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How Much Does an Accountant Cost (And How to Make the Partnership Profitable)

October 30th, 2020Accounting & Bookkeeping

Warren Buffet famously says that “Accounting is the language of business.”

The very best way to learn the language of your business — that is, accounting — is to hire an expert to both help and teach you. If you’re wondering how much does an accountant cost, though? remember, it’ll cost you to continue operating without hiring a finance expert, too.

For example, your growing venture needs an accountant if:

  • You’re not yet profitable (and outside funding is drying up).
  • You’re profitable but struggling to pay bills (or make payroll) on time.
  • You’re spending too much energy and time on bookkeeping, payroll, and tax prep.
  • You’re not sure how to cut operating costs.
  • You’re interested in mitigating risk.
  • You’re unclear on how much liquid cash you should have or how (or even why) to achieve better liquidity.
  • You’re unable to answer your own questions about your business’s finances.
  • You’re committed to putting checks and balances in place to prevent fraud but don’t know where to start.

Continuing to operate under these conditions is an expense many business owners can’t afford. These examples indicate it’s time to trade the cost of doing business inefficiently with the investment of hiring an accountant. But first, here’s a look at what exactly that investment is, how much does an accountant cost you, and what you get in return.

How much does an accountant cost, and why?

The cost you pay for an accountant reflects the value they can add to your business. The number-one determinants of how much you’ll pay for accounting services are the size and complexity of your organization.

How much does an accountant cost for Small businesses (and why)

Silicon Valley-based CostHelper reports that accounting services will cost your small business between $100 and over $400 per hour.

Wow — that’s a large range, right? In fact, it may provoke more questions than answers, and that can be frustrating. To clarify, your particular business will pay something on the high end of that range or on the low end, depending on your accountant’s expertise, pricing structure, and the scope of work you require.

An accountant’s expertise includes their education, specialization, past performance, and ongoing training, certifications, or study. The more they have of any of those elements, the more they can (and should) charge small businesses to apply their expertise.

Composer and conductor Victoria Bond famously said that “True expertise is the most potent form of authority.” When learning the language of business, you want your translator to be fluent, commanding an authoritative knowledge of the lexical nuances of that tongue. How else will you navigate the complicated, foreign world of business as you scale?

The next item that factors into the question of how much does an accountant cost is the scope of work. Most solopreneurs who hire an accountant only need help with business structure advice and quarterly or yearly tax preparation. But as a tiny venture grows and begins hiring employees, those business owners find themselves stretched thin, desperately needing bookkeeping help, payroll processing, and bank and transaction reconciliation.

The more tasks you need help with (and the more complex those requirements), the more you can expect to pay an accountant. Continue growing, and you’ll also soon need financial statements and reporting, risk management, and cost or opportunity analyses performed on top of the other work your accountant is already doing. Thankfully, if you’ve found the right one, they (and their team) will be able to help with all of these needs.

Finally, there are four ways to engage a small business accountant. Each one will influence your cost.

Source: U.S. News & World Report

  • You can pay an accountant hourly, as needed. A less common way to work with an accountant is to engage them ad hoc or as needed. Some small business owners do this when they’re unexpectedly audited, when they need help choosing a bookkeeping automation tool, or when they want to get their operating costs under control.
  • On retainer. The most common way small businesses engage accounting help is by outsourcing the work to a consultant or accounting firm. These parties usually charge a flat fee for both on-demand and ongoing work, such as tax preparation and filing, financial statements and reporting, and invoicing, payroll, and advisory work.
  • Project-based. Similar to an hourly pricing structure, this arrangement is event-based. You could find and hire an accountant just to establish your corporate structure legally, cut operational costs, or conduct a professional cash flow analysis.

How much does an accountant cost for Medium-size and enterprise-level businesses?

The U.S. federal government defines small businesses as companies with fewer than 500 employees or less than $10M in assets. Organizations above those thresholds, or “enterprise-level” companies, typically employ a whole finance department (or, if you prefer, a whole department of business-language “translators”).

If you’re a small business leader with hopes to scale to this level, then plan to budget for multiple accountants to cover these various roles. You’ll likely have a separate accountant for bookkeeping, invoicing, accounts receivable, taxes, accounts payable, payroll processing, internal reporting and financial statement preparation, and financial analysis.
Source: Robert Half, 5 Surprising Facts About Accounting as a Profession

How to get the most out of your accounting partnership

Accountants guide you through the language of business, converting it into plain English, so you can grasp what your financials are telling you. Finding the right expert, ensuring they know what you expect, and doing your portion of the mental work facilitates a mutually profitable partnership.

First, Find the Right One

Every year, ManpowerGroup releases its Talent Shortage report, listing the roles companies find hardest to fill. Consistently, accounting and finance professionals rank among the top 10.

What’s even more troubling is that 75% of today’s CPAs will finish their tenure and leave the profession within 15 years. Sadly, due to the rising costs (and education requirements) of the CPA examination, fewer and fewer new accountants are replacing the outgoing certified public accountants.

Source: AccountingWEB, “Why CPA Candidate Numbers Have Decreased: Part 1

Once you’ve determined how much an accountant costs for your particular need, make the search easier on yourself. Start by getting referrals from colleagues. Vendors, business partners, peers, and even friends may know and trust someone who would be a good candidate.

Next, interview each one. Dr. Jean Wilson Murray provides a smart list of interview questions to cover when you meet potential candidates.

Finally, ask for a trial period. Plan to make this contractual pilot run at least 90 days to give the partnership time to prove itself.

Clarify Expectations on Both Sides

Establish the scope of work and what deliverables you’ll expect. Include timeframes, so you can create a schedule for yourself to review their work regularly.

Set goals together. Your accountant should be eager to grow alongside your business. Together, establish your business’s financial goals and your accountant’s service goals.

Want a few example goals to spark your imagination? At first, your goals may be to get organized or come into compliance. After that, you may want to know how to steady your cash flow, so you can sleep better at night. Or perhaps you want to make a big capital investment and aren’t sure whether you can do it while still making payroll. Meanwhile, your accountant may want to get to a place where they spot trends and anomalies to show you. Or maybe they want to bring market intelligence to augment your regular business finance material.

Finally, ask what your accountant will need from you. Set calendar reminders to deliver these materials, so it doesn’t slip your mind.

Stay Engaged

The best accountants want “good clients.” To be a good client, you must stay engaged. That means:

  • Look and listen for financial terms you don’t recognize and ask about them.
  • Know what questions not to ask and why they are off-limits. For example, do not ask your accountant to do work that can be easily automated.
  • Ask how each financial element within your business “factors into” bottom-line totals.
  • Learn what your accountant recommends and do it. Remember, solving problems is the #1 reason accountants love their job.

Source: Robert Half, 5 Surprising Facts About Accounting as a Profession

  • Keep an eye on troublesome parts of the partnership.
    • If friction arises, clarify why together. With most language differences, often the breakdown between accountant and client is just a benign misunderstanding. Once you’ve identified the problem, create a plan for improvement.
    • Tap the same network you used to find your accountant. This time, ask how their accountants typically handle the pain point. Honor your accounting partner by keeping your inquiry (and the resulting conversation) positive.

Debrief Regularly

Set a time to meet consistently — and prioritize it. How often depends on how well you’d like to “listen” to your financials. Because just like a linguistic translator, your accountant can only take in and retain so much information before either passing it on to you or forgetting to mention it. Give your accountant the outlet they need and be a good listener by meeting at least quarterly to debrief.

When you do, revisit the mutual goals you set earlier. Measure and celebrate any progress made toward those milestones. When your debriefings uncover missteps or lost opportunities, use them to inform future goals and expectations.

So how much does an accountant cost? Learning that is just the beginning

Accountants translate the language of business (that is, finance) into plain English for business owners to understand.

Now that you know how much an accountant costs to translate for you (and how to ensure your partnership is a profitable one), it’s time to take the first step. You may need someone to handle your taxes, process payroll, prepare financial statements, or all the above. Whatever your specific requirements, Neat’s list of trusted accounting partners is a great place to start your search.

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