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How Much Does A Bookkeeper Cost For A Small Business?

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If you’re a small-to-medium business, the thought of hiring a bookkeeper seems lofty at best, and decadently impossible at worst.

But when it comes to bookkeeping, hiring an employee to handle it may not be realistic – at least not yet. But bookkeeping is much like going to the dentist – no one actually wants to do it, but not doing it simply isn’t an option, either.

Still, the dedication required to maintain accurate financial records often falls to the bottom of your to-do list – after all, you likely didn’t go into business to become a bookkeeper – but your time is too valuable for you to afford your own hourly rate if you choose to do your own bookkeeping.

In the earliest stages of starting a business, a solopreneur can carefully tread the waters of managing their own finances, but there will hopefully come a time when your business has grown beyond the bounds of your grassroots bookkeeping capabilities.

But your books – and the fact that they squarely shoulder the financial health of your burgeoning business – can’t be left to tackle late at night after work, family, kids, dinner, baths and bedtime are done.

Simply put: Bookkeeping can’t be an afterthought, as tempting as it may be when all of life’s other demands come calling.

But you hem-and-haw at the prospect of paying someone to do something that, until this point, you felt comfortable handling yourself, and you hem-and-haw at the prospect of doing it yourself because, well, it’s not your passion or your calling.

It’s a catch-22.

Ask yourself: Can you afford your own hourly rate if you were to take time away from other pressing matters to handle your own bookkeeping? Can you afford to correct mistakes made year after accruing year?

You may not have considered it from that perspective – but it warrants some thought. 

Because while you may think you can’t afford to hire a bookkeeper, you’re technically costing yourself whatever your hourly time is worth every time you sit down to handle a task that could be delegated to someone – often surprisingly – more affordable than you. And let’s not even get into how they’re more qualified, dedicated to handling bookkeeping and nothing else and – GASP! – really enjoy doing it.

So here, we’ll cover how the cost of bookkeeping services varies depending on several factors and all the options available depending on the needs of your business.

 

What Does A Bookkeeper Do?

First things first: Let’s cover what a bookkeeper is – and does.

A bookkeeper records a business’s financial transactions with financial implications that need to be recorded and tracks your business’s financial transactions with entries to specific accounts using a debit and credit system. 

Here are some typical tasks that bookkeepers do – and don’t do … 

 

What Do Bookkeepers Do?

  • Pay client’s bills weekly
  • Reconcile bank statements
  • Journal and data entry (coding)
  • Provide clients with weekly & monthly reports (you can add this to your contract)
  • Accounts receivable aging (weekly)
  • Accounts payable aging (weekly)
  • Monthly aging (monthly)
  • Balance sheet (monthly)
  • P & L (monthly)
  • Budget to actual (monthly)
  • Statement of cash flow (monthly)
  • Other custom reports (for an additional cost)
  • Maintain and manage the chart of accounts
  • Debit/credit card reconciliation
  • 1099 preparation (may include an additional fee)
  • Process payroll by working with a verified vendor to set up the payroll account, and then they schedule and process payroll.
What Do Bookkeepers Not Do?

  • Prepare 990
  • Forecast
  • Handle payroll taxes (A Third Party Vendor will process taxes and W2 on your behalf.)
  • Determine the correct coding for transactions
  • Perform worker’s comp audits
  • Collections

“So then why wouldn’t I hire an accountant who could handle all of the above?” you counter.

Fair question. And the answer comes down to one word: Cost.

Accountants are considerably more expensive. So just as it’s critical to pick the right tool for the job, bookkeepers are best for day-to-day financial management and accountants then take that data and can handle tax strategy, advice and planning, auditing, reporting and compliance, superannuation fund advice, and financial management advice.

Put simply: Think of it as a relay where bookkeepers run the first leg, passing the baton to the accountants. 

A refresher

Bookkeepers have two to four years experience or an associate’s degree, with their work overseen by either an accountant or the small business owner whose books they are doing. They record financial transactions, which lay the foundation for … 

Accountants who have a bachelor’s degree in accounting – or a finance degree considered an adequate substitute – and interpret, classify, analyze, report and summarize financial data. 

 

Types of Bookkeeping

With the idea of hiring a full-time accountant on your roster now put to bed, let’s consider what kind of bookkeeping you may need.

Because let’s face it: Your organization’s bookkeeping needs may change as it grows and changes, right? Right.

So let’s dig into two financial services – accounting clerks and bookkeepers – your organization could use and how to decide which one is, like Goldilocks, just right for you.

 

 Accounting Clerks

Bookkeepers

What they do … What they do … 
Accounts Receivable 

  • Prepare and issue invoices
  • Process ACH/credit card transactions
  • Identify delinquent accounts and insufficient payments
  • Reconcile deposits, transactions, and bank statements
  • Resolve discrepancies in customer accounts
  • Provide the weekly aging report to the client
  • Maintain up-to-date accounts receivable records
  • Reconcile customer balances

Accounts Payable 

  • Enter all vendor bills and expenses into the accounting software
  • Process bill payments through a 3rd-party bill pay system, like bill.com
  • Review, code and process vendor bills
  • Maintain vendor database and vendor balances
  • Verify W9 completion
  • Review expense reports and investigate any issues
  • Reconcile and review credit card statements
  • Reconcile accounts payable sub-ledgers
  • Pay client’s bills weekly 
  • Bank statement reconciliation
  • Journal and data entry (coding)
  • Provide clients with weekly & monthly reports
  • Weekly accounts receivable aging
  • Prepare and issue invoices
  • Process ACH/credit card transactions
  • Identify delinquent accounts and insufficient payments
  • Reconcile deposits, transactions, and bank statements
  • Resolve discrepancies in customer accounts
  • Provide the weekly aging report to the client
  • Maintain up-to-date accounts receivable records
  • Reconcile customer balances
  • Weekly accounts payable aging
  • Enter all vendor bills and expenses into the accounting software
  • Process bill payments through a 3rd-party bill pay system, like bill.com
  • Review, code and process vendor bills
  • Maintain vendor database and vendor balances
  • Verify W9 completion
  • Review expense reports and investigate any issues
  • Reconcile and review credit card statements
  • Reconcile accounts payable sub-ledgers
  • Monthly aging 
  • Monthly balance sheet 
  • Monthly P&L
  • Monthly budget to actual
  • Monthly statement of cash flow
  • Custom reports 
  • Maintain and manage the chart of accounts
  • Debit/credit card reconciliation
  • 1099 preparation
  • Payroll, including working with a verified vendor to set up the payroll account, schedules and processing

Basic Bookkeeping Costs

So you’ve concluded you can’t afford your own hourly rate to keep doing your bookkeeping. Bravo!

And you’ve learned that a full-time accountant isn’t the best use of your money – and their time. Bravo pt. 2!

Now, let’s lay the argument of in-house vs. outsourced bookkeeping squarely on what this looks like in application – with real dollars-and-cents.

On average, remote work is very often cheaper for employers – reportedly $11,000 cheaper – when instituted on just a part-time basis. 

But let’s break it down a little further, shall we? Let’s compare the cost of an in-house bookkeeper vs. an outsourced bookkeeper. But keep in mind that these numbers are industry averages, and are subject to variables, like your location.

 Full-Time In-House Bookkeeping Costs

On average, a full-time in-house bookkeeper’s annual salary is roughly $45,000 but unless you actually need full-time bookkeeping – and we’re guessing you don’t … yet – you’re paying for more hours than you need.

Then, overhead costs add an additional 20 percent on top of an employee’s base salary and include … 

  • Payroll Taxes
  • Medical/Benefits
  • Retirement Plans
  • Vacation/Sick Days
  • Placing Ads
  • Screening Interviews
  • Testing and Training

Outsourced Bookkeeping Costs

On average, outsourced bookkeeping services cost anywhere between $500 to $2,500 a month for small and medium businesses depending on the hours you need each month. 

Even at the top of the range – $2,500 per month – it would cost your business $30,000 a year. And BONUS! Outsourced bookkeeping comes with none of the a la carte overhead expenses.

 

The Indirect Costs of DIY Bookkeeping

If you’re like most entrepreneurs, you’ve got nothing but free time to enjoy specialty mini-umbrellaed drinks poolside, right?

“What’s ‘free time,’” you ask?

Oh, that’s right. There are barely enough hours in the day of a busy entrepreneur to remember to drink anything, let alone lounge. The ever-elusive ‘free time’ is about as attainable as stumbling across a leprechaun riding a unicorn: It just doesn’t exist.

But those hours you spend managing receivables and accounts payable, preparing tax documents, and creating budgets? They add up. So as we said before: If you don’t have a bookkeeper, you are the bookkeeper.

So here are just three reasons why you can’t afford to not outsource to a virtual bookkeeper:

It’ll Cost You Money

This one should really go without saying but … we’re saying it. Not managing your finances accurately will cost you money. You could end up making a huge mess and, potentially, some seriously costly mistakes. The nitty-gritty costs …

It’ll Cost You Time

As a business owner, you’re acutely aware of how precious a commodity time is. But what you might not realize is that putting bookkeeping off can cost exponentially more time.

But we get it. You’re fearful that you don’t have the expertise to get it all done – and get it all done accurately – so you put it off so that you’re not revealed as incapable. You figure not getting it done is better than trying and failing. The nitty-gritty costs …

It’ll Cost You Peace of Mind

Maybe you’re afraid of math. Maybe you’re afraid of the information in your financials. Maybe you’re afraid of failure. You know that when it comes to numbers, the results are binary. It’s right or it’s wrong. It’s black or, in this case, red.

For more on exactly what it’ll cost you to not do your bookkeeping, check out The Cost Of Not Doing Your Bookkeeping.

 

How To Hire The Right Bookkeeper

Now that you have a better idea of what you’re looking for, here are five questions to ask to make sure you hire the right bookkeeper for your business.

1. What is the average length of time that your bookkeepers stay with your organization?

Why this is an important question to ask: Having high turnover on your account is concerning as it makes you feel like you’re always starting over. And without a smooth transition, concerns about whether the details were transferred correctly can further compound your worry.

At BELAY, our current length of service with our bookkeepers is 25 months – though we have many bookkeepers that have been with us five years and more.

2. Will I have one bookkeeper or a team working on my account?

Why this is an important question to ask: Many competitors use a team of people to serve their clients so clients never know who to call or who is doing what on their account.

At BELAY, you have one dedicated bookkeeper that completes all work on your account. We are intentional in our placement as we want the bookkeeper to be a great fit for your team. We’re talking The One here.

3. How are your bookkeepers qualified?

Why this is an important question to ask: It’s paramount to know that your bookkeeper is qualified to manage the financial vitality of your business.

At BELAY, we prefer that our bookkeepers have bachelor’s degrees or five years’ experience – or both. In addition, they must complete an online assessment created in conjunction with eSkill to ensure all candidates have the content knowledge and skills required to pay clients’ bills weekly, reconcile bank statements, manage budget and cash flow, provide weekly and monthly reports, maintain accounts, and more.

4. How long have you been providing outsourced bookkeeping?

Why this is an important question to ask: You don’t want to hire a yet-untested company with unproven processes. You want a company that has a secure infrastructure for handling your sensitive financial information with success stories from their clients

At BELAY, we’ve provided remote services from all over the U.S. for 10 years. We work hard to evaluate the necessary tools and technologies that support remote work relationships while providing the key checks and balances needed in bookkeeping.

5. Are there additional fees that I may be charged?

Why this is an important question to ask: Make sure you understand all the possible fees that could be added to your monthly invoice. Be sure to ask if there are additional fees for more transactions, calls with your bookkeeper, or additional report requests.

At BELAY, our model is a set subscription paid on the first of each month. That subscription is set and based on an agreed-upon scope of work, and will not incur additional fees based on transactions or report requests.

For more on how to find a good bookkeeper, check this out.

 

Stop Doing It All Yourself. We Can Help.

Whether you’re a church, nonprofit, or small business, managing your bottom line is the difference between success and failure.

Accurate monthly and annual reports of financial data allow you to effectively run your company, enable you to better analyze operations, and help inform all business decisions.

So if you’re ready to wave the white flag on handling your red and black margins, let one of BELAY’s experienced remote bookkeepers help.

You’ll regain your peace of mind – and wonder why you waited so long.

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Related BELAY article: You’re Not Still Doing Your Own Bookkeeping, Right?