Accounting Cost for Small Businesses: What You Need to Know

Sustaining a small business requires management of its financial aspects as well as ensuring that it yields profits. As you manage the business and attend to your clientele, activities such as record keeping, processing of employees’ wages, and compiling tax and fiscal reports and statements look irrelevant. Nevertheless, it is important to have proper accounting when it comes to managerial decisions as well as legal aspects. It is the purpose of this article to describe and define the essential accounting costs any small business must consider.

Accounting Cost for Small Businesses

Bookkeeping Fees

Accounting entails preparing various accounts that record all financial activities of a business daily. Some of the typical functions encompass issuing invoices to clients, managing accounts receivables, making payments to vendors, managing accounts payables, preparing and processing payroll, recording income and expenses, reconciling bank statements, and others. Accounting supplies the primary records to put together the financial statements.

You do not need a professional to help you with accounting work since there are programs available that can assist you with the basics. Still, it is relevant to seek assistance from an accountant or bookkeeper as your business expands. According to estimates, the cost of their services costs about $30 to $100 per hour. Outsourced bookkeepers can perform tasks from a distance, and it would be cheaper compared to local services.

Accounting Software Costs

Accounting software that is on the cloud assists in the management of finances and reduces the work of the hands. Another thing to note is that entry-level platforms such as Wave and QuickBooks Simple Start offer basic functionalities for free. QuickBooks offers a middle-range software called QuickBooks Plus for $25 per month; more comprehensive systems include QuickBooks Online Advanced which starts at $80 per month. You will also have per-user charges and other charges may apply.

They should also incorporate the costs of implementing payment processors, e-commerce platforms, and other systems through the concept of integration fees. The total costs depend upon the functionality of the features, the number of users required, inventory tracking necessities, and more, It increases efficiency and offers a feature that can identify patterns.

Financial Statements Preparation

Following the records as bookkeepers, the accounting staff will use them to generate financial statements such as the income statement, balance sheet, statement of cash flows, and other schedules. These are the generic financial reports that give information on the company's financial position in terms of revenues, profitability, liquidity position, assets and liabilities, and many others. The majority of the funders and investors would need to look at the statements before they fund a business.

A lawyer may bill $200 and up per monthly or quarterly statement and this will depend on the size of the company. Comparable summaries also include audited statements which are more credible than reviewed statements because they undergo additional checks at a higher price. Performance information in the financial statements is used to assess performance targets and other benchmarks. It helps in managing the resources more efficiently towards the most profitable streams in business.

Tax Preparation & Filing

They include income taxes for federal as well as income taxes that are levied on companies at the state level based on their income and type of legal entity. There are some common taxes that a small business has to pay such as Income tax, Self-employment tax, Payroll tax, Excise tax, Franchise tax, and Sales/use tax in some states. Another issue with taxation of businesses is that tax rates and allowable deductions vary depending on the type of business and sector.

Costs for small business tax preparation start at $500 and above, depending on the complexity of the tax returns. Services such as applying for Employer ID Numbers, sales tax permits, tax credit & incentive applications, and appealing against IRS assessments are others that attract more charges. Any non-submission of taxes or even mistakes in the filings and payments of taxes can lead to lots of penalties and interest.

Payroll Management Expenses

Payroll accounting includes delivering paychecks, deductions for taxes, compliance with tax laws, and recordkeeping for each employee or independent contractor. Each run costs money plus monthly base costs, starting at approximately $40 with higher prices based on options. On the other hand, an accountant who offers payroll services may offer payroll services for $75-$150 per payroll cycle while the companies offering payroll services charge between $25-$100 per month plus a small fee for each employee on the payroll list.

Also, factor costs for computation of final payrolls, preparation of W-2 forms at every end of the year, consultation on other miscellaneous items that are not usual such as bonuses or stock options, or correction of errors and omissions that can attract penalties. Easier payroll encourages high employee morale while decreasing legal infringements and the consequent fines for such issues.

Audit Fees

However, it is important to note that financial statement audits by a CPA add third-party credibility to the reports and ensure accuracy and comprehensiveness. Auditors search through documents to find transactions and to verify balances and internal controls before delivering an audit report. This way, audits enable the company to achieve improved credibility within the market.

A small private company would be looking for $3,000 to $10,000+ for annual audited statements based on the revenues. It is not as efficient, but it offers great risk information and there may be problems that could be identified in advance. The audited financials may be required when obtaining a grant or a business loan, or when fulfilling certain requirements for the grant or loan.

External CFO Services

Mature CFOs provide outsourced services in an advisory capacity as far as financial structure, as well as strategic choices, are concerned. Their rates per hour are from 200 Dollars up to and beyond depending on experience. It is not cheap for a start-up, but it is extremely helpful to avoid mistakes in funding, expansion, budgeting projects, etc On-demand CFO guidance gives an experienced opinion from third parties on the financial aspects of the business using specific analyses and modeling.

Outsourcing Accounting

There is no need to hire full-time accounting staff which may seem rather unnecessary in the early stages of the business operation; outsourced accounting firms are always available to serve the purpose at a much cheaper cost. Rates vary depending on the type of services that one requires; basic monthly support ranges from $295, on the other hand, comprehensive support goes for $850 and above. Cloud collaboration results in a smooth transfer and transition of tasks without compromising quality and timely delivery.

Choose candidates who are familiar with the regulatory and reporting requirements of your particular type of business. The key guidelines include, amongst others, well-defined work descriptions and service levels, easy access to the platform by both partners and sufficient levels of support.

The Bottom Line

While challenging, it is essential to understand these accounting costs enable fair budgeting and avoid any shocks. A clear understanding of cash inflows and outflows leads to better decision-making regarding capital investments and growth plans. With the help of an expert accountant or an accounting firm of your choice, specialized help is available as you move to new heights. It is in this regard that where a firm has set the right systems and resources around accounting, then a firm can direct energy towards what is most important, which is customer delight. Maintaining a keen eye on these costs from the outset also ensures that an element of flexibility or robustness in the business model is established.