Small businesses that intend to hire accounting firms or an accountant to handle their accounts are often flummoxed or lost when it comes to calculating approximate costs required for the services. There really is no benchmark or classification for the costs involved i.e how much to pay for accountancy or how much do accountants charge. This is mainly because the nature of services involved differ among domains and within domains the volume of data that needs to be processed and the actually nature of services that are sought are different. Consequently, the costs towards accounting for two firms of similar size may actually vary. However, it is possible to arrive at a rough figure of what can be spent towards accountant fees for small business start up. This way, small businesses can decide if the fees quoted by a short listed accountant or firm is worth the service that is sought. So here is the lowdown on working towards a reasonable figure that can be spent towards accounting services.
To calculate the expected costs, you need to first have a good idea of the nature of services that you will seek from an accountant. Typically, a business may look at either bookkeeping services or accounting services. If you are looking at bookkeeping services, the costs will come down considerably, because of a few reasons. One, bookkeeping services do not actually require a CPA (Certified Public Accountant), and bookkeepers generally are not competent enough to advise a business about taxation. And neither are they certified. Bookkeeping operations, however, are now performed with accounting software, and regardless of the certification of a bookkeeper, you need to ascertain and insist that the individual relies on popular software for the purpose. On the other hand, find an accountant will typically have certification and will be competent enough to file taxes and reports. This comes at a considerably higher price band than bookkeeping services.
Businesses have a lot to benefit from the services of a good accountant, who offer more services than just record numbers or generate some financial reports. Accounting firms that offer full services will typically provide astute guidance and advice in addition to making sense of large volumes of financial data to help organisations chalk out plans. Regardless of the holding/ownership pattern of the business viz., sole proprietorship or partnership, a skilled and competent accountant would be in a position to assist a business in various processes, such as working capital, establishing the overall accounting system, preparing tax returns, helping in financial statements and budgeting etc. Accounting processes for businesses include critical aspects such as cash flow management, financial decisions regarding acquisition or leasing of assets, internal controls, strategies to manage inventories, keystone pricing or other pricing parameters that contribute to the overall growth of the organisation.
Depending on the nature of your business and the volume of transactions, the kind of services may actually differ from business to business. However there are some services that are typically common to all and here is a look at some of the more common services that are sought from an accountant
While many accountants charge per hour like most other specialist professions, some choose to calculate payables per page, while others arrive at the fees through a predetermined flat or fixed fee. While each has its own merits, the fact is that each type of payment calculation is suitable for a particular nature of accounting service. For instance, if you run a small business and do not have too many transactions or multiple ‘head of accounts’ under which the transactions take place, you will require a limited number of hours of the accountant’s time. This would make the per hour calculation most suitable. On the other hand if, all that you need is data entry which can be populated through pages, then the per page calculation will help. For those looking at a full suite of services, that includes advisory services, then a fixed fee or a flat rate would be the best way to go about calculating the fees payable. It will be difficult to quantify certain tasks and break it down into number of hours or pages. This will therefore automatically get sequestered as services that are paid through a flat or fixed fee.
While it would be futile to explicitly state the amount that may be required for accounting services, it is possible to understand the different categories of businesses. A survey conducted by SCORE shows that small businesses fall into five different categories when it comes to spending on fees towards accounting services.
This clearly demonstrates that most businesses spend anywhere between 1000£ to 5000£ per annum on accounting. This could be a useful ballpark to follow when establishing a business, so that the investment and the OpEx could accommodate this requirement. It will be difficult to actually do the work inhouse, if the amount of work and the nature of services do not combine to justify the salary and perks that may be required for maintaining a separate accounting division, in addition to other overhead costs. On the other hand a full fledged accounting service will offer specialised support services at costs that are definitely cheaper when compared to an accountants salary.
Time is productivity. If your small business does not have a qualified accountant or accounting service to take care of your bookkeeping and other accounting needs, you will surely end up using available resources as ad hoc arrangements. While it may sometimes work in your favor, it runs the risk of backfiring at the most inopportune time. Rather than spending time trying to save a small amount, and ending up wasting time and money rectifying something, it is best to use the services of a specialist and free up resources for core tasks. For instance, for something as low as 75 Pounds per month it is possible to avail bookkeeping services. Of course, this does depend on the volume of transactions, but for small firms, this is all that it would take to hire a service provider on a monthly basis. Similarly, assuming that the bookkeeping has been carried out as per requirements, you can also hire an accountant to file VAT returns at 40 Pounds per month. This is certainly worth it and frees you from the hassle of negotiating your way through different filing regulations and parlance which you may find befuddling. For your tax registration needs and setting up of accounting services, you need to shell out an additional 150 to 200 Pounds per month, while for year end accounts the fee payable will be 450 pounds. A roundup of all the services that may be required will end up bracketing you in the second category, as listed by SCORE.
While the per hour costs will differ from agency to agency, the average cost is around 100 to 120 Pounds per hour for basic services that are provided. While free accounting advice may be offered by most accountants, it will be general in nature. You will receive information that will
add to your knowledge, but when it comes to taking inputs and planning your tax and finances, the advice will be of limited use. You will then require a competent CPA to help you with your planning. For services that will help you to make substantial savings and assist you in planning your finances, the per hour cost may actually be double of what you may need to pay for basic services. However, the rates will differ and will entirely depend on the nature of services that you need and volume of work that you will be offloading to an accountant or firm.
If you are able to nail this value, you will be able to understand before hand, the amount that is required to be budgeted for accountant’s fees. For instance, if you need an accountant to help you with your startup, then you will be looking at around two hours of his assistance. The same goes with reviewing books of accounts. Which means that depending on the price band of the accountant you will need to set aside this particular amount. Some services will require services on a monthly basis, while some will require services annually. Many organisation opt for popular applications and packages that help in bookkeeping. This helps to cut down the costs towards bookkeeping. However, the services of an accountant will still be required at the end of the year or monthly to review the same. If you hire Local accountants at 100 to 120 Pounds per hour, you will therefore be looking at around 240 pounds per month. If you hire an accountant at 250 pounds per hour, you will have to set aside around 500 pounds per month.
Hiring an accountant will certainly help a business to save money, and ring in efficiency. Costs can be reined in and planning can help to improve the way money is spent. But accounting will actually not help businesses to earn additional money. It is your money that will be saved or put to better use, it will however, not be an avenue for earning more money. Despite not falling into an earning aspect of business, accounting is as important, if not more important than other areas of operation in a business. In addition to the compliance and regulatory part, accounting is important to a business which is all about planning and executing it. You need a budget for this activity, and it will be in the form of fees paid towards services.
A startup, a small business comes with a lot of responsibilities and plans. The checklist of things to be completed to establish the business are by itself long and seemingly never ending, with little incomplete tasks leading to a harrowing experience. To add another dimension to this list and saddling oneself with accounting will be a recipe for added misery. With qualified accountants and specialised software available, it is possible to sharpen the accounting aspect of business so that every single area works as per plan.
Read Also – Top 10 Questions to Ask your Accountant
Advisory services of accountants bring in results that are both tangible and intangible. The results of certain plans and actions will bear fruit either immediately or at some point in the future. Accounting services and financial planning have both long term and short term benefits. Choose the kind of services that you need, bearing in mind your business objective and your plans. If your plans are to expand your business quickly, then you need to look at managing your cash flow, and planning your acquisition in a phased manner. Without the acumen of a brilliant accountant, you will find it difficult to plan your finances better. Critical decisions, such as buying or leasing a particular asset, should not only be considered from the operational aspect and its functional use, but need to be also viewed from a financial angle, including depreciation. It pays to hire the services of an accountant to be able to plan operations and strategies better, while remaining compliant with regulations, and a few thousand pounds annually should not come in the way of the larger picture.