How Much Does an Accountant Cost?
Keeping track of your cash flow and budgeting as a small business owner is vital. Not only is accurate record-keeping important when it comes to filing taxes with the IRS but you also need to ensure that your business expenses are covered and business needs are met.
However, bookkeeping and accounting tasks can be time-consuming. Because of this, some people consider hiring a small business accountant to handle their finances. In choosing to do so, however, you must weigh your business's needs against the costs and benefits.
The cost of an accountant largely depends on what type of accounting services you'll need and can vary widely. This article will cover the costs associated with hiring an accountant and the pros and cons of this small business service.
Types of Accounting Service Professionals
First, it's worth noting that accounting services fall into different categories. Each category has a slightly different title and a slightly different job description, although there is overlap. Understanding the differences between each can help you narrow down which might be best for the types of accounting tasks you need performed.
Bookkeeping requires fewer skills than regular accounting. Its primary focus is on the day-to-day record-keeping of all financial transactions. While no analysis or specialized training is involved, bookkeepers still need to be detail-oriented and accurate in their work.
If your business is a sole proprietorship, this might be a task you're willing to take on yourself or with the help of accounting software like Skynova to simplify the process.
The next step above the bookkeeper is an accountant, which requires more specialized skills. Accountants may or may not perform similar duties as a bookkeeper, but their primary focus is on creating financial statements, ensuring regulations are met, and providing actionable insights into your business's financial situation.
Certified Public Accountants (CPAs)
A certified public accountant (CPA) is a more highly trained accountant. All CPAs are accountants and can carry out the same tasks described above; however, not all accountants are CPAs. To have the title of CPA, the accountant must pass the Uniform CPA Examination in addition to meeting other requirements for education (bachelor's degree) and experience.
How Much Does an Accountant Cost per Hour?
Many factors affect how much an accountant might cost per hour. These factors include the type of accounting services needed, the experience of the accountant, the type of industry, your company size, and your location. There is no exact answer to how much accountants charge per hour, but it's possible to get a general idea of pricing.
Because bookkeeping requires fewer skills, hiring a bookkeeper will likely be less expensive than hiring an accountant or a CPA. The average cost for bookkeeping services is typically $30 to $50 per hour. Note that this is different than the typical hourly rate you might pay a full-time employee doing bookkeeping services for you because when you hire someone externally, they have to cover other expenses and overhead on their end.
The cost of accounting services is typically higher than the cost of bookkeeping and may range from $150 to $400 an hour, with CPAs on the higher end of the accounting fees spectrum and non-CPA accountants on the lower end.
Depending on your business structure, you may not require the specialization of an accountant or CPA or you may only need one in the short term or during certain times of the year for tax services. When shopping for an accountant, ask for their fees upfront so you can compare prices.
Pros and Cons of Using Outside Accounting Services for Your Small Business
Small business owners and freelancers must weigh the pros and cons of paying for accounting services carefully. If your budget is tight, you might be more inclined to take on the tasks yourself. It's worth keeping in mind that a good accountant can end up saving you money in the long run if they can identify beneficial changes or tax breaks you were unaware of.
Pros of hiring an accountant include:
- Help during tax time: Many businesses find that they don't necessarily need a full-time accountant; rather, they like to have a tax accountant when it comes time to file their tax returns. Business taxes can be cumbersome and difficult to manage. An experienced accountant will be familiar with the process and can eliminate the headache in addition to finding deductions you may have missed — which can result in the accountant's fee essentially paying for itself.
- An expert when it comes to business finances: When you pay an accountant, especially a CPA, you aren't just paying them to do something you don't have time for. You're also paying them for expertise that you may not have. Experienced professionals can provide insights and make suggestions that can improve your business's cash flow.
- Decreased liability: It's easy to make mistakes with your finances, especially when it comes to taxes. By leaving it to a professional, you can avoid potential problems and legal fees.
- Time savings: If you take on accounting, it will eat into the time you might spend on other business activities. In fact, because you are likely less experienced than a professional, the time you spend on getting your finances in order will be more than the time it takes for the professional to do their job.
Cons of hiring an accountant include:
- Can be expensive: Anytime you outsource duties associated with your business, it will cost money. Accountants can be expensive. If your business is relatively simple and small, it may not be the case that the peace of mind and additional insights an accountant might provide will be worth the expense. If you're unsure, you might see if any accountants in your area provide free consultations so you can better decide.
- Disconnected from the business: Hiring outside your business requires you to bring the external contractor up to speed. If you can handle these tasks in-house, less time and effort is needed to devote to this and there is less possibility of misunderstanding.
- Missed learning opportunity: Some small business owners see value in doing their own accounting and tax filings. It can provide an opportunity to understand business financials on a more fundamental level and lead to better business decision-making.
If you decide you want to hire an accountant, be sure to shop around. Ask for referrals and look up online reviews to avoid problems down the road. Don't be afraid to ask prospective accountants for references from clients in the same industry as you. If you are seeking a CPA, check your state registry to ensure any prospective accountants are certified.
Keep Track of Your Business Finances Using Skynova's Accounting Software
Particularly for sole proprietorships, freelancers, or very small businesses, hiring a professional might be out of budget and unnecessary. This is where a smaller investment in quality software can make a big difference.
There's help for tracking your financial information throughout the year with Skynova's accounting software. This software includes all-in-one invoicing and is made for small businesses. You can get started keeping accurate records of income, expenses, sales tax, and payments in just seconds. Best of all, you can try it for free with no commitment for 21 days.
Skynova's accounting software goes beyond standard bookkeeping functions by providing space for year-end adjustment entries and the ability to run financial reports, including income statements, balance sheets, and more, allowing you to make better-informed business decisions. Check out how our software products and business templates can make bookkeeping even easier.
Notice to the Reader
The content within this article is meant to be used as general guidelines on accountant costs and may not apply to your specific situation. Always do your research before consulting with a professional accountant.