As a small business owner, you have a lot of costs to consider. One expense you might not have thought about is your accounting program. One of the biggest challenges entrepreneurs face is running a company’s finances. It costs money to record business transactions, but do you know how much?

Your costs and fees will vary depending on how you complete your books. Expenses largely depend on the complexity of your bookkeeping process. The more involved the system, the higher the cost.

Accounting costs and overhead

When looking at the cost of accounting, it’s important to remember that the expenses are overhead. Overhead is necessary to run your business, but it will never convert into cash.

Because accounting does not drive in revenue, you want to keep costs low. That way, more profits go towards your bottom line.

You can keep your accounting costs relatively low for your small business. You need a simple system that takes little time and knowledge. Before committing to an accounting solution, know the overhead costs.

Accounting service costs and fees

There are several expenses involved in hiring a financial professional. The costs depend on who you hire, the services you need, and the time it takes to complete tasks.

Which financial professional do you need?

Not all financial services are the same. Depending on your needs, you will want to hire either a bookkeeper or an accountant. There are several key differences between a bookkeeper vs. accountant.

Bookkeepers use a uniform method to keep track of day-to-day transactions. They record transactions, process payroll, invoice customers, and balance your books. Use a bookkeeper if you need help recording transactions in your books.

Accountants verify data recorded in your books. They make sense of your financial information and look at the big picture. Accountants complete more advanced tasks, like filing business taxes, creating statements, analyzing costs, and giving advice. They can play an instrumental part in developing a successful business plan for your small business. Use an accountant if you need help understanding your financial activities.

How do financial professionals charge you?

Bookkeepers and accountants can charge you in a couple of ways, including per hour or project. They might also require you to pay a monthly retainer. Bookkeeper rates are usually lower because the tasks they complete are less involved.

How much you pay for accounting services depends on the amount of work you need to be completed. The more services you add and the harder the tasks become, the more you pay.

Experience also plays a part in your bill. An experienced accountant might charge more per hour, but they will get the job done faster. Looking at the cost per hour alone might not be the best deal.

Get a quote before signing on with an accountant. Compare fees between several services. Check your budget to see if the accountant is affordable and offers the services you need.

Things to keep in mind

By using an accounting service, you give up most of the control over your financial records. You must trust the person you hire to correctly track your finances and steer you in the right direction. If you do not maintain communication with your accountant, you won’t know about your business’s financial health.

A full-time bookkeeper might be more than you need for your small business. The number of tasks you need to be completed and the level of difficulty might not require full-time help. Instead, have an accountant look at your records quarterly or yearly.

You can reduce accounting costs by doing some bookkeeping tasks on your own. You can record transactions and process payroll using online software solutions. You enter amounts into the program, and the software computes totals and generates reports. Then, you can take the information to an accountant to help you with tax filing and financial planning.

Accounting software

Many small business owners use a basic accounting software program to do their books. Accounting software solutions range widely in features and costs.

What kind of software do you need?

There are two different types of software you can choose from: desktop and online.

Desktop software is installed directly on your computer. You can only use the program from the device you install it on. If your computer crashes, it’s possible that you will lose your accounting information.

Online software stores your information in the cloud. That means you can access the online accounting solution from anywhere with an internet connection. If your computer crashes, you don’t need to worry about losing your data. Business usage of cloud services, like accounting software, are becoming more and more popular due to their cost effectiveness and adaptability.

How do software companies charge?

Software companies have different ways of charging users. Some services offer multiple package sizes with corresponding monthly fees. There could also be a standard cost with extra fees for add-on services. Sometimes, software companies charge you based on the number of invoices you create.

The cost of accounting software often depends on the number of features you have access to. Usually, the more features you add, the higher the cost. Find out about additional or hidden fees before choosing software. These costs could include set up, use of customer service, and cloud storage.

Sometimes, you need to sign a contract in order to use the software. If there is a contract involved, find out the length. You might have to pay a fee to break the contract.

Look for software companies that offer free trials and demos. You can use these to understand what you’re getting before committing to a program.

Things to keep in mind

Be sure you need the features included in the software. You don’t want to pay too much for functions you don’t use. Also, look for a program that can grow with your company and allows you to add features when necessary.

Find out the level of accounting knowledge required to use the software. Some accounting solutions are more difficult to use than others. You might need an understanding of basic accounting. Know the time commitment involved in learning the software.

To choose the right accounting software, make a list of all the features you are looking for. Start with the features you absolutely need to run your business. For example, you might need to be able to create and track invoices. Then, write down the features you might not need but would like to have. This will help you narrow down your choices.

Small business accounting costs your company should expect

The cost of accounting is unique to every small business owner. There is no one answer to how much you should expect to be spending on your accounting program. But, there is data that reveals the average dollars spent on accounting fees and costs.

In 2015, SCORE, a small business nonprofit organization, compiled statistics on small business accounting costs. The information shows that most small business owners spend at least $1,000 per year on administrative accounting costs, internal expenses, and legal fees.

This is how much small business owners spend on accounting:

  • 23% spend $1,000 or less
  • 31% spend $1,000 to $5,000
  • 18% spend $5,000 to $10,000
  • 12% spend $10,000 to $20,000
  • 16% spend $20,000 or more

The most common amount for small business owners to spend is between $1,000 and $5,000. If you’re a new business owner, make sure you include accounting costs in your budget. And if you own an established business, see how your accounting costs fit into the data.


Author Bio: Amanda Cameron is a content writer for Patriot Software, LLC, a provider of online accounting and payroll software. At Patriot, she writes about payroll, small business accounting, the recruiting process, and other small business topics.

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