Should You Hire an Accountant? A Cost-Benefit Analysis

Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky

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:

Hiring an Accountant Means Access To…

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:

  • Setting up bookkeeping and accounting systems
  • Maintaining financial records
  • Tax planning advice
  • Preparing and filing your business taxes
  • Generating audited financial statements or auditing your business’s books
  • Providing business advice to help you operate cost-effectively
  • Creating a personal financial plan

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.

The Costs of Hiring an Accountant

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.

Should You Hire an Accountant? A Cost-Benefit Analysis

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.

  1. Determine what services you need. In this case, you probably want everything from bookkeeping to business advice.
  2. Get price quotes from several accountants. Most accountants bill by the hour, but some work on monthly retainers. Also, ask if the accountant uses lower-cost help (such as a bookkeeper) to perform some of the duties; if so, those rates may be lower.
  3. Get an estimate of the hours per month it would take to provide what you need and the total monthly cost.

Think through all of the possible costs and benefits, not just the short-term or obvious ones. Here are some you might itemize:

The Monthly Cost of an Accountant

  • The accountant’s wages. Find the average hourly rate for a CPA in your city and go from there.
  • Cost of your time interacting with the accountant. You’ll still need to provide necessary records, get documentation together, and meet with the accountant occasionally.
  • Cost of any new software required by the accountant. A new accountant might ask that you invest in a given accounting software that they prefer.
  • Opportunity costs. What could you gain by using the same amount of money for something else? Would hiring another IT employee or buying equipment generate a better return?

The Monthly Benefits of an Accountant

  • The monthly amount of time you save giving up bookkeeping. For this benefit, you should multiply the hours you spend on bookkeeping by your hourly pay rate, being sure to include the overhead costs of any benefits.
  • The potential new business you could obtain using that time. Suppose you currently spend 20 hours a month on accounting, and could spend those 20 hours on business development instead. If it takes you an average of 60 hours to land a new client, and your average client accounts for $80,000 of business annually, the dollar benefit of the accountant would be 20 x 12 (or 240) divided by 60, which = 4 new clients. Multiplied by the average account’s fee, that’s 4 x $80,000 or $320,000 annually.
  • Potential financial gains you could make based on the accountant’s retirement planning advice. You can find average rates of return for various types of investments online.
  • Benefits of avoiding costly tax filing mistakes or fines. If you’ve ever had tax problems, you will have some estimate of how much these can cost.

To Hire an Accountant or Not to Hire an Accountant: Final Thoughts

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.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Rieva Lesonsky

Rieva Lesonsky

Contributor at Fundera
Rieva Lesonsky is a small business contributor for Fundera and CEO of GrowBiz Media, a media company. She has spent 30+ years covering, consulting and speaking to small businesses owners and entrepreneurs.
Rieva Lesonsky

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