If you own a small business, you may be able to use accounting software to manage your own books. This can be a tempting solution considering every penny counts when you’re a small business owner.
However, doing your own accounting can be risky if you aren’t familiar with accounting principles. In fact, accounting mistakes can lead to errors in financial statements and tax returns, which can put you at risk of penalties and fines. Poor accounting practices can also lead to mismanagement of funds and poor decisions, which can hurt your business’s financial health.
As your business grows, accounting and bookkeeping can become very time consuming as well, forcing you to step away from other aspects of your business that require your attention.
To avoid these risks, it may be time to hire a small business accountant.
What Does A Small Business Accountant Do?
A small business accountant manages your accounting and bookkeeping services. A business accountant handles a company’s finances and prepares any
financial reports needed to ensure payments are processed and taxes are paid on time.
Accounting services that a small business accountant may oversee include:
- Cash flow management to ensure your business has financial liquidity when required
- The calculation of financial ratios and specific indicators to help analyze the performance of your company
- Tax preparation to ensure compliance with laws and industry regulations
- Strategic planning that helps plan for your company’s future
Bookkeeping services typically include:
- Maintaining a chart of accounts, which is the base of your accounting platform
- Providing ledger maintenance, including general, expense and assets ledgers
- Reconciling bank accounts, a tool used to double-check your bookkeeping to ensure all of your records agree with one another
- Creating financial reports on a monthly and annual basis
- Overseeing all aspects of accounts payable and receivable, which includes tracking invoices and monitoring payments
A small business accountant may also offer tax preparation, including mid-level business tax preparation. This specialized form of tax preparation can be especially important for self-employed individuals who own their own business since self-employment taxes can be high.
How Much Does A Small Business Accountant Cost?
Before you determine whether partnering with a small business accountant is worth the cost, it’s important to fully understand how much this service will cost you.
How much a small business accountant costs varies substantially and takes into several factors, from the size of your business to the types of bookkeeping services that your business requires.
The average accounting fees for small businesses range from $1,000 to $5,000 per year. However, some small businesses pay more, while others pay less. If you seek out an accountant for a special, one-time service such as having your taxes completed, the average small business pays between $146 and $457, according to Investopedia.
How Does An Accountant’s Cost Compare To Other Options?
Accounting Software
First, let’s take a look at how much small business accounting software costs if you opt to go the DIY route. Accounting software can range dramatically in both price and capabilities.
Some very basic plans are even free, but most lower level plans cost up to $40 per month. These typically let you perform simple tasks like sending invoices, categorizing your income and preparing some basic financial reports. Other options can run up to $450-$1200 per month and may offer additional services like integrating with a third-party payroll service if you have employees.
Starting prices for more comprehensive software programs can run as much as $300 per month per location. These types of programs are more appropriate for businesses that have a different set of needs than an independent contractor, such as point of sale (POS) considerations or food usage reports.
Keep in mind that these costs are only for the software itself. As a business owner, you’ll need to determine what your time is worth as well.
There’s always a learning curve with any new software program, not to mention new features you’ll need as your business grows or updates that will require becoming familiar with any changes to the program. Even once you become proficient in using accounting software, you’ll be responsible for utilizing it. The amount of time this takes out of your schedule will depend on factors like the volume and complexity of your transactions.
In-House Accountant
If your business is growing, you may be considering adding another employee to your team by hiring an in-house accountant.
Salaries for accountants can vary based on location, experience and other factors. However, Glassdoor estimates that the average total pay for an in-house accountant in 2023 is $68,966 per year. That includes an average salary of $51,940 along with $17,026 in cash bonuses, commissions or profit sharing.
However, that salary is not the true cost to your business. In addition to base salary, you’ll need to account for fixed expenses such as training, taxes, health insurance contributions, retirement plan matches, vacation, sick days and more. In fact, the cost of hiring a new employee is really as much as 1.25 to 1.4 times the base salary.
While some companies may prefer to grow their team and hire a new staff member, some small businesses simply can’t afford this additional significant expense.
Is A Small Business Accountant The Solution?
Accounting and bookkeeping can take a significant amount of time, especially as your business grows and requires more services to keep your company financially sound.
While it may be tempting to save some money and purchase accounting software, performing these duties simply may not be sustainable in the long run. As a business owner, you wear many hats, and wearing an accounting hat may simply be one hat too many. After all, there’s only so many hours in the day, and one of the best traits of a successful business owner is knowing when to delegate.
While your other option is to grow your team and hire an in-house accountant, this is a costly expense and may only be attainable for businesses that have enough revenue in place to afford expanding their teams.
A small business accountant may be the right solution that provides the best of both options. Working with a small business account can be significantly less expensive than hiring an in-house employee while providing you with the level of experience you need so that you can focus on running your business.
