How much should you pay for bookkeeping for your business? That’s like asking how much you should pay for your next vacation. Are you traveling around the block or around the world? Are you staying at the Ritz or the Holiday Inn Express? One isn’t better than the other (all right, the Ritz is better than the Holiday Inn). But different people want and need different things – and the price changes based on that.
Nobody likes to hear “it depends” – but when it comes to the price of bookkeeping – it depends.
What does it depend on?
Let’s start by defining the “basic” level of bookkeeping – the absolute minimum you should get if you hire someone to help you with the books. Any bookkeeper should at least:
- Record transactions from your bank accounts and credit cards to the proper accounts in your accounting system
- Reconcile these bank accounts and credit cards against month-end statements
That’s it. And for some people, that is all they need. Maybe you are just trying to get a tax return prepared and you don’t need anything more complicated than that. There is no reason to pay for a higher level of service if you don’t need it.
But what factors would increase the price you pay for bookkeeping?
Six Things that Increase the Price of Bookkeeping
Frequency
How often do you need your books updated? How often do you want to be able to review the numbers to see how your business is doing? Modern accounting software promises “real-time” updates but somebody still needs to review everything to make sure it is working. Some businesses need the books updated every day so they can make business decisions. Others only need the books updated once a year to get the tax returns done. Most businesses are okay with a weekly or monthly schedule. The more often your books are updated, the more you will pay.
Software Subscriptions
Most online accounting software packages come with a monthly subscription (please don’t tell me you are using desktop software). There may also be several complementary software systems that your bookkeeper uses to make everything run smoother. Some bookkeepers will include the costs of these systems in their price – so be sure to understand who is paying for what.
Cash vs. Accrual
When your books are kept on the cash-basis, transactions are recorded when they show up on the bank statement. So if you make a rent payment in June, it shows up in June – even if the rent is for July. In accrual-basis accounting, the bookkeeper attempts to record income and expenses in the proper period. This is more difficult than cash-basis accounting since you have to know more about each individual transaction. So accrual-basis accounting is going to be more expensive.
Complexity
Some businesses have more complex accounting issues than others. There are countless things that might make your business more complicated, but the most common are:
- Inventory – if your business buys items for resale your bookkeeping will be more complicated – even more so if your business makes products from parts
- Projects and/or Departments – if you want to calculate your profit for specific projects or departments, expect to pay more
- Software Integrations – if you have programs other than the accounting software that you use in your business (maybe for inventory, or online sales processing, or payroll), this information needs to get into your accounting system and it can cause major headaches
Add-On Services
There are many services that fall under the general heading of “bookkeeping” that go beyond the basic definition that we gave above. Some bookkeepers will include them – some won’t. But you should expect to pay more if they are included. Some examples are:
- Sales Tax Compliance
- Payroll Processing
- Bill Paying
- Customized Reporting
- Document and Receipt Management
Consulting
All of the services that we have mentioned so far will help you get an Income Statement and Balance Sheet for your business. But what if you need help understanding the numbers? What if you are looking for advice on how to improve the numbers? What if you need to figure out how long it would take to pay for your new equipment purchase? You shouldn’t expect to get much help in these areas if you are paying for basic bookkeeping services. So if you need them, they will cost extra.
Enough already – how much should I pay?
You can probably expect to pay anywhere from $200 – $500 per month for basic bookkeeping. Each level of complexity and each add-on service is going to increase that price, so you might end up paying $5,000 per month or more. The important thing is to understand what is included in the price – make sure you are comparing apples to apples if you are getting several price quotes. It isn’t uncommon to get a quote of $250 from one bookkeeper and $1,500 from another because they have different definitions of “bookkeeping”.
While we can’t tell you how much you should be paying for your bookkeeping, hopefully, you now have a better idea of what drives the price of your bookkeeping so you can make a smarter decision about who to choose for the job.
