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Costs of hiring an accountant: Accountant’s wages ($28/hr national average); Time interacting with accountant; Any new software; Opportunity cost of wages.
Benefits of hiring an accountant: Time saved on avoided bookkeeping; Potential growth from time saved; Potential gains from accountant’s advice; Avoiding fines from tax filing mistakes.
With limited resources, small business owners often seek to make the most of every penny often by deciding not to hire an accountant. With software solutions such as QuickBooks or Xero that make bookkeeping easier than ever, hiring an accountant might seem like an avoidable luxury.
But even if you’re adept at using accounting software, you could be selling your business short of valuable financial insights by deciding to not hire an accountant.
So how do you know whether or not you should hire an accountant?
Although there are a lot of factors that go into whether or not you should hire an accountant, the most pertinent to small businesses will be how much an accountant costs.
So, how much does an accountant cost for a small business? And are the services accountants offer worth the investment hiring an accountant requires?
These are two questions we’ll attack head-on by providing a cost-benefit analysis to help you decide whether or not to hire an accountant for your small business:
First, let’s consider what the decision to hire an accountant really means for your business.
There’s an important thing to note: While bookkeeping involves maintaining financial records, accounting encompasses much more.
A certified public accountant (CPA) can provide a wide range of services, including:
Make sure you’re familiar with all that an accountant can do for your business before you write hiring an accountant off because of the costs.
Of all of this expertise, one of the main benefits of deciding to hire an accountant is the time you’ll be able to access. Not having to settle up your business’s budget will mean more time to innovate and grow, so don’t forget to include that in the benefits of hiring an accountant for your small business.
However, hiring an accountant can also be a substantial financial investment. The average hourly rate for a CPA is $28, but that could easily spike if you need access to industry-specific expertise or if you run your business in a big city.
Not to mention, you won’t completely rid of your books even if you decide to hire an accountant: You’ll still need to invest some time in interacting with a newly hired accountant, and you’ll need to dedicate time to get your books in order.
Plus, as with any investment you make, hiring an accountant means you’re not investing that money elsewhere. As such, you’ll need to incorporate that opportunity cost into the mix.
Finally, if you hire an accountant, they might request that you invest in certain software or technology, so be sure to keep these costs in mind when trying to decide which accountant to hire—or whether or not to hire one in the first place.
In a cost-benefit analysis, you list and estimate all the costs of an action. You’ll also list all the benefits of that action, assign a dollar value to each, add up the two columns, and subtract one from the other to determine whether the action is financially feasible. Generally, you assign a time frame to the costs and benefits—in this case, a three-year period might be reasonable.
Suppose you own an IT consulting firm and handle all the bookkeeping yourself using QuickBooks. You’re so busy that bookkeeping falls to the back burner. As a result, you’re late getting invoices out and cash flow is suffering. Should you hire an accountant?
Before calculating the cost-benefit analysis of hiring an accountant, gather some information.
Think through all of the possible costs and benefits, not just the short-term or obvious ones. Here are some you might itemize:
Some costs and benefits are easier to quantify than others; in many cases, you’ll be using estimates or averages. However, by thinking through the costs and benefits in financial terms, you’ll be better able to assess the real value of hiring an accountant. As with any business financial decision, deciding whether or not to hire an accountant for your small business should be weighed carefully. Though this cost-benefit analysis of getting an accountant for your business will be based on approximations, it will help you think hard about whether or not hiring an accountant is the right move for your business.