When you run a small business, you probably want to be involved in every aspect, even the parts that aren’t your strong suit. For many small business owners, that’s accounting. It’s the part of business you have to do, not the part you want to do.
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If you’re thinking about outsourcing your monthly accounting, your next big question is probably, “How much is this going to cost?”
The answer, of course, is “it depends.” But we can dive into the details together.
Knowing what services you need and how much you’re going to pay for them will help you pick the right accounting partner. Pricing your needs may seem complicated, but understanding the basics will make it much easier.
By the end of this article, you’ll know which services best suit your small business needs and how much you’re going to pay for them, whether it’s with us or a different firm.
What Are The Average Monthly Costs For Small Business Accounting?
Outsourced accounting firms prioritize giving you good financial insight on a routine basis and preventing tax surprises at year-end. They price their services based on financial volume, complexity, and your employees. Once these items are reviewed, a monthly fee is determined that covers all services.
A good rule of thumb is that your accounting and finance expenses should be 1-4% of your annual revenue.
Average Cost of Monthly Outsourced Accounting
Because the cost of outsourced accounting services can vary significantly based on the scope and complexity of the services provided, here's a look at the average monthly costs you might expect:
For small businesses with straightforward accounting needs, costs typically start at around $500 to $1,000 per month. This includes basic bookkeeping, monthly financial statements, and simple tax filings. Businesses in this category usually have annual revenues up to $500,000.
On average, most small businesses fall within the $1,000 to $2,500 per month range. This covers more comprehensive accounting services, including detailed financial reporting, payroll management, tax preparation, and strategic financial advice. Businesses in this range often have more complex transactions and require regular financial oversight to ensure accuracy and compliance.
For businesses with extensive accounting needs, costs can be higher, ranging from $2,500 to $5,000 per month. This includes multi-location operations, complex tax situations, or those requiring frequent financial analysis and strategic planning. These businesses need robust financial management, frequent reporting, and strategic advice to support growth and operational efficiency.
What Determines the Price of Accounting Services?
The cost of outsourced accounting services can vary widely based on several factors, including the complexity of your business, the volume of transactions, and your specific service needs.
1. Complexity With an Outsourced Accounting Firm
Your business structure is important because it dictates the different tax filings you need. Generally, your monthly fee covers these tax filings if they are applicable to your business structure.
Common tax filings include:
- Federal and state income tax returns
- Sales tax
- Local business returns
- Tangible personal property tax returns
- Franchise and excise taxes
- Industry-specific taxes (like liquor tax, tobacco tax, wheel tax)
- Renewal of annual business licenses
Tax structure will always dictate what filings an accountant needs to take care of for your business.
For example, if you are a multi-unit restaurant owner with three different locations and three different business entities, all those taxes will be filed for each entity. Understanding your entity structure helps arrive at an accurate monthly fee you can budget for.
2. Financial Volume
You have a lot coming in and out of your business bank accounts, and a key component of monthly accounting is the reconciliation of your bank accounts, credit cards, and loans on your business.
To provide you with a weekly snapshot of your key performance indicators and monthly financials (profit and loss statement, balance sheet, budget, key metrics), all expenses and sales need to be accounted for accurately.
An accountant will review your bank statements to see how complex your monthly expenditures are, which helps them arrive at a predictable amount of time that it will take to produce your statements and keep your books up to date.
3. Employee Needs
Many firms require clients to use their payroll service because having streamlined and easily accessible payroll information is crucial for delivering timely financial statements.
Payroll fees start at around $125/month or $10.25 per employee per month (PEPM) for businesses with more than 15 employees.
Firms often ask questions about your payroll process, benefits, and insurance needs to determine the best package for your business. They also consider the complexity of your payroll process, such as pay period frequency, employee types (e.g., full-time, part-time, contractors), and any special payroll needs like garnishments or multiple state tax filings.
Additional Fees and First-Time Investment
To get started, there may be a one-time investment to catch up on current books, review and catch up on taxes, and hold strategic accounting meetings. This typically ranges from 25%-40% of your first year’s annual fee.
Initial Setup and Catch-Up Work
- One-Time Investment: Many clients will need a one-time investment to catch up on their current books, review and catch up on the year’s taxes, and hold strategic accounting meetings.
- Strategic Planning: This involves assessing the last three years of tax returns, reviewing and cleaning up your books, providing new tools to stay organized, and ensuring you get insights into your business to make informed decisions.
What You Get with Outsourced Accounting Services
Outsourcing your accounting is not just about handling financial tasks; it’s about gaining a partner that helps you see the bigger picture and plan for the future. Here are some of the core services you can expect:
1. Bookkeeping
Regular tracking of all financial transactions to maintain accurate financial records.
2. Tax Preparation and Filing
All federal, state, and local taxes are prepared and filed correctly and on time.
3. Payroll Management
Handling all aspects of payroll, from processing paychecks to managing taxes and benefits.
4. Financial Reporting
Providing monthly or quarterly financial statements, including profit and loss statements, balance sheets, and cash flow statements.
5. Strategic Advice
Offering insights and recommendations based on your financial data to help you make informed business decisions.
Benefits of Outsourcing Your Accounting
Outsourcing your accounting can provide numerous benefits, including:
Comprehensive Expertise
Outsourced accounting firms often boast a team of professionals skilled in various financial areas. This diverse knowledge pool ensures that you have access to a wide range of expertise, and you may find a firm that specializes in your industry. This benefit might unlock potential cost savings or tax strategies than a part-time bookkeeper might be unaware of.
Cost Efficiency
Outsourced accounting firms can be a more cost-effective solution, as you only pay for the services you need, without the overhead costs associated with hiring an in-house employee.
Redundancy
Outsourced accounting firms typically have backup personnel in place, ensuring consistent service, even during vacations or employee absences. You are not dependent on one person for any of your financial needs.
Scalability
As your business grows, you can easily scale up services with an outsourced accounting firm, adapting to your evolving financial requirements, or adding services as new things come up.
Consolidation of Partners
With an outsourced accounting firm, you have one primary point of contact handling finance, payroll, taxes, and reporting. This reduced friction in communication and puts the burden of delivering services to you on your team instead of you being the constant middleman for your bookkeeper, payroll company, or CPA.
Think Outsourcing Your Accounting Is Right for Your Small Business?
Understanding the costs associated with outsourced accounting services is crucial for making an informed decision. By considering the complexity of your business, the volume of transactions, and your specific service needs, you can determine the best value for your business.
Outsourcing your accounting can provide you with comprehensive expertise, cost efficiency, and scalability, making it a valuable investment for many small businesses. It allows you to focus on growing your business while ensuring your financial tasks are managed accurately and efficiently.
Now that you have a clearer picture of the general scope and price of outsourced accounting firms, why not explore what Patrick Accounting can offer you? Learn more about our Core, Advanced, or Ultimate packages to find the best fit for your business.
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