If you’ve just launched your small business and looking for a professional bookkeeper, it’s important to get a good grasp on major aspects of it. On the other hand, if your small business is flourishing already and requires a professional account, either condition holds the same requirements.
Bookkeeping can feel easy at the start will it eventually gets complex as the business grows. It is important to understand the cost of bookkeeping services for small businesses to get a balanced distribution of your finances.
IS BOOKKEEPING ANY DIFFERENT FROM ACCOUNTING?
While both bookkeepers and accountants deal with financial data, their roles and expertise differ significantly.
- Bookkeepers: They primarily focus on recording and organizing financial transactions. They ensure that your financial records are accurate and up-to-date but typically do not provide in-depth analysis or advice.
- Accountants: These professionals go a step further by analyzing the financial data prepared by bookkeepers. They prepare tax returns, provide strategic financial advice, and help with long-term financial planning.
Therefore, it depends on your business’s requirements and the complexity of transitions you carry out on a day-to-day basis.
RESPONSIBILITIES OF A BOOKKEEPER:
While a bookkeeper may seem to deal with the basic financial responsibilities of your business, they do some complex chores as well. More specifically maintaining the records in technical software like Quickbooks. The cost of bookkeeping services for small businesses depends highly on the responsibilities of a bookkeeper. They generally deal with:
- Data entry
- Records of bill payments
- Invoicing
- Inventory management
- Reconciling financials (bank accounts & credit cards)
- Maintaining vendor & client lists (accounts payable and accounts receivable)
- Preparing & organizing important financial documents
- Collection of past-due payments
AVERAGE COST OF BOOKKEEPING SERVICES FOR SMALL BUSINESSES:
Generally, bookkeeping services for small businesses aren’t that complex and require mid-level expertise. So the cost you pay for their service actually depends upon:
- Whether they are working full-time or part-time for you.
- Whether you outsource them.
- Whether they work on an hourly/monthly basis.
Part-time bookkeeping:
Part-time bookkeeping means that the bookkeeping professional you hire will work for a short duration of 4-5 hours. Part-time bookkeepers perform relatively fewer tasks as compared to full-time ones.
Part-time bookkeeping services for small businesses vary depending on the location, level of expertise, and payment procedure (hourly/weekly/monthly basis).
In 2018, the average hourly wage for a bookkeeper in the United States ranged from $14 to $17 (according to Indeed), translating to approximately $2,400 to $3,000 per month. Annually, bookkeepers earn an average salary between $37,000 and $47,000 (as reported by Salary.com).
- Pros: It is budget-friendly and you only pay for the hours worked, which reduces expenses related to salaries, benefits, and taxes. With a part-time bookkeeper, you save on workspace, equipment, and other costs associated with having an in-house employee. Many part-time bookkeepers work remotely, further lowering overhead.
- Cons: You have to spend extra hours auditing their work to ensure accuracy. Since they spend less time with your business, a part-time bookkeeper may not gain as deep an understanding of your operations compared to a full-time employee.
Full-time bookkeeping:
You can hire a full-time bookkeeping service for your small business if you have to deal with plenty of technical complexities in accounting. A full-time bookkeeper gives you an edge in the accuracy criteria as they spend their day working in a real-world environment. It helps them get a better understanding of business goals, requirements, and strategies for effective transactions.
The average salary of a full-time bookkeeper with a handful of experience costs about $50,000 annually.
- Pros: As a permanent team member, a full-time bookkeeper will be more accessible and responsive. Additionally, they offer better communication and build a closer relationship with you and your team.
- Cons: A full-time bookkeeper typically requires a salary, benefits (health insurance, vacation, etc.), and other employment-related expenses, which can add up significantly. If your business has periods of low activity or doesn’t require constant bookkeeping attention, you may end up paying for more hours than necessary.
Outsourced Bookkeeping:
Another way to access bookkeeping services for small businesses is to outsource the talent. It refers to when you collaborate with third-party organizations to outsource talented bookkeepers for your business goals.
It is the most cost-efficient option if you have a tight budget. Generally, outsourcing firms charge somewhere between $300-$400 per month depending upon the nature and complexity of your requirements.
- Pros: Outsourcing bookkeeping services is typically more affordable than hiring a full-time in-house bookkeeper. You avoid expenses such as salary, benefits, and taxes, as well as overhead costs like office space and equipment.
- Cons: Depending on the service provider, especially if they are in a different time zone or country, communication can be slower or less direct. Misunderstandings and delays in getting information can also occur. Moreover, sharing sensitive financial data with an outside firm increases the risk of data breaches or unauthorized access, especially if proper security protocols aren’t in place.
CONCLUSION:
Choosing the right bookkeeping strategy is highly essential when it comes to maintaining the credibility and accuracy of your business. By partnering with a skilled bookkeeper, you ensure compliance with financial regulations and gain peace of mind knowing your financial records are in capable hands. Whether you choose a bookkeeper or an accountant, or both depends on your business’s unique needs. So thoroughly analyze your requirements, budget, and expectations with the service. That is how you’ll be able to better understand the cost of bookkeeping services for small businesses.