When you run a small business, avoiding unnecessary spending is often crucial to protecting your bottom line. This means you don’t want to spend money on services that you could DIY—especially if going the DIY route would be more cost-effective.
When it comes to small business accounting, however, it sometimes makes sense for businesses to pay a professional. But in today’s landscape, many small business owners find themselves feeling uncertain as to whether they need an accountant and, if so, how much it will cost.
Ultimately, the cost of an accountant for small business can vary greatly based on the specific services provided, complexity, and other factors. Below, we’re breaking down typical pricing, the factors that affect it, and tips for deciding whether paying for an accountant is right for your business.
How much should a small business pay for an accountant?
The US accounting services industry is highly lucrative, worth $145.5 billion. But there’s no one-size-fits-all answer to the question, “how much does an accountant cost for a small business?” That’s because how much an accountant charges will depend on things like the size of your business, your location, and the exact accountancy services being offered.
Still, there are some typical averages that you can expect as you shop around for small business accountants:
- Hourly costs – $100-300+
- Monthly bookkeeping – $300-$2,500+
- Tax preparation – $500-2,000+
- Payroll services – $20-$100 per employee/month
With these ranges in mind, it’s worth noting that smaller and simpler businesses will typically fall on the lower end of the cost spectrum—whereas more complex businesses (with more employees, inventory, and/or multiple revenue streams) will pay more.
What affects the cost of an accountant?
In reviewing average accountant costs for small business, you’ll notice that these expenses can range greatly. That’s because there are so many factors that go into these costs, ranging from the business size and services needed to location, experience, and specialization.
Type of services needed
Some businesses may only need an accountant for basic bookkeeping purposes, whereas others may need full financial management (which will inherently cost more). On the other hand, some small businesses may only bring in an accountant once per year to assist with tax planning.
Business size and complexity
Generally, the larger and more complex the business, the more accountancy services will cost. That’s because larger businesses tend to involve more transactions, more employees, and more revenue streams that lead to an increased workload for accountants.
Location
The location of your business can also impact how much you pay for accounting services. In major cities with a higher cost of living, for example, you might expect to pay more for a small business accountant than in a smaller city with a lower cost of living.
Experience and specialization
Even with all other factors being equal, some accountants simply charge more for their services because they have more experience, specialization, education, and/or training. This higher cost may come with greater strategic guidance, which may be worth it for businesses that need additional help planning for the future or strategizing growth.
Common accounting services and their costs
Below, you’ll find a breakdown of common services offered by small business accountants, as well as a range of their typical costs.
Bookkeeping
Bookkeeping services involve tracking small business income, expenses, and transactions—typically on a monthly basis.
Usual cost: $300-$2,500 per month.
Tax preparation and filing
Many small businesses rely on an accountant to help them understand how to prepare for tax season and submit tax returns each year. An experienced accountant may be able to help businesses find and take advantage of tax credits, deductions, and other advantages that could lower their total tax responsibility and save them money.
Usual cost: $500-$2,000+.
Payroll services
This is a common service offered by accountants that involves managing employee wages, taxes (including withholding), and reporting.
Usual cost: $20–$100 per employee/month.
Financial reporting and advisory
Small businesses are required to maintain detailed reports of their financial records, transactions, and expenses—all of which can be critical for assessing the financial health of the business and making informed decisions moving forward. Often, these services are billed at a flat hourly rate by accountants (or included in higher-tier services).
Usual cost: For accountants that bill hourly, $100-$300 per hour.
Is it worth getting an accountant for a small business?
Not sure whether the cost of an accountant is justified when starting a small business? There are a few things worth keeping in mind as you decide.
When an accountant is worth it
In general, the value of an accountant tends to increase as your business scales, so paying for a professional accountant could be worth it if your business is reaching a time of rapid growth and expansion. During this time, your business finances may become increasingly complex—and you simply may not have a lot of free time to manage your accounting needs because you have other important duties to focus on.
A professional accountant can not only free up your valuable time, but can provide your business with guidance on important decisions.
When you might not need one yet
On the other hand, the cost of hiring an accountant may not be justified for all small businesses. If you currently have a small business with a simple business structure and low transaction volume, it may be just as easy (and more cost-effective) to use accounting software than to hire a professional. Often times, small businesses will start out relying on a quality accounting software platform and only transition to using a professional accountant as they grow and scale.
Accounting software vs. hiring an accountant
For businesses with a simple, non-complex structure, using accounting software can be a cost-effective alternative to hiring a professional accountant. However, there are some things to keep in mind before you decide on software versus an accountant for your small business.
What accounting software can handle
Accounting software has come a long way over the years and can now handle more complexity than ever before. Some examples of the kinds of accounting tasks and services that most platforms can handle include:
- Tracking income and expenses
- Invoicing
- Basic reporting
- Some tax preparation support
Of course, it’s important to understand that accounting software capabilities can vary greatly—and not all services may be included with all software plans/subscriptions.
Where software falls short
Despite their capabilities, however, accounting software can’t do everything a professional accountant can. For example, software typically cannot provide personalized financial guidance to small businesses—and its ability to offer strategic advice is limited.
Meanwhile, getting accustomed to using accounting software can require a major investment of time, money, and resources. Employees will need to learn how to use the software in order to get the most out of its features, and implementing a new program can pose its own challenges.
When to use both
In some cases, it may actually make sense for a small business to use both a professional accountant and accounting software for the best results. In doing so, businesses can complete basic accounting services (like payroll and bookkeeping) in a way that’s more cost-effective. At the same time, these businesses can rely on professional accountants for more strategic guidance and personalized financial advice.
How to reduce accounting costs
Small business owners looking for a way to reduce their accounting costs can keep some basic tips and best practices in mind. In doing so, they can help their accounting budgets stretch farther without sacrificing the quality of small business accounting services.
Keep your records organized
One of the best ways to cut down on business accounting costs is to simply keep financial records as organized as possible. When employees are in the habit of carefully documenting all spending and expenses, this reduces the amount of time accountants need to spend compiling information to do their jobs. This, in turn, can cut down on costs—especially for accounting services that are billed hourly.
Use accounting software
For some accounting tasks that can be automated (like payroll and bookkeeping), using a basic accounting software will be much more cost-effective than paying a professional accountant for the same services. By automating basic tasks and reducing manual work, businesses can cut down on their accounting costs significantly.
Only pay for what you need
Finally, small business owners should regularly review their needs to ensure they’re only paying for the accounting services that they’re actually using. At the end of the day, not all businesses need full-service accounting; some may be able to save money by choosing a-la-carte services or paying once a year for things like tax preparation and auditing.
Preparing your business before hiring an accountant
Working with an accountant or even managing your own small business accounting is easier when your business is properly set up and organized from the beginning. Disorganized finances, on the other hand, can increase costs, create confusion, and make it harder for your business to maintain accurate records.
Before you dive into your business accounting needs, then, make sure you have set your business up for success by:
- Choosing a business structure (such as an LLC or corporation) that suits your needs.
- Obtaining an Employee Identification Number (EIN).
- Opening a dedicated business bank account.
- Keeping financial records, invoices, and documents organized.
By taking these steps, you can reduce the amount of time a small business accountant will need to organize your finances while making it easier to track income and expenses consistently.
At Tailor Brands, our knowledgeable and friendly team specializes in helping business owners form and establish their businesses, manage essential documents and compliance, and track day-to-day finances—all in one place. While our services may not be a replacement for a professional accountant, we can help your business streamline its financial organization to help you get the most out of your accounting software or professional accounting services.
Conclusion
As you can see, the cost to hire an accountant for your small business can vary based on where you’re located and the specific services you need. Many small businesses start by DIYing their own accounting or using software, but in most cases, it will make sense to hire a professional at some point. The right choice for your business ultimately depends on the complexity of your setup and your specific needs—but understanding the typical costs involved can help you make a more informed decision.
Looking for additional guidance in setting up and structuring your business for success? Tailor Brands is here to help with plans to suit your growing business needs. Get in touch by calling (332) 286-2770 today to learn more about how we can streamline and support your financial organization!