Accounting Fees for Small Business: How Much They Cost and How to Save Money

Accounting Fees for Small Business: How Much They Cost and How to Save Money

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Last Updated on March 18, 2024 by Qusai Ahmad

Accounting is an essential function for any small business. Accounting helps a small business to keep track of its financial transactions, prepare and file its tax returns, comply with the accounting standards and regulations, and make informed and strategic decisions.

However, accounting can also be a costly and time-consuming task for a small business. Accounting fees for small business can vary depending on the size, complexity, and needs of the business, as well as the type, quality, and frequency of the accounting services.

In this blog post, we will discuss the average accounting fees for small business, the factors that affect the accounting fees, and the tips and tricks to save money on accounting fees.

What You Will Learn

By reading this blog post, you will learn:

The Average Accounting Fees for Small Business

According to a survey by the National Federation of Independent Business (NFIB), the average accounting fees for small business in the US in 2020 were $1,200 per year. However, this figure can vary widely depending on the type of accounting service and the size of the business. For example, the average accounting fees for bookkeeping services were $500 per year, while the average accounting fees for tax preparation services were $2,000 per year. The average accounting fees also increased with the number of employees, from $800 per year for businesses with no employees to $4,000 per year for businesses with 20 or more employees.

According to a report by the Association of Chartered Certified Accountants (ACCA), the average accounting fees for small business in the UK in 2019 were £3,000 per year. However, this figure can also vary widely depending on the type of accounting service and the size of the business. For example, the average accounting fees for bookkeeping services were £1,500 per year, while the average accounting fees for tax preparation services were £2,500 per year. The average accounting fees also increased with the turnover, from £2,000 per year for businesses with less than £50,000 turnover to £5,000 per year for businesses with more than £500,000 turnover.

The Main Factors that Affect the Accounting Fees for Small Business

The accounting fees for small business can be affected by several factors, such as:

  • The type of accounting service: Different accounting services have different scopes, complexities, and requirements, which can affect the amount of time, effort, and resources needed to perform them. For example, bookkeeping services, which involve recording and organizing the financial transactions of a business, are usually less complex and time-consuming than tax preparation services, which involve calculating and filing the tax returns of a business.

    Therefore, bookkeeping services tend to cost less than tax preparation services. Other types of accounting services that a small business may need include payroll services, financial reporting services, auditing services, and consulting services.
  • The level of accounting expertise: Different accounting services require different levels of accounting expertise, which can affect the quality and reliability of the accounting work. For example, bookkeeping services, which involve basic accounting skills, can be performed by a bookkeeper, who is a person who has some training and experience in accounting. However, tax preparation services, which involve advanced accounting skills, can only be performed by a certified public accountant (CPA), who is a person who has a professional license and certification in accounting.

    Therefore, CPA services tend to cost more than bookkeeper services. Other levels of accounting expertise that a small business may need include enrolled agent (EA), who is a person who has a special authorization from the IRS to represent taxpayers, and chartered accountant (CA), who is a person who has a membership and qualification from a professional accounting body.
  • The accounting software: Different accounting software have different features, functionalities, and prices, which can affect the efficiency and accuracy of the accounting work. For example, cloud-based accounting software, which are online applications that can be accessed from any device and location, are usually more user-friendly and secure than desktop-based accounting software, which are offline applications that can only be accessed from a specific device and location.

    However, cloud-based accounting software tend to cost more than desktop-based accounting software, as they usually charge a monthly or annual subscription fee. Other types of accounting software that a small business may need include spreadsheet software, which are simple applications that can perform basic calculations and data analysis, and specialized software, which are customized applications that can perform specific accounting tasks or functions.
  • The location of the accountant: Different locations have different costs of living, demand and supply, and competition, which can affect the pricing and availability of the accounting services. For example, accounting services in urban areas, which have higher costs of living, higher demand and supply, and higher competition, are usually more expensive and accessible than accounting services in rural areas, which have lower costs of living, lower demand and supply, and lower competition.

    Therefore, accounting services in urban areas tend to cost more than accounting services in rural areas. Other factors that can affect the location of the accountant include the time zone, the currency, and the tax laws.

The Best Practices and Tips to Save Money on Accounting Fees for Small Business

Accounting fees for small business can be a significant expense for a small business, especially if the business has limited resources and budget. However, there are some best practices and tips that can help a small business to save money on accounting fees, such as:

  • Outsourcing: Outsourcing is the practice of hiring an external party to perform a task or function that is not part of the core business operations. Outsourcing can help a small business to save money on accounting fees by reducing the need to hire, train, and manage an in-house accountant, as well as the overhead costs associated with maintaining an accounting department.

    Outsourcing can also help a small business to access a wider range of accounting services, expertise, and software, as well as to improve the quality and timeliness of the accounting work. However, outsourcing also has some drawbacks, such as the loss of control, confidentiality, and communication, as well as the risk of fraud, errors, and disputes.

    Therefore, a small business should carefully evaluate the pros and cons of outsourcing before deciding to outsource its accounting functions.
  • Automating: Automating is the practice of using technology to perform a task or function that is repetitive, routine, or manual. Automating can help a small business to save money on accounting fees by reducing the amount of time, effort, and resources needed to perform the accounting tasks, as well as the human errors and mistakes that can occur in the accounting process.

    Automating can also help a small business to enhance the efficiency and accuracy of the accounting work, as well as to generate real-time and reliable accounting data and reports. However, automating also has some challenges, such as the initial cost, the maintenance cost, the compatibility issue, and the security issue.

    Therefore, a small business should carefully select and implement the appropriate accounting software and tools that can automate its accounting functions.
  • Negotiating: Negotiating is the practice of discussing and agreeing on the terms and conditions of a contract or agreement. Negotiating can help a small business to save money on accounting fees by obtaining the best possible price, quality, and service from the accountant or the accounting firm.

    Negotiating can also help a small business to establish a long-term and mutually beneficial relationship with the accountant or the accounting firm, as well as to avoid any misunderstandings, conflicts, or disputes. However, negotiating also requires some skills, strategies, and tactics, such as researching, preparing, communicating, listening, compromising, and closing.

    Therefore, a small business should carefully plan and execute the negotiation process with the accountant or the accounting firm.
  • Comparing: Comparing is the practice of evaluating and contrasting the different options and alternatives available. Comparing can help a small business to save money on accounting fees by finding the most suitable and affordable accounting service, expertise, and software for its needs and objectives.

    Comparing can also help a small business to identify and avoid any hidden fees, charges, or costs that may be included in the accounting fees, as well as to take advantage of any discounts, offers, or incentives that may be available.

    However, comparing also involves some criteria, factors, and sources, such as the scope, complexity, and frequency of the accounting service, the level, qualification, and reputation of the accounting expertise, the features, functionalities, and prices of the accounting software, and the reviews, ratings, and referrals of the accountant or the accounting firm.

    Therefore, a small business should carefully research and analyze the different options and alternatives before choosing the best one for its accounting functions.

Conclusion

Accounting fees for small business are the costs incurred by a small business to obtain accounting services, expertise, and software. Accounting fees for small business can vary depending on the size, complexity, and needs of the business, as well as the type, quality, and frequency of the accounting services.

By understanding the average accounting fees for small business, the factors that affect the accounting fees, and the tips and tricks to save money on accounting fees, you can improve your accounting skills and financial literacy, as well as the management and performance of your business.

We hope that this blog post has helped you understand and appreciate the accounting fees for small business and how to save money on them. If you have any questions or comments, please feel free to leave them below. Thank you for reading and happy learning!

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