ensure that your business’ internal and external transactions (e.g. overhead bills, payment collections, etc) are managed properly and on time.

Here are some of the things a bookkeeper tracks:

• Assets
• Liabilities
• Expenses
• Revenue
• Net income
• Equity

Accounting in a small business

If bookkeepers record all your financial documents and transactions, accountants analyse all that collated data. After reviewing your documents, an accountant will prepare a detailed financial statement reporting your business’ growth and progress.

An accountant can create more accurate and realistic forecasts and projections, which allows a business owner to make informed and strategic decisions. This is one of the many reasons the majority of business owners consider their accountant to be a trusted advisor.

It’s important to note that while accountants can also do bookkeeping, bookkeepers need more formal training or education to become certified accountants.

What should accounting cost you?

Your initial search for different accountants will definitely come up with different price points. Remember that there are a lot of things to consider before you hire an accountant.

The overall costs will depend on internal and external factors. Internal ones include the specifics of your business, its financial needs, and how frequently you will need accounting services. This will identify the specific financial tasks that your accountant will be in charge of.

External factors include the accountant’s level of experience, the location they’re based in, and their pricing model.

Veteran and well-known accountants will have higher fees because of their invaluable experience and added skills, though immediate-level accountants may be more accessible to small businesses with a limited budget.

Rates will also vary depending on where your potential accountant lives, and how they charge their fees. The most common pricing models are either the hourly rate or the per service rate. The former means that an accountant can charge you on an hourly basis regardless of the service, while the latter indicates they will charge you for a specific service, regardless of the time it takes to complete the task.

Take note of their skills and credentials. Here are some of the things you should look for when choosing an accountant:

• Financial and analytical skills. They need to be able to analyse and interpret figures and data. An accountant should also be detail-oriented and accurate with numbers since they’re reading tons of information at a time.
• Communication and interpersonal skills. A good accountant should be able to communicate complex mathematical or numerical ideas in a clear way via email, phone, or even face-to-face discussions.
• Information technology skills. Savvy accountants are adaptable to the current digital landscape, and they should be knowledgeable about financial-related software systems and programs.
• Organisational and business skills. Because an accountant handles different documents, they need to be able to understand business operations and processes.
• Accreditation from higher education institutions. Well-rounded accountants will expand their typical accounting competencies to other essential skills such as business management, customer service, orientation, and even leadership abilities.

The industry is moving away from an hourly based pricing model, but historically the average hourly rate is about $300. Make sure to look for an accountant who charges a fixed price, rather than an hourly rate (you shouldn’t reward them for being inefficient)

What should you charge for bookkeeping?

Like accountants, each bookkeeper will have different fees depending on internal and external factors.

When you identify the level of complexity of your business’ financial processes, you can establish the type of bookkeeping services you need.

Basic bookkeeping is ideal for new small businesses and it includes services such as financial compliance, accounts payable and receivable, and recording and filing transactions.

Meanwhile, growing businesses may need the full service bookkeeping, wherein there is a high volume of transactions and documents to be recorded, filed, and organised. This will also indicate whether your business needs a part-time bookkeeper or a full-time bookkeeper.

Some of the tasks a full-time bookkeeper does include:

• Managing the payroll
• Handling deposits
• Maintaining monthly financial statements
• Managing taxes
• Assisting in the creation of the budget and business plan

Similarly to accountants, bookkeeper fees are dependent on their level of experience, location, and preferred pricing model (which is typically either hourly or per service as well).

Here are some of the skills and credentials you need to look out for in a potential bookkeeper:

• Basic accounting skills. A professional bookkeeper needs to have a fundamental understanding of accounting to maintain the finances of your business. At the very least they should be knowledgeable and skilled about debit and credit, account payable and receivable, and recording transactions.
• Numerical competence. While bookkeepers don’t need to do mental math (since they have calculators, spreadsheet formulas, and software), they should be competent in numeracy to quickly catch errors and inaccuracies.
• Detail-oriented. This is an essential skill for bookkeepers as they handle every single transaction and its corresponding documentation every day. This ensures that every task is handled on time.
• Computer and technology skills. A bookkeeper should be familiar with financial-related software to do their tasks more efficiently. These include spreadsheets, Microsoft Excel, and even accounting software.
• Communication and interpersonal skills.  A bookkeeper also needs to have good oral and written communication skills to relay the status of your books.

Similarly, the bookkeeping industry is moving away from hourly rate pricing to a fixed pricing model. Unfortunately there’s a wide historic price range for bookkeeping because it’s not as heavily regulated as the accounting industry. As a general rule, anything under $60 per hour should be avoided, and you’ll likely pay a little more if your bookkeeper is also an accountant.

How “cheaper” can be more expensive in the long run

It can be enticing to hire a “cheaper” accountant or bookkeeper. But you need to ask yourself this: why are they pricing their services lower than others in the first place?

“Cheaper” services will cost you more in the long run. Bookkeepers and accountants under this category may not accomplish as much or as comprehensively as your business needs.

Because they’re less effective and efficient as other accountants and bookkeepers with competitive fees, it can affect your operations and even your finances.

Make sure that you have a general idea of what services you need from your potential accountant and bookkeeper. If “cheaper” options don’t offer your requested services, or they can’t answer your questions satisfactorily, it’s time to look elsewhere.

Why you should invest in good bookkeepers and accountants

If you want to maintain spotless financial records and efficient financial processes, you need to invest in excellent bookkeepers and accountants.

As a small business, it may seem better to do away with financial professionals because you want to save costs. But hiring a bookkeeper and accountant will ultimately save time and money, especially when you start handling multiple aspects of growing your business.

Having clean records can also help if you want the option of selling a business in the future. Prospective buyers will be more interested in a venture that has credible, well-maintained financial statements.

Hiring an accountant and bookkeeper involves a lot of research on the business owner’s part. You need to be knowledgeable about both financial processes and how they function in a business. You also need to know how much they charge, and what factors affect the prices of different accountants and bookkeepers.

Getting high-quality services is an investment that will greatly benefit your business, so it’s best to think twice about “cheaper” alternatives that won’t even help you achieve your financial goals.

If you need help with finding a top-notch accountant or bookkeeper, get in touch with us.