You may be afraid you cannot afford a bookkeeper, which is probably your number one reason for not hiring one. But here's a secret, it's probably even more expensive to do your own bookkeeping. Investing in a bookkeeper or accounting team is one of the best investments you can make to grow your business.

An organized bookkeeping system will help you save on taxes, reduce stress, and give you the insight you need to improve efficiency and increase revenue. In this guide, we'll examine the true cost of hiring a bookkeeper versus the costs you may incur by doing it yourself.

various images depicting bookkeeper and bookkeeping tasks, and their cost

Why Is Bookkeeping Important?

Managing a small business requires a great deal of coordination and logistics. As your busy season approaches or other administrative duties pile up, business owners are distracted, resulting in inefficient infrastructure and stagnating growth strategies.

Bookkeeping and accounting are often the first departments to fall through the cracks. Why is that an issue? You cannot deny that cash flow is what keeps your business afloat, even if you are not a numbers person.

As a business owner, you have both income and expenses to worry about, and it can be hard to keep everything in order. When your business' money is mismanaged, you may have less opportunity for growth and be less productive.

Having a bookkeeping expert manage your accounts can save you time and allow you to concentrate more on your business strategy and profit growth. The services of a bookkeeper ensure that you remain in compliance with state and federal regulations for your industry, as well as taking some time off your hands as a business owner. Incorrectly filing your taxes, or failing to pay your employees on time, could result in a lot of headaches for you as a business owner.

With professional bookkeeping, there are many options and fees. Let's take a look at the different types, and what you can expect to pay for financial management and bookkeeping.

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Are Bookkeepers Necessary?

The function of bookkeeping is crucial to ensure that companies pay their employees and vendors accurately. It also keeps track of supplies and other expenditures. Additionally, bookkeeping can be used to reduce expenses and improve profitability by finding areas where costs can be reduced.

Small businesses can focus on other tasks instead of working behind the scenes with numbers by hiring outside help.

If your finances are complicated or there are many employees working for your company, you might want to outsource this process. Bookkeeping professionals know how to handle these tasks effectively in order to ensure that everything is handled correctly and is reported regularly; they can also keep track of the company's financial health so owners are aware of where the business stands if it runs into trouble.

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Types of Bookkeeping

Different business owners require different levels of financial management. Your business' industry, size, number of employees, and length of time you've been operating can all affect the amount of support you need.

Consider this before you hire a bookkeeper: “Do I just need basic bookkeeping tasks handled, or do I need bookkeeping help to increase my business’ profit?” 

After you've answered this question, you can start comparing your options for basic bookkeeping and full-service bookkeeping.

Each has different rates and services, so it is essential to do your research to find the right solution for your business. Here's an overview of the differences between basic bookkeeping and full-service bookkeeping- and how to choose what's right for your business.

1. Basic Bookkeeping

When you're just starting out, you may want to focus on basic bookkeeping tasks such as accounts payables and receivables operations in order to remain compliant with relevant regulations. You may need to transition to a full-service bookkeeping department after establishing a baseline for your revenue and overhead. Which basic bookkeeping services are available to you?

  • Compliant financial reporting to the state and government
  • Accounts payable and receivable
  • Maintaining proper records of all transactions
  • Basic payroll management or processing

2. Full Service Bookkeeping

Businesses with a longer history, more employees, or those with a growth-oriented focus may require more complex bookkeeping services.

Full-service bookkeepers can help you manage your finances, provide basic bookkeeping, and optimize your financial strategy to boost efficiency and increase profits. You can expect a full-service bookkeeper to provide the following services:

  • Individual or team dedicated to your bookkeeping.
  • Regular monthly reporting to analyze your financial situation and growth opportunities.
  • Optimized tax planning and consulting.
  • Maintenance of accurate financial records.
  • Defense against financial audits.
  • Account management for business bank accounts and credit cards.

How Much Do Bookkeepers Charge?

The cost of a bookkeeper varies according to the size of the business, the industry, and the financial services needed. Depending on experience, in-house bookkeepers can charge anywhere from $18-23 per hour. Alternatively, outsourced bookkeepers can be hired with monthly bookkeeping fees starting at $99 per month.

Cost of an In-House Bookkeeper

An American bookkeeper's average hourly wage is $20, but bookkeeper rates can range anywhere from $18 to $23 per hour, depending on education, experience, and additional skill sets. Your labor cost calculation will be greatly affected by whether you need to hire a full-time or part-time employee. It is important to consider employee costs, such as benefits, training, and time off, when comparing in-house bookkeeping and financial management companies.

For many high-volume businesses, the costs of training, payroll, and the potential for inaccuracies outweigh the benefits of having an in-house employee.

Cost of an Outsourced Bookkeeper

Although hiring an outsourced bookkeeping agency may seem daunting at first glance, it can actually be a simple, cost-effective solution with many benefits that can help your business grow. Depending on your needs, your bookkeeping costs may vary.

The benefits of outsourcing your bookkeeping:

  • There is no need to train or onboard bookkeeping staff.
  • Saves time and money.
  • Internal and external tech solutions are integrated.
  • Mobile and remote access to your accounts.
  • Advanced security solutions to protect your company's financial information.
  • Manage your accounts centrally and track business insights and areas for improvement

Spend a Little to Save A Lot

If small business owners have a sufficient understanding of what is going on behind the scenes, they can make informed decisions regarding the growth or contraction of their company. When a business owner does not have outside help, they may end up spending too much on something that does not generate income or cutting back when the business should remain stable instead of cutting back to increase profitability later on.

In addition to saving money through these activities, bookkeeping services will likely cost less than if you attempted to do everything yourself, since you don't have to purchase supplies or equipment, train staff, and take time out of your busy schedule to deal directly with numbers. Furthermore, mistakes are still possible if you handle these tasks yourself. In the long run, using this cost-effective approach will actually save you time and money.

Hourly Pricing vs. Flat Fee Bookkeeping Costs

Your business will generally pay financial experts hourly or at a flat rate. Hourly rates may seem cheaper, but they aren't always the best option. 

The hourly rate of a financial expert varies depending on his or her expertise.  As opposed to bookkeepers who may charge $30 to $90 an hour, a CPA  or accountant will charge more.

In order to determine which is best for your business, it is important to understand the differences between hourly pricing and flat-fee bookkeeping costs.

Hourly Pricing

If you need help with your books only occasionally, hourly rates are a good option. On a per-project basis, you can hire someone and pay them only for the time they spend on the project, or for an agreed-upon amount of time. 

The advantage is that you can keep better track of your bookkeeping costs, but most small businesses need consistent services to stay on top of their books. 

Flat Fee

It is simpler to use flat fee bookkeeping. You can pay a set price for an unlimited amount of work.

Some months may not require much of a bookkeeper, but there will always be a few months that are busier than others. Having a consistently steady rate makes it easier to manage your business bookkeeper costs.  

How a Bookkeeper Can Save You Money

In addition to saving you time, a bookkeeper can also save you money.

A good bookkeeper knows how to track your expenses correctly and comprehensively. Essentially, they help you both maximize your deductions and avoid IRS fines at tax time by ensuring you track everything in the right way.

The cost of accountants is much higher than that of bookkeepers. An accountant would charge you $150-$400 per hour to prepare your DIY books for tax season if you aren't confident that they are tax-ready.

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It will be cheaper to file your taxes if your books are simple when you send them to your CPA.

The task of bookkeeping demands meticulous attention to detail. You can easily let things slip when you're already working 60+ hours and you're exhausted. Furthermore, overwork can result in burnout, which means time spent away from your business and clients.

Your books can be done by someone else, taking one more stress off your plate.

Why Should You Hire a Bookkeeper?

Bookkeepers' costs will vary from one business to another, just as every business has different needs. It is important to determine what kind of small business bookkeeping services you need and what your company can afford.

Every business has different bookkeeping needs, and these needs will likely change as the company grows. New businesses can benefit from part-time bookkeeping and outsourcing, while established businesses benefit more from full-time bookkeeping. Companies must decide on the best appropriate solution to maximize their profitability and ensure their growth.

By working with a financial expert, you can simplify your accounting and focus on the areas where you're most passionate and most needed.

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