How Much Does an Accountant Cost for Small Businesses?

Updated on August 10, 2020
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how much does an accountant cost

As a small business owner looking to save on unneeded costs, you may hesitate to decide if you should hire an accountant. With all of the different business accounting software on the market, you might feel like accounting services are a cost you can definitely avoid. However, even if you’re skilled at using your accounting platform, there could be valuable financial insights that your business is missing out on—that an accountant could provide.

That being said though, how do you actually know whether or not you should hire an accountant for your small business? And perhaps more importantly, how much does an accountant cost? There are a variety of different factors at play here to answer both of those questions. We’ll take you through those factors and how they relate to the average cost of accounting services for small businesses—so that you’ll know when you need a business accountant, how to find one, and what kind of accountant fees you can expect.

Hiring an Accountant: When Does Your Business Need One?

First, let’s consider what your small business can gain from deciding to hire an accountant. A business accountant or 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

Although you might be able to perform some of these tasks yourself, or with the help of your accounting software, there might be valid reasons to turn to an accountant for assistance. Some of the most common reasons are for business taxes and audits. These processes can be complex, time-consuming, and they’re certainly instances where you don’t want to make errors. Choosing to work with an accountant, who is certified and has experience with these processes, can be a life-saver.

Additionally, an accountant can help you, not only with the physical accounting tasks but also with planning and offer sage financial advice for your business. You may not need to hire an accountant all year long, but it’s worth considering working with one when you do need their expertise. Whether you just need an accountant to set up your accounting and bookkeeping software as you get your business started, or you want assistance with yearly business taxes, there are endless reasons (all of them valid) that you would consult with a professional for accounting services. Plus, don’t forget that by outsourcing some of these important responsibilities to an accountant, you open up your time to spend on other parts of managing and growing your business.

How Much Does an Accountant Cost?

Now that we’ve discussed the services an accountant can offer and a few reasons why you might consider hiring one, let’s answer the question—How much does an accountant cost?—and break down what kind of overall costs you can expect and what small business accountant fees look like.

As you might imagine, it’s very difficult to land on a definitive number and say: “this is how much an accountant costs per year for a small business.” The ultimate cost of an accountant is going to depend on a variety of factors, namely, the fees of the individual accountant you hire, the specifics of your business and its needs, and how frequently you require accounting services.

To explain, as with most service-based professions, accountant fees are going to depend on the individual accountant. Most accountants charge their fees on an hourly basis or at a per service rate. This means, then, that your accountant could charge you an hourly rate regardless of the service, or they could charge for a specific task, say for your taxes, at one rate regardless of the time it takes. The exact average for accountant hourly fees is difficult to pinpoint and the number you find may vary based on the source. According to the U.S. Bureau of Labor Statistics, the average accountant hourly fee is about $40.[1] Keep in mind, however, that this number can be higher or lower depending on location, as well as the accountant’s experience.

In general, an accountant with business-specific experience might charge more than a general, everyday personal accountant. CPAs also might have higher fees because of the additional qualifications they went through to become certified. Similarly, an accountant with 20 years’ experience in the field might have higher fees than someone just starting out in their career. Furthermore, fees will more likely be higher if you need access to industry-specific expertise or if you run your business in a big city.

The total cost for accounting services then, as we’ve mentioned, will not only depend on your accountant’s individual fee but also the services your business requires. If your business needs assistance with simple, more routine tasks, the cost is going to be less than if you require help with longer, more complex accounting tasks. Additionally, if you retain an accountant monthly, your yearly cost, as you might expect, is probably going to be more than if you hire an accountant for a one-time project.

Furthermore, it’s important to remember the other costs involved with this process, besides the actual cost of the accountant themselves. You’ll need to invest time in finding and hiring the accountant, getting your books in order, and working with them to get started. If you’re trying to budget accounting services into your business finance plans, you’ll also want to remember to include the cost of any accounting or bookkeeping software you use as well.

how much does an accountant cost

How to Find a Business Accountant

One of the most important ways to make sure that you’re getting the most out of the cost for accounting services is to make sure you find a good accountant and the right one for your business. If you don’t know where to start, asking for referrals from other business professionals you use and trust is a great way to find different accountants to talk to. You can also go to the American Institute of Certified Public Accountants for a directory of CPAs and accounting companies in your area.

If you’re meeting with different business accountants, you might wonder how to know if the accountant is good. To make this determination, you’ll want to be sure that the accountant has prior experience working with small businesses or start-ups. The accountant should be open about how they bill for their services and what specific services they offer. Don’t be afraid to talk to several different people and compare their services and prices. Many accountants offer a free consultation—which is certainly something worth participating in to determine if they’re the right fit for your business.

Should You Hire an Accountant? A Cost-Benefit Analysis

If you’re still unsure whether you need to hire an accountant and furthermore, if you can shoulder the cost of small business accounting services, a cost-benefit analysis can help. A cost-benefit analysis is an accounting concept where you list and estimate all the costs of an action, in this case, hiring an accountant. 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, for example, you own an IT consulting firm and handle all the bookkeeping yourself using QuickBooks Online. 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? How much does an accountant cost in this situation?

Before calculating the cost-benefit analysis, you’ll want to 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. As we’ve mentioned, many 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 a Business Accountant

  • The accountant’s wages. Find the average hourly rate for a certified public accountant 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 particular 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 a Business Accountant

  • The monthly amount of time you save giving up on your small business 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 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.

Some costs and benefits are easier to quantify than others; in many cases, you’ll be using estimates or averages. By going through this process, however, you’ll not only have a better sense to answer to the question “How much does an accountant cost,” but you’ll also have an answer that’s specific to your business. Moreover, you’ll have insight into exactly what kind of accounting services you require, how these will affect your average accountant fees and overall costs, and how working with an accountant will (or won’t) benefit your business in the long run.

how much does an accountant cost

Hiring a Business Accountant: The Bottom Line

Deciding to hire an accountant to work with your small business is a big decision. Unfortunately, this decision is not made easier by all of the different factors involved in answering “how much does an accountant cost?” At the end of the day, it’s best to think about your options carefully and weigh the cost-benefits. By thinking about your business specifically—what kind of accounting services you require and how often you need them—you’ll be able to better determine if the cost of an accountant will be meaningful for your small business. If you do decide to work with an accountant, you’ll want to be just as diligent in your process to choose the right one for your business—considering specific fees, services, and experience. Although it might be difficult to make a final decision, the time and hassle you save, in addition to the direct benefits the accountant provides, can certainly outweigh the costs.

Article Sources:

  1. “Occupational Employment Statistics
Rieva Lesonsky
Contributing Writer at Fundera

Rieva Lesonsky

Rieva Lesonsky is a contributing writer for Fundera. 

Rieva has over 30 years of experience covering, consulting and speaking to small businesses owners and entrepreneurs. She covers small business trends, employment, and leadership advice for the Fundera Ledger. She’s the CEO of GrowBiz Media, a media company specializing in small business and entrepreneurship. Before GrowBiz Media, Rieva was the editorial director at Entrepreneur Magazine. 

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