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How Much Should A Small Business Spend On Accounting

How Much Should A Small Business Spend On Accounting?

If you run a small business, you might have been advised at some point to hire an accountant. What is an accountant? The online Cambridge Dictionary defines an accountant as “someone whose job is to keep or examine the financial records of a company or organisation”.

Having read this, you might be wondering why you couldn’t just directly handle your company’s own day-to-day accounting operations rather than outsource them to an external company. After all, the latter approach would entail adding more to your company’s financial outgoings.

However, there is much more to accounting than you might have assumed. For this reason, attempting to keep all of your company’s accounting duties in-house could lose you or your employees a lot of time that would be better spent on other aspects of the business.

So, the important question could be less whether you should hire an accountant, and more whether it would be practically viable for you to not hire one. If your small business does decide to utilise accounting services, though, how much should it pay for the privilege?

What does an accountant do?

As we have implied, an accountant does a lot more than simply check data now and again to make sure it paints a rosy picture of your company’s financial health. Here are several important duties an accountant would be able to fulfil on behalf of your small business:

  • Track and manage financial resources: You need to know not only what money is coming in (revenue) and going out (expenses), but also what this all means for your profitability and cash flow. An accountant can calculate — and provide you with — all of these figures.
  • Keeping your company legally compliant: Failing to file tax returns on time, maintain proper bookkeeping records or adhere to proper accounting standards can risk your small company being hit with penalties that would hurt your brand image.
  • Tax planning and optimisation: Your company could be eligible for tax deductions and exemptions that would enable you to reduce your corporate tax burden. You would be able to trust an accountant with spotting — and acting on — these opportunities for your benefit.

All in all, an accountant’s insights can aid you in making informed decisions about how you should run your business. For example, when you can see areas where your company is falling short financially, you could devote more of your time, effort, and resources to addressing these problem aspects.

How much is an accountant for a small business in the UK?

Most accountants in the UK charge a monthly fee in the region of £150 to £300. In practice, though, exactly how much your small business is required to spend on an accountant will depend on a wide array of factors — including:

  • What specific accountancy services you opt for: Although you can streamline your expenditure by opting just for ‘core’ services like payroll processing and tax return submissions, you might want to pay extra for such add-ons as business advisory services.
  • Quality of the service: What if you only need a simple individual tax return? You could be surprised by how significantly the price of this varies depending on where you get it from — but you have to remember that some accountancy firms are a lot more reliable than others.
  • The size of your business: How much money does your business make? How many employees does it have? Basically, the larger your business, the more financial data it will inevitably have — leaving the accounting professional with more to sift through.
  • The accuracy of your business records: Keeping your books in order — especially if your company’s income stream is unpredictable — will give the accountant less work to do, meaning they can get the job done sooner and at a lower price as well.

Some accountants can be conveniently flexible with how they charge you — such as by imposing an ad-hoc fee or letting you pay one fixed price for an entire year of accountancy services.

Choosing an accountant

As is the case when you are trying to choose any other type of service provider, it would be ideal for you to look for online reviews of the services on offer. You could also get in touch with the accountant that you are considering, or their company, to ask questions on such matters as:

  • Whether the accountant would review — and report back to you about — your small company’s current accounting processes
  • How the accountant would prepare you for the tax year
  • Whether you will be given access to just one dedicated accountant or a larger team of professionals
  • How the accountant would assist you in optimising your corporate taxes
  • How the accountant would prevent you from missing tax return submission deadlines

It would also be wise to ask about the accountant’s relevant background. For example, if you are looking for an accountant in Ipswich, you can take comfort that here at ST Accountancy, we have worked in the financial sector for years, and have developed invaluable contacts with industry professionals in this time.

How much should a small business spend on accounting?

You might now have a general idea of how much your small business would typically be charged for accounting services, but how much should it be charged? In other words, where is the sweet spot — a price that reflects expertise on the accountant’s part, but that also remains value for money?

It is possible to pay an accountant an hourly rate for their services. If this is an attractive route for you to take, you can realistically expect that rate to be somewhere between £50 and £150.

However, it bears emphasis that some accountants who are especially experienced and hold a relatively high number of relevant qualifications could be inclined to charge more than this upper threshold — in which case, their services could prove to be well worth the additional outlay.

How ST Accountancy can help

Our own experienced accountant management firm in Ipswich can serve small businesses right across Ipswich and the rest of East Anglia. To learn more about our specialist expertise and pricing structure, please reach out to our team by calling 01473 561035 or emailing [email protected]. You can also use our cost calculator.

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