We are often asked by prospective clients how much does outsourcing their business accounting cost each month? The short answer to this question is: It depends. Company size, number of transactions flowing through your accounts on a monthly basis, the number of employees and overall engagement level, all impact the monthly pricing. Below are a few things you should consider as you evaluate the overall cost of outsourcing your business accounting:
Outsourcing your accounting can save you money in the long run, how? First think about how much an hour of your time is truly worth? If you are unsure consider using this tool from Clearer Thinking in order to determine your hourly rate. Now that you determined your hourly rate, recent studies show that most business owners that handle their own accounting spend approximately 5 to 10 hours a month handling their books. For those entrepreneurs that handle their own Tax Returns, most spend approximately another 3.5 hours per month just to handle their tax compliance. Therefore, if you spend an average of 13 hours per month on Accounting and Tax work for your small business, and your hourly rate is for example $ 110/hr. then you are spending $ 1,430 per month in order to complete these tasks. Compare this estimate when considering the cost of outsourcing your accounting cost, you might be very surprised to find out how cost effective is to outsource this task rather than doing it yourself.
Improved Business Growth:
While outsourcing your accounting can result in significant cost savings, pricing is not the only consideration. According to a study conducted by Accounting Today, 60 percent of small businesses who worked with an accountant grew their profits, versus 49 percent of those who don’t work with an accountant. If you are unsure if you really need to work with an Accountant, our article showcases some of the major benefits of doing so including, the ability to have a trained professional review and help you understand the story behind your business numbers.
Expertise and learning curve:
Why outsource your business accounting when popular software like QuickBooks, Xero, Wave, and FreshBooks can connect to my bank account and automatically record transactions? After all, the software manufacturer often make statements that anyone, without accounting training can manage their own business records. These statements are often misleading at best, there is nothing simple about accounting and taxes, this field if changing continuously as changes to our complex tax code are implemented almost on an annual basis. Most business that handle their own accounting often end up having a huge mess at the end of the year. Often, when new business owners take a DIY approach to their accounting, they end up not recording revenue, miscategorizing expenses, which could spell bad news in the event of an IRS audit. Other times, business owners realize that learning an accounting software like QuickBooks is not as easy as advertised, resulting in a steep learning curve that can lead to costly errors. In our article: Bookkeeping Services for Small Business we discuss how professional offering accounting services to small business clients must have expertise in both accounting and taxation.
Relationships have different pricing structures:
Most accountants cannot provide a simple price on their website to outsource your accounting because each client relationship is unique. Some business owners might only look for a basic accounting engagement, where their accountant is simply keeping their business books in good order and ready for tax preparation. Other business owners look for a more trusted advisory relationship with their accountant, in this case these business clients value an accountant that meets with them on a regular basis to discuss Accounting and Tax challenges and provides ongoing tax reduction advice before the end of the year. Based on these different relationship needs, the monthly pricing for your outsourced accounting will be different.
Therefore, before considering costs, it is important to set up an initial exploratory meeting with the accountant to evaluate your needs, what your working relationship will look like, and your overall goals and objectives. Based on this information the accountant will then provide you with a customized proposal that is unique to your individual situation.