Cost to Hire a CPA for Small Business

by | Apr 29, 2021 | Taxes, Cash Flow Management

Cost to Hire a CPA for Small Business

Accounting plays a vital role in expansion for small businesses, especially if running on a limited budget and resources. However, only 40% small business owners know about finance and accounting. This statistic shows the need for professional assistance from certified advisors, but deciding what type of service would benefit you the most is difficult. You cannot pick one of them as all the professionals: accountant, bookkeeper, CPAs, and financial planners are vital for maintaining and analyzing the financial data of a small business. CPA cost may, however, make you think twice, but this is the centerpiece for beginning building wealth for small business owners. This article will dissect the importance, the cost of hiring, and how often you should engage with these individuals to optimize your wealth at the most important times. 

Difference between a CPA, Accountant, Bookkeeper, and Advisor

The professional skills of a CPA, Accountant, and Bookkeeper are often confusing. They are similar yet different in many ways. The most important similarity is that all of them are integral to the success or failure of a business. 

Let’s start with CPA – Certified Public Accountant

A CPA is a certified accounting professional who helps businesses prepare and file taxes. In addition, they typically furnish the following services when working with an organization:

  • Audit and Assurance services
  • Tax advice and Planning
  • Consulting and Management
  • Forensic accounting

An accountant is a professional who records business transactions and reports the management on the company’s performance. In general, he does the following:

  • Analysing financial records
  • Creating financial statements
    • Cash Flow Statement
    • Profit Loss Statement
    • Balance Sheet
  • Resolving accounting discrepancies

A bookkeeper is a financial professional who helps businesses maintain their finances in order. The core responsibilities of a bookkeeper involve:

  • Data entry
  • Bank reconciliation
  • Monthly reports

Many times CPA firms that have a team associated with it will be able to help provide the first three services. They likely bill different amounts for the different types of services they offer, and will work with you to coordinate your understanding of the revenue you make, tax you owe, and analysis of your cash flow so that you can then plan your own personal finances as well.

A Financial Advisor helps small business owners by providing  guidance on how to coordinate the full financial picture with both the business and your family’s finances. Since this is less within the scope of this article we will address this in more detail at a different time.

Let’s understand this with a more in-depth insight into each one by one’s roles and responsibilities that a CPA firm may provide.

What does a Bookkeeper do?

Bookkeepers are responsible for creating sales invoices, following up on an invoice, processing payroll information and monitoring debits and credits. Besides this, they monitor debits and credits, send invoices to vendors and statements to customers, ensure correct payroll information by the employees and record subsidiaries, ledgers and historical accounts.

What does an accountant do?

An accountant analyzes accounts, prepares audits, determines and adjusts wages for employees, and verifies ledgers or financial software’s financial information. They also prepare cash flow statements, balance sheets, tax returns and income statements and oversee bookkeeper’s work.

What does a CPA do?

A CPA evaluates transactions, prepares reports, updates and organises financial records, conducts regular audits in financial documents, investments and expenditures, manages accounts receivable/payable and forecasts revenue. They work closely with tax accountants to monitor tax returns and tax payments and prepare the budget. They also oversee bookkeeping activities and brief management on the company’s financial status to help business owners make good financial decisions.

How are a CPA, an Accountant and a Bookkeeper similar and different?

CPA and Accountant: All CPAs can be called as accountants, but not all accountants are CPAs.

However, an accountant requires a bachelor’s degree with specific semester hours dedicated entirely to accounting classes and a work experience under a CPA. Whereas a CPA earns license to work only after a specific education and passing an exam. 

An accountant can prepare documents for tax return but it is the CPA who has the knowledge of tax codes and is authorized to represent a company or individual before the IRS, if an ever occurs.

Additionally, in the United States there can be strict requirements for large publicly traded companies which require their financial statements to be audited annually, and only a CPA has the authority to produce the appropriate credible documents to satisfy the requirement.

Accountant and Bookkeeper: These two are often viewed as similar because one firm often provides both of these services behind the scenes. Their duties hardly overlap, however they they work closely together to maintain the financial health of a company. 

Both are responsible for maintaining a company’s financial records and taking care of the accounting needs’ bookkeeping functions. In simple terms, a bookkeeper keeps records of the financial data while an accountant may analyze, interpret, report and summarize this financial data.

CPA and Bookkeeper: A CPA can also perform bookkeeping functions in a company besides his own duties. Both the professionals evaluate financial data, work on income tax returns and advise on general tax filing. 

While a bookkeeper looks after day-to-day cash flow within a company, a CPA reviews them every month, quarter and year, and for various reasons, a business must consider the services of both. This is why we recommend working with a firm who can serve all your needs to help simplify your financial life to coordinate with only one financial professional to start.

In addition to their roles and responsibilities during regular operations, each plays a specific role in tax planning and filing for the company you run. 

Role In Tax Filing 

Accountants are responsible for reviewing financial statements to maintain their accuracy. This is necessary for fulfilling laws and regulations for filing taxes. 

On the other hand, a bookkeeper is involved recording transactions such as accounts payable, accounts receivable, payroll and payroll taxes, inventory and preparing monthly, quarterly and annual reports. Lastly, they support the CPA with well-maintained records but cannot file taxes. 

And finally, a tax accountant is a licensed professional responsible for filing federal and state income tax returns. Often these individuals only file the information you provide, and may not provide planning advice. This is why we always recommend working with a team that provides these comprehensive services, and offers tax planning advice. 

All in all, you need all these professionals for smooth functioning of your small business. These costs may be deterring at first, but once your company is producing a profit one of the best reinvestment choices you can make is into a team that helps you understand the financials of your company. If deterred by cost at first sight,  remember, you would have to perform the other  duties yourself, which can be a daunting task and provide nearly zero analysis of your financials from a professional.

CPA: Benefits and Cost 

CPAs are typically for companies that need to understand their business finances to make better decisions on how to invest back into your business. Remember, even a small business needs a CPA. A qualified CPA can help with different incomes and financial conditions. Here are some of the key benefits you get with a CPA.

Managing Business Assets

The primary role of a CPA is that of an auditor. They are well equipped to manage business data, an essential business asset that includes enormous information about the business’s performance, consumer behavior of products or services and the market. 

A CPA safeguards the data, analyses it, and offers information-driven solutions to run and grow the business.

Cut Back on Business Costs

Running a business involves enormous expenditures, and business owners always look for ways to increase their profit margin. A CPA service can help alleviate certain expenses to ease your financial burden by showing you ways to optimize your taxes. There are several ways CPAs do this. A CPA hired to file taxes can save from filing incorrect taxes, resulting in penalties, fines or unpaid dues. Additionally, something as simple as switching your company structure could save you thousands in taxes, immediately covering their cost and still saving you additional money.

Making Critical Business Decisions

CPAs are one of the few who are aware of the acute financial performance and nuances of a business. They utilize this data to help in decision making by advising you when and how much to invest in a specific venture. According to OnPay, 61% of small business owners trust advice given by their accountant, and with good reason.

We recommend working with a CPA because small business and it’s owner can benefit from the professional experience and expertise in interpreting the financial data for making informed decisions. 

Filing Taxes

The most essential benefit of hiring a CPA is the professional assistance they provide when filing taxes. They are qualified, licensed and experienced in tax filing and the processes and services involving tax preparation. When picking a CPA, make sure that they have a preparer tax identification number (PTIN) from the IRS

For a small business, CPA cost can vary from a few hundred dollars up to to $5,000 – $10,000 per year for assistance for a small business. The entire accounting cost is dependent on the role, service provided and business structure and can vary from one situation to another. You may choose to get hourly services or have a permanent involvement as per your budget.

Accountant: Benefits and Cost 

You may wonder, “how much is an accountant?” Well the better question to ask is how much will it improve my situation to hire a CPA, and what is the cost to receive that benefit? An accountant focuses on helping you build reports and tracking the finances of your business, as well as provide advanced tax services at times. Here are some of their roles discussed in some detail. 

Save you time

While as a small business, you are involved in several operational roles that eat up a significant chunk of your time. It is wise to hire an accountant and bring in his expertise to handle the company’s accounts. This provides you with extra time to focus on other things. You will also be at peace when finances are being monitored consistently by a professional.

Opportunities for networking

Though the primary responsibility of an accountant is financial management, they are also capable of making you connect to potential clients. Or at least nurture connections useful in growing your business. A business can thus make sound judgement in this context. 

Update Financial options

For a small business, it is essential to have in-depth knowledge about your financial options. He is the man with forecasts of gains and losses. And this isn’t required only in times of crisis, but also when to invest and seal an opportunity. An accountant helps you prepare for both the correct financial perspective to move or not to move and precisely when.

Support Business Plan

Business plans are essential for a small business to raise funds and manage cash flow every month. Accountants can help create these documents and lend support in including the financial details needed to showcase to creditors and potential investors.

How much is an accountant charging these days? An accountant hourly rate is around $20-30, but for premium advice can be $40-50 per hour. 

Bookkeeper: Benefits and Cost

An individual with expertise in finance and bookkeeping can support your small business in a myriad of ways.

Save Time for Vital Business Operations

A business can rely on a bookkeeper for managing the tracking of all financial components. A professional more adept at tracking expenses, paying invoices on time, processing payroll and writing checks is a far better choice than handling all by yourself. It saves you ample time to focus on more critical business operations, and your main job as a business owner of producing revenue.

Create a better budget 

Going overboard with expenditure and without documenting can put an entire budget array. A bookkeeper monitors your expenses and the revenue generated. This will in turn inform you about your business spending, and supports you in operating the business smoothly.

Better Relationships

A bookkeeper ensures the smooth running of your accounts payable department. Invoices are handled well. It proves valuable when faster payments convert to more discounts. Such timely actions help in building good relationships. It may make suppliers and partners happier to keep doing business with you.

Tax Predictions

For tax filing, the IRS may ask for an official financial statement. If you have all the balance sheets, it will become easy for you to predict the result. A bookkeeper instills confidence in you as you know how much you may have to pay in taxes by the end of the fiscal year. 

An average hourly rate of a bookkeeper starts from $15-30 per hour, and it may go up as the complexity of services increase on a regular basis, with premium services costing up to $45 per hour. 

Bottom Line 

As a small business, managing your budget is crucial for growth. Filing correct taxes ensures a smooth ride. One of the facets attached to is tax filing is a tax deduction. You may or may not be aware of the right tax deductions that apply for your business. A professional with experience and expertise can help and support you to navigate it. Therefore a professional is needed, whether you are a freelancer or a small business the cost of these professionals, especially a CPA cost you should embrace paying as an investment in your business.

About the Author

Aaron is a financial planner who is passionate about helping small business owners create wealth in an efficient way. Helping you define your vision for a wealthy life in both money and lifestyle, Gig Wealthy helps you reduce taxes, manage cash flow, and optimize retirement savings with strategies advised by world class financial panning firms.