How Much Should You Be Paying for Your Accounting?
Financial management is not something that should break the bank. However, it can be tough to figure out whether your accounting costs make sense or not. Even for companies of comparable sizes that fall under the same industry, their accounting costs can differ greatly.
- In 2015, SCORE (a non-profit business organization) estimated that the yearly accounting expenses for small businesses hover around $1,000. About 23% of small businesses spend less than $1,000/year on accounting.
- According to accountantcosts.co.uk, the cost of accounting can depend on the size of your business, type of business you own and the number of employees you have.
- Accounting expenses form a core part of a company's overheads. Even though overheads don't directly translate to profits, they contribute to the successful operation of a company.
- A business owner who doesn't take into account his overhead expenses, may not be able to maximize his profits. On the other hand, if overhead costs are low, then you're on the way to increasing your returns.
Usually, the accounting costs of a small enterprise vary with the frequency of a company's bookkeeping requirements and its size.
This article explains how small business owners should be spending on their accounting costs, with respect to the size of their businesses and transaction volumes.
How Much Should A Small Business/Entrepreneur Expect To Pay For Accounting?
The mean accounting cost incurred by SMEs is a function of the skills of professionals rendering their services to the company. Bookkeepers can prepare invoices for customers, record transactions, and also balance your sheets. If your business requires more advanced accounting solutions, then you'll have to call on accountants and certified public accountants (CPAs). These professionals can perform more tedious tasks such as the generation of statements, financial advice, analyzing expenses, filing of business taxes.
- Small VAT registered businesses with about 3–10 employees can expect to pay up to £1000/year ($1,257.82) on accounting.
- For small to medium scale enterprises (SMEs), business owners may pay about £500-£1000 for accounts, and a charge of £10 to set up each payroll run and then £4 per payslip (VAT inclusive).
What Does An Accountant Do?
Accounts do what most people are afraid to do — i.e., crunching the numbers. Preparation and interpretation of financial data is the daily job of accountants. While that is true, accounts may perform a tall list of other responsibilities ranging from transaction reconciliation, profit & loss, balance sheets, and VAT registrations.
The day-to-day duties of accountants may vary in accordance with the nature of the business and the accountants' positions in the company. That said, here are other common duties of accountants.
- Making sure that financial documents are accurate and comply with regulatory standards
- Preparing and maintaining essential financial reports.
- Processing of tax returns
- Evaluation of financial operations and offering recommendations for growth
- Giving guidance on how a business can reduce costs, enhance revenue, maximize profit
- Predicting the future and performing risk analysis.
When Should A One-Man-Band Business Outsource Their Accounting?
Believe it or not, accounting has long been a dreadful headache for some SMEs. When your business starts to grow appreciably, more money will flow into your accounts. Nevertheless, the myriad of responsibilities that may follow the exponential growth of your business will be a bitter pill to swallow.
It's up to you to step up and form a team. Together, you can take the bull by the horns. You can also decide to do it alone. But when the weight of your company becomes overwhelming for you alone, everything you have built may start to crumble. At that point, a smart business person should think about how they can outsource their accounting.
Outsourcing your accounting means that accounting wizards will crack the hard nuts of your financial transactions, while you pay them for their services. It's a win-win affair.
However, before you run to hire accountants, consider the following three key factors
- your financial background
- your ability to pay accountants
- how much time you have on your side.
It's important to note that outsourcing your accounting at the wrong time can negatively impact the growth of your business. But if it all goes well, you can take pride in your decision.
If your company hires the finest financial bookkeeping brains, filing of taxes, record keeping, and maintenance of reports, will no longer be hurdles. That said, you need to weigh the possibilities of growth before you outsource your business.
We understand how tricky the ins and outs of business finance can get, and we are here to help.