How Much Do Outsourced Accounting Services Cost?
How Much Do Outsourced Accounting Services Cost?
Managing your finances is crucial to your success in the dynamic world of small business ownership. As your company grows, the complexity of managing your finances also increases. Many companies will hire an outsourced bookkeeping firm or a part-time bookkeeper to stay on top of financial reporting, filing taxes, payroll, and reconciling bank accounts to stay on top of financial insight.
If you’re here, you are likely wondering if an outsourced accounting firm is right for your small business and you want to know how much it’s going to cost you. First, we will explore the merits and drawbacks of both an in-house and outsourced solution, and then we will conclude with helping you understand how pricing works at Patrick Accounting.
Hiring an In-House or Part Time Bookkeeper
- Direct Control: Hiring an in-house part-time bookkeeper allows you to have someone physically present within your organization. This means immediate access to financial data and the ability to address any concerns in real time. It might also mean you can utilize this hire for other administrative needs you may have like answering the phones or scanning documents.
- Customization: You have the flexibility to tailor the responsibilities of your in-house bookkeeper to your specific needs. This personalization can be especially advantageous if your business has unique financial requirements, complex tax needs, or say, job-costing requirements.
- Confidentiality: With an in-house bookkeeper, you can maintain a high level of confidentiality and control over sensitive financial information, reducing the risk of data breaches.
- Familiarity: Over time, your in-house bookkeeper becomes intimately familiar with your business’s financial intricacies, enabling them to provide insights and recommendations that are finely tuned to your situation.
- Limited Expertise: Part-time bookkeepers may lack the breadth of expertise found in an outsourced accounting firm that employs a diverse team with various skill sets. While you may get to customize their role on your team, you will often miss out on tax strategies or best practices that would come with a whole team of experts.
- Cost: Hiring an in-house bookkeeper is expensive compared to your ROI. You have many expenses beyond salary, such as benefits, training, potential office space requirements, and taxes.
- Vacation and Sick Leave: When your in-house bookkeeper takes time off, you may face operational disruptions, and covering their responsibilities can be challenging. Let’s say your bookkeeper goes on maternity leave. If you need financial statements sent to your banker, you may get behind while waiting for your employee to return to work.
Hiring an Outsourced Accounting Firm for Bookkeeping, Payroll, and Taxes:
- 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.
- Lack of Immediate Access: When working with an outsourced accounting firm, you may not have immediate access to your financial data, which can be a drawback if you require real-time insights. You might receive financial on a monthly or weekly basis, and it will be on a routine schedule, usually set by the accounting firm.
- Less Personalization: While an outsourced accounting firm can offer a wide range of services, they may not be as intimately familiar with your business’s unique needs as an in-house bookkeeper, and will likely want to work with a standard chart of accounts. You may have to have several conversations to get meaningful insight out of your financials.
- Loss of Process Control: If you use an outsourced accounting firm, you will not be able to pick and choose the tasks that your firm does for you, as most firms will bucket their scope of services and you won’t be able to deviate from a standard process like you would with an in-house person.
The choice between hiring an in-house part-time bookkeeper and a year-end CPA or partnering with an outsourced accounting firm depends on your business’s unique circumstances and requirements. If you like the idea of a team of experts managing your finances for you for likely a fraction of the cost of an internal bookkeeper, our services could be perfect for you!
Pricing at Patrick Accounting
Let’s dive into our costs so you have a clear idea of how everything works. At Patrick Accounting, we have two big priorities for all our clients. We want to give you good financial insight on a routine basis so you can make good business decisions AND we don’t want you to have any tax surprises at year-end. Put simply, we exist to help you make more money (profitability) and help you keep more of it (tax planning & strategy. We are able to deliver on these promises by providing you with a clean set of accounting books that you can rely on monthly and that we can build your tax return on.
We price our services based on financial volume, complexity, and your employees. Once we review these items, we will arrive at a monthly fee that covers ALL our services to you. You do not sign up for a long-term contract, so if you’re unhappy with services, you can cancel at any time. As a good rule of thumb, your accounting and finance expense should be 1-4% of your annual revenue, so most businesses that are doing more than $500,000 in annual revenue will find our core package starting at $750/month to be a huge value to them. Let’s talk about how we get to $750/month.
Let’s start with complexity.
Complexity With an Outsourced Accounting Firm:
Your business structure is important to us because how you are structured dictates all the different tax filings you have. Generally, our fee covers completing these taxes:
- federal and state income tax return
- sales tax (if applicable)
- your local business returns (if applicable)
- tangible personal property tax return
- franchise and excise taxes
- industry-specific taxes (like liquor tax, tobacco tax, wheel tax, etc.)
- renewal of annual business licenses
So, if you are a multi-unit restaurant owner with three different locations and three different business entities, then we will file all those taxes above for all three entities. This type of complexity is important for us to understand because we charge you one monthly fee for everything you need. So understanding your entity structure and what types of businesses you have helps us get to an accurate number that you can budget on. If we start out thinking you have one entity, and later find out you actually have three, and ask to charge you more, you will get frustrated in that process. That’s why we try to learn about the types of businesses you have and their structure. Tax Structure will always dictate what filings we need to take care of for you.
Financial Volume With an Outsourced Accounting Firm
You have a lot coming in and out of your business bank accounts, and key component of monthly accounting is the reconciliation of your bank accounts, credit cards, and loans on your business. In order to provide you with a weekly snapshot of your key performance indicators and monthly financials (profit and loss statement, balance sheet, budget, key metrics) we have to account for all of those expenses and your sales accurately. We want to review your bank statements to see how complex your monthly expenditures are, which help us arrive at a predictable amount of time that it will take to produce your statements and keep your books up to date.
Employee Needs with an Outsourced Accounting Firm
Last, we will review your employees and your employee needs. We do not work with clients if we aren’t able to take care of their payroll as this is a very important part of your financial statement. It’s mission critical for us to have this information in a streamlined, easy-to-access way for all our clients so that we can deliver financials on time. Because of this, we require our clients to utilize our payroll service so that we can deliver effective service to you. Our payroll fee starts at a fixed rate of $125/month or $10.25/per-employee-per-month when you have more than 15 employees. We will ask a lot of questions about your employees – from payroll process complications, benefit and insurance needs, to determine which package fits your business best. To view a complete list of our payroll pricing and payroll add-ons, explore pricing here.
Once we have reviewed all these specific areas of your business, we can arrive at a fixed monthly fee for your accounting, tax, and payroll needs. We have three unique packages that start with our core service at $750/month. This core package includes everything I’ve mentioned from your monthly bookkeeping and financial packet, to payroll, to federal taxes.
We offer two more additional packages which include outsourced accounts payable (a/p) and a package designed to update your books weekly and deliver a weekly snapshot of your business a little faster than our standard package. Keep in mind that these prices are our starting points, but depending on your business’s financial complexity, volume, and people, your price may go up or down depending on these assumptions.
Today, most of our clients pay between $1000-1500/month for our services. Our listed pricing assumes a standard business with one business entity doing between 40-70 debit transactions in their bank with less than 15 employees in a year. If your business is different than that, your monthly pricing will change. If you’d like us to review and assess your current situation, we would love to sit down with you in a first-time meeting.
Important Note:* There are a few additional fees to be aware of outside of our monthly service fee as an outsourced accounting firm. To get started with us, many clients will have a one-time investment to catch up on their current books, review and catch up on the year’s taxes, and have a handful of strategic accounting conversations to set you up for success. Remember, our goal is to provide you with a system to help you get organized so that you have peace of mind that this part of your business is done right. We want to help you rest easy at night and help you focus on what matters most to you as an owner.
For us to do that, we want to ensure that you get you started on the right foot. It’s our job to make sure your systems and processes are dialed in, your historical information is accurate, you don’t have any tax issues from misfiled information in the past, and we go back and ensure you haven’t missed any opportunities or overpaid your taxes. We do this by assessing the last 3 years of tax returns, review and clean up your books to ensure that your books and tax returns are accurate and up to date, provide you with new tools to help you stay organized, and have a series of strategic meetings to make sure you are comfortable with the process and getting the insight into your business to help you make awesome decisions. As a general rule of thumb, you can expect to pay between 25%-40% of your first year’s annual fee in a one-time investment. Every business will have different needs, and we will discuss this in your first meeting with our team.
Our first-time meetings are designed to understand your business goals, learn where you’re trying to go with your business, understand what’s not working well for you with your current processes and formulate a plan to get more organized and help take the accounting and tax burden off your shoulders as an owner.
If you’re ready to offload this work to a team of experts at an outsourced accounting firm, consider scheduling a call with us here. When you do this, we’ll ask you for a variety of documents so we can provide you a detailed service engagement. View that list here.