Accounting services include tax preparation, tracking all your spending and gains, audits, etc. Hence, accounting becomes a vital part of every business, especially those just starting out.
However, accounting does require a lot of resources, which is why many small businesses with a limited budget struggle with it.
In our guide, our experts discuss the different types of accounting services, key factors that can influence the cost, and of course, their average costs to help you plan your business finances.
Key Takeaways
- The average accounting services for a small business cost from $100 to $5,000 depending on the services and hired accountant.
- Hiring a CPA is more expensive than hiring an accountant.
- Seven factors influence the cost of accounting services for a small business, including:
- Your business size
- Industry
- Location
- Number of transactions
- Type and frequency of service
- The accountant’s experience level
- Accounting firms usually charge by the hour.
Table of Contents
- 8 Types of Accounting Services
- How Much Is an Accountant for a Small Business?
- CPA vs. Accountant Cost for Small Businesses
- Does Your Small Business Need an Accountant or a CPA?
- 7 Key Factors That Affect the Cost of Hiring an Accountant or a CPA
- Why Do Small Businesses Need Accountants or CPAs?
- Accounting Services for Small Businesses Cost Takeaways
8 Types of Accounting Services
Before you bring an accountant on board, you should first understand the types of accounting agency services. As a small business, you can make the most use of the following accounting services:
- Bookkeeping: It involves keeping track of your business’s financial records and transactions, such as incomes and expenses, making sure they're up to date, and preparing accurate financial statements.
- Tax Preparation: It implies preparing and filing tax returns for your businesses.  Accountants who deal with tax preparation are also in charge of filing all the necessary taxes on time, as well as providing other tax advice needed.
- Financial Statement Preparation: It entails preparing financial statements such as balance sheets, income statements, and cash flow statements. Businesses use these statements to stay on top of their financial performance and make informed decisions about their operations.
- Payroll Services: It involves preparing and processing the payroll for your employees. Accountants are the best payroll service providers since they know the payroll laws in your jurisdiction.
- Auditing: This refers to reviewing a business’s financial statements and records to confirm they are accurate and in compliance with applicable laws and regulations. Audits can be performed annually, quarterly, or as needed.
- Consulting: If your business needs advice on financial planning, investment strategies, or other matters related to accounting and finance, you can hire an accountant to deliver the guidance you require.
- Financial Planning: This type of planning entails ensuring that your business has enough money coming in to cover its expenses, such as operating costs or figuring out how to do payrolls. 
- Management Consulting: Small business management consulting is a type of accounting service that helps businesses improve their operations. It includes advice on various topics, including strategic planning, organizational design, marketing, and human resources.
Note: Remember that the average cost of small business accounting company services greatly depends on the type of accounting service you need. 
How Much Is an Accountant for a Small Business?
The accounting cost for a small business depends on several factors, mainly the accountant the business hires and the services it needs. These services can go from anywhere between $100 - $5,000.
Consider these statistics for a clearer picture:
- Accounting service rates fall between $37 to $400 per hour.
- The average yearly salary for an accountant in 2023 was $79,880. 
- Accountants in major cities may charge up to $500 per hour.
Difference Accountant Pricing Models and Methods
Accounting firms have many different pricing models and methods. Some use flat rates, others charge by the hour, while some don't even have a formal fee structure at all.
Learn more about it below:
Hourly Rates
These vary depending on the size of your business, the complexity of your finances, and the location of the accounting firm. Generally speaking, the minimum accounting services for a small business cost per hour falls between $27 and $33, but the rate can vary depending on several factors. 
Retainer Fees
This is the set amount you will pay the accounting firm in advance, regardless of how many hours they work on your behalf. It’s typically based on the size and complexity of your business. 
A small business with simple finances may only pay a few hundred dollars per month, while a large company with multiple entities may pay several thousand dollars per month. The retainer fee is usually a matter of agreement between the client and the professional. 
Project-based Fees
Pay for the specific services that you need, such as help setting up QuickBooks or preparing your taxes. Project-based fees can range from a few hundred dollars to several thousand dollars, depending on the scope of work. 
Other
Although rare, some accountants also use these pricing strategies: 
- Cost-plus pricing: An additional percent (a markup) to the cost of the service.
- Competition-based pricing: Considers the competition to give you a price matching theirs.
- Value-based pricing: The price is based on the perceived value of the services.
CPA vs. Accountant Cost for Small Businesses
Most small businesses don't have a large enough revenue stream to justify hiring a certified public accountant (CPA), so the obvious choice is hiring an accountant. However, if you do have the resources, a CPA can prove invaluable in helping you organize your finances and grow your business. 
If you’re thinking of hiring a CPA, here are some estimates of the costs of different CPA services:
- Payroll management - $100/month
- Federal and state tax return prep - $180/hour
- Management advisory - $200/hour
- Financial statement audits - $200/hour
- Estate or financial planning - $300/hour
Does Your Small Business Need an Accountant or a CPA?
Essentially, both an accountant and a CPA can perform many of the same services, but there are some key differences between them. 
An accountant typically has a college degree in accounting, but unlike CPAs, they are not required to pass a uniform exam. As a result, CPAs usually have more extensive knowledge of accounting and tax laws. They also must adhere to higher ethical standards and complete continuing education requirements regularly. 
Based on this, the cost of hiring a CPA is usually higher than that of hiring an accountant. However, many small businesses believe the extra expertise a CPA offers is worth the cost for the peace of mind it provides them.
7 Key Factors That Affect the Cost of Hiring an Accountant or a CPA
As we mentioned, the cost of hiring an accountant or a CPA for a small business depends on several factors. Those are the following:
- Size of the business: A small business will typically need fewer accounting services than a large business and will pay less for those services.
- Industry: Businesses in industries with complex regulations or those required to file multiple tax returns, may need to pay more for accounting services.
- Location: If your business is in a major metropolitan area, your accounting fees will likely be higher than those in smaller cities or towns.
- Number of transactions: Businesses that have many transactions will need more accounting services than businesses with fewer transactions.
- Type of accounting services: In case you need specialized services, such as tax preparation or auditing, you may need to pay more than businesses that only need basic bookkeeping and financial statement preparation
- Frequency of service: Any company that needs monthly or quarterly accounting services will pay more than a business that only needs annual accounting services.
- Experience level of the accountant: Hiring an accountant with years of experience means businesses must pay more than those who hire one with less experience. 
Why Do Small Businesses Need Accountants or CPAs?
If you think the cost of an accountant for a small business is too high, consider all the aspects they help with, such as:
- Keeping Financial Records Organized
- Saving Money
- Making Informed Decisions
- Avoiding Frauds
- Providing Invaluable Advice and Expertise
- Ensuring Peace of Mind
1. Keeping Financial Records Organized
Accountants and CPAs help you keep your financial records organized. They maintain accurate records of your income and expenses and stay up to date with your invoices and receipts. 
Having organized financial records is essential for running a successful business, as it allows you to track your progress and make informed decisions about where to allocate your resources. 
2. Saving Money
An accountant or a CPA can help you take advantage of tax deductions and credits that you may be eligible for, which can significantly reduce your taxes. They can also create a budget and establish financial goals, both of which can help you save money in the long run.
3. Making Informed Decisions
Since they have a thorough understanding of financial concepts, accountants and CPAs play a vital role in helping you make informed decisions about your business. For example, suppose you are considering expanding your business or making a major purchase. In that case, an accountant can help you assess the financial feasibility of these decisions and advise you on the best course of action.
4. Avoiding Frauds
Fraud is a common problem among small businesses; an accountant can help you avoid fraud by keeping track of your finances and ensuring that all transactions are properly documented. 
A CPA or an accountant identifies red flags that may indicate fraud, such as suspicious activity in your bank account or discrepancies between your records and those of your vendors.
5. Providing Invaluable Advice and Expertise
When it comes to financial matters, it is always best to seek the advice of an expert. Accountants have the training and experience necessary to provide sound financial advice that can help you make the best decisions for your business. 
Also, since they keep up with changes in tax laws and regulations, accountants can ensure you comply with all applicable laws.
6. Ensuring Peace of Mind
Knowing that someone else is taking care of your finances delivers peace of mind and can reduce stress, allowing you to enjoy running your business. This frees up your time so you can focus on other aspects, such as sales and advertising your business via the newest marketing trends. 
Accounting Services for Small Businesses Cost Takeaways
If you're a small business owner, you may be wondering if it's worth it to hire an accountant. After all, many software programs can handle basic accounting tasks. 
However, an accountant can provide valuable insights into your business finances, help you save money on taxes, and catch errors that could cost you money. Overall, the cost of hiring an accountant is well worth the peace of mind and financial savings they can provide.
If you're concerned about the cost, consider looking for accounting firms that offer services on a monthly or annual retainer basis, so you only pay for the services you need.
