For many small business owners, bookkeeping is one of those necessary evils. It’s not something that most people enjoy, but it is essential in order to keep your business running smoothly. But how much does bookkeeping cost? The short answer is that it depends.
What are bookkeeping services?
Businesses of all sizes need accurate and timely financial information in order to make informed decisions. This task is generally assigned to the bookkeeping department. But what exactly does bookkeeping include?
The bookkeeping process includes recording, classifying, and summarizing financial transactions to provide insights into an organization’s financial position. More specifically, bookkeeping services usually include the following tasks:
- Accounts payable: This refers to money that a business owes to suppliers, creditors, or other entities. Accounts payable is typically managed using accounts payable software, which can automate and streamline the payment process.
- Accounts receivable: This refers to money that is owed to a business by customers or other entities. Once again, accounts receivable software can be used to manage invoices and payments.
- Banking and credit card reconciliations: This involves making sure that the records of a business’ bank account(s) and credit card(s) agree with the corresponding statements from the bank or credit card company.
- General ledger: The general ledger is a record of all of a business’ financial transactions. This includes things like accounts payable and accounts receivable, as well as income and expenses. The general ledger forms the basis for an organization’s financial statements.
- Payroll: Payroll includes tasks like issuing paychecks, calculating payroll taxes, and maintaining employee records. Payroll can be handled in-house or outsourced to a payroll service provider.
- Trial balance: A trial balance is a list of all the debit and credit balances in a business’ accounts at a specific point in time (usually at the end of an accounting period). This information is used to prepare financial statements like the balance sheet and income statement.
Related Content: Top benefits of financial projections and why they matter
How much does bookkeeping cost?
How much you spend on bookkeeping services will depend on a number of factors, including the size of your business and the complexity of your financial situation. For example, if you have a lot of inventory or high-value assets, you’ll need to account for those in your bookkeeping. Additionally, if you have employees, you’ll need to track payroll and other associated expenses.
The good news is that there are a number of bookkeeping software options available that can make the process easier and more affordable. QuickBooks is one of the most popular options and offers a variety of plans starting at just $5 per month. There are also a number of free options available, such as Wave Accounting.
But how much does it cost to hire a bookkeeper? The answer, unfortunately, is not a simple one. The cost of hiring a bookkeeper will vary depending on factors like the size of your business, the complexity of your finances, and the location of your business. Let’s break down some of the factors that may affect the cost of hiring a bookkeeper, so you can make an informed decision for your business.
One common way that bookkeepers charge for their services is by the hour. Hourly rates can range from $20 to $60 per hour, with the average rate being around $40 per hour. If you decide to go with an hourly rate, make sure to ask for an estimate of how many hours per month the bookkeeping will take so that you can budget accordingly.
Another common pricing structure for bookkeepers is a flat fee. With a flat fee arrangement, you will pay one lump sum per month (or per quarter) for the bookkeeping services. Flat fees are often based on the number of transactions that need to be processed each month. For example, a small business with 50-100 transactions per month might pay a flat fee of $200-$300 per month for bookkeeping services.
Percentage of Sales
Lastly, some bookkeepers may charge a percentage of sales—usually 1-2%. This pricing structure is most common with businesses that have a high sales volume and low transaction volume—such as businesses that sell physical products.
When deciding whether to hire a bookkeeper, weigh the cost against the time and energy you would need to spend doing the books yourself; in many cases, it might be worth it to outsource this crucial task to a professional.