Cost of Accountant for Small Business Guide

Cost of Accountant for Small Business Guide
Article by Zarah Ariola
Last Updated: April 27, 2023

If you're running a small business, having an accountant can help you grow your company.

Accountants are trained to help their clients make informed decisions about finances and investments. They also have access to advanced accounting software that keeps track of all the necessary data for running a business.

But, you may have a limited budget, and knowing the cost of an accountant for a small business can help you plan your finances ahead—at least until you hire an accountant to deal with all the planning. 

Before you bring an accountant on board, it’s crucial you understand the types of accounting agency services and pricing models. Only then can you determine which one(s) is right for you and whether it’s worth the cost. 

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Eight Types of Accounting Services

There are numerous types of accounting services that you can hire an accountant for. As a small business, you can make the most use of the following accounting services:

  1. Bookkeeping
  2. Tax Preparation
  3. Financial Statement Preparation
  4. Payroll Services
  5. Auditing
  6. Consulting
  7. Financial Planning
  8. Management Consulting

1. Bookkeeping

Bookkeeping involves keeping track of your business’s financial records and transactions while making sure they're up-to-date. 

As such, it is essential for keeping tabs on the business’s income and expenses and preparing accurate financial statements.

2. Tax Preparation

Tax preparation can be a complex process, and it is important to work with an accountant who is familiar with the tax laws in your jurisdiction.

It implies preparing and filing tax returns for individuals or businesses. 

Accountants that deal with tax preparation are also in charge of filing all the necessary taxes on time, as well as providing any other tax advice needed based on what's in your records.

3. Financial Statement Preparation

Accountants for this service prepare 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.

4. Payroll Services

Any business needs payroll services as it involves preparing and processing payroll for employees. 

Accountants are the best payroll service providers since they know the payroll laws in your jurisdiction.

5. Auditing

Accounts are often hired to perform auditing, i.e., review 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.

6. 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. 

7. Financial Planning 

Businesses hire accountants that have experience in personal finance and corporate accounting to help them plan their finances. 

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. 

8. Management Consulting

Small business management consulting is a type of accounting service that helps businesses improve their operations. 

Management consultants provide advice on a variety of topics, including strategic planning, organizational design, marketing, and human resources. 

The average cost of small business accounting company services greatly depends on the type of accounting service you need. 

You should keep in mind that different accounting pricing models will also affect the overall price.

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Cost of Accountant for Small Business: Accounting Pricing Models 

Accounting firms have many different pricing models and methods.

Some use flat rates, others charge by the hour, and some don't even have a formal fee structure at all.

Usually, accountants charge:

  • Hourly rates: can vary depending on the size of your business, the complexity of your finances, and the location of the accounting firm.  Generally speaking,  the minimum accountant wage falls between $26 and $31, but the rate can vary depending on the factors we’ll explain below. 
  • Retainer fees: a set amount you will pay the accounting firm in advance, regardless of how many hours they work on your behalf, and are typically based on the size and complexity of your business. A small business with fairly 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. 

Although rare, some accountants use the following pricing strategies: 

  • Cost-plus pricing
  • Competition-based pricing
  • Valued-based pricing

There’s no rule set in stone regarding the cost of an accountant for a small business. 

However, this is what the statistics say: 

  • Accounting service rates fall between $60 to $400 per hour 
  • The average yearly salary for an accountant in 2021 was $77,250  
  • Accountants in major cities may charge up to $500 per hour 

Cost of CPA for Small Businesses

Most small businesses don't have a large enough revenue stream to justify hiring a CPA, so the obvious choice is hiring an accountant. 

But, a CPA can prove invaluable in helping you organize your finances and grow your business. 

If you’re thinking of hiring a CPA, these are the average hourly costs of different CPA services, according to National Society of Accountants:

  • Payroll management - $100
  • Federal and state tax return prep - $180
  • Management advisory - $158
  • Financial statement audits - $164
  • Estate or financial planning - $170

Does Your Small Business Need an Accountant or a CPA?

Many small business owners wonder whether they need an accountant or a certified public accountant (CPA). 

Essentially, both professionals 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 they are not required to pass a uniform exam like CPAs are. 

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 on a regular basis. 

The cost of hiring a CPA can vary depending on the size and complexity of your business, but they usually charge more than an accountant. 

However, many small businesses feel the peace of mind, and extra expertise is worth the cost.

Ultimately, you should decide by comparing the cost of an accountant and the cost of a CPA for a small business while taking your budget into account. 

Seven Key Factors That Affect the Cost of Hiring an Accountant or a CPA

The cost of hiring an accountant or a CPA for a small business depends on the following factors:

  1. The Size of the Business
  2. The Industry
  3. The Location
  4. The Number of Transactions
  5. The Type of Accounting Services
  6. The Frequency of Service
  7. The Experience Level of the Accountant

1. The Size of the Business

A small business will typically need fewer accounting services than a large business and will pay less for those services.

2. The Industry

Businesses in industries with complex regulations, or those required to file multiple tax returns, may need to pay more for accounting services.

3. The Location

If your business is situated in a major metropolitan area, your accounting fees will probably be higher than those in smaller cities or towns.

4. The Number of Transactions 

Businesses that have a large number of transactions will need more accounting services than businesses with fewer transactions.

5. The 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.

6. The Frequency of Service

Any company that needs monthly or quarterly accounting services will pay more than a business that only needs annual accounting services.

7. The Experience Level of the Accountant

Upon hiring an accountant with many years of experience, businesses are inclined to pay more than those that hire an accountant 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:

1. Stay 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. Save 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. Make 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. Avoid Frauds

Fraud is a common problem among small businesses. And, 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. Access 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. 

Additionally, because they keep up with changes in tax laws and regulations, accountants can ensure that you are in compliance with all applicable laws.

6. Get 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 marketing and sales. 

Is the Cost of Accountant for Small Business Worth It: Key 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 an accountant who offers services on a monthly or annual retainer basis, so you only pay for the services you need.

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