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Understanding the Cost of Accountant for Small Business

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Financial management is an important but sometimes challenging factor for small businesses to address on their way to stable development. However, there are cases when the price of small business accounting services becomes a problem for new and small business individuals when getting the necessary professional help. 

The upcoming sections will reveal the hidden value behind accounting costs, discussing the features of Tax and accounting services, Payroll services, and Financial reporting. MMBA is now available to help you understand where these small business costs come from, how to get the most from your funding, and how accurately accounting can support your business. 

Table of Contents

Cost of Accountant for Small Business

The cost of an accountant for small businesses depends on the types of services and their intensity. The cost of accountants ranges between £50 and £450 per month, depending on business size.  

A small business that only needs to perform basic business account maintenance, such as monthly bookkeeping or an end-of-the-year report, might incur significantly lower costs than a business that needs tax planning services, payroll service, or corporation tax returns.

Assistance in ensuring compliance, managing money, and cash flow, and saving the time of the owners in the business makes accounting services essential for the business. Normally, the cost of an accountant for a small business ranges between £50 and £150 for an hour in the UK and maybe more depending on the service provider and the services offered to a business. 

However, service packages can be more useful for situations when a company requires constant help in accounting. The cost of accounting for small businesses in the UK depends on various factors, such as the size of the business, the services required, and the location. 

Here are some things to consider: 

Monthly fees

For smaller businesses, monthly accounting fees can start at under £50. Sole traders can expect to pay between £100 and £150, start-upstart up businesses typically incur fees of £300 to £400, and established businesses may face costs ranging from £500 to £1,000. 

Hourly rates

The average hourly rate for small business accountants in the UK is around £35 to £100 but can range from £15 to £150+. 

Tax return

Self assessment accountant fees for an annual tax return typically range from £150 to £300.

Other factors

The complexity of the financial transactions, the number of accounts that need to be managed, and the experience and geographic location of the bookkeeper can also impact the cost. 

You can also access accounting services for free through DIY methods, or free accounting software for small businesses in the UK. However, DIY accounting isn’t suitable for every business.

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Understanding Accounting Services for Small Businesses

Small businesses in the UK can access various accounting services which include daily bookkeeping, long-term tax advice and business planning advice. Key services often include:
  • Bookkeeping: This fundamental accounting service helps business organisations monitor their income and expenditure, hence the financial position of the business. Though it is possible to handle accounting in-house, especially if the business is very small, accuracy can be best handled by professional bookkeepers.
  • Tax Planning and Preparation: A Small business files annual tax returns and may find it helpful to get accounting advice on how to minimise their tax. This includes financial planning for tax deadlines, identifying deductions, and adhering to tax avoidance legislation.
Avoid missing deductions by hiring a tax adviser or accountant to manage taxes effectively.
  • Payroll Services: Payroll management should be done as carefully as possible to avoid fines or penalties on employees and employers. Accountants can also provide advice on accounting software you might use for payroll, some tasks may be accomplished through accounting software automatically.
  • Annual Accounts and Financial Reporting: Annual Accounts and Financial Reporting: Every company needs to prepare annual accounts according to Companies House rules, which include a profit and loss statement and balance sheet.

Comparing Accountant Fees: Fixed, Hourly, and Monthly Rates

The first thing small business owners would like to know is how accountants can package their services. The cost of an accountant can be affected by the billing method, which might be based on:

  • Fixed Fees: This structure is usually simple and easily predictable business services, such as annual tax preparation or payroll processing, as it gives firms a clear picture of expected expenditures.
  • Hourly Rates: Often used for advisory or strategic planning, such as tax planning or consultations. This can vary widely depending on the complexity of the business.
  • Monthly Accounting Packages: Many businesses prefer a monthly fee that includes multiple services, such as regular financial reports, tax advice, and payroll, which offers comprehensive support.

Importance of Accounting for A Small Limited Company

For any small limited company, accounting is more than a compliance exercise, it is an essential business tool for control, evaluation, efficiency, and planning. 

Here are some of the key reasons accounting is essential for a small limited company:

Financial Clarity and Management

Accounting provides a guide on a firm’s financial health ranging from cash management to profits. This is important in business performance monitoring, it helps small businesses ensure that they make the necessary changes to the expenditure to ensure the business is financially stable.

Tax Efficiency

Proper accounting helps small limited companies make the most of tax allowances and deductions, ensuring they pay only what’s required. Hiring an accountant to help with strategic taxation will enable them to manage their financial flow, especially when it comes to a limited company that is eligible to register for corporation tax relief or VAT.

Take Informed Decisions

Accurate financial information enables the owners of a small business to appropriately invest, set their prices, and expand. Accounting data plays a crucial role in creating a strategy as the business grows. 

Secure Funding and Investment

Another important aspect of accounting is its function of presenting financial health to investors and creditors. Well-maintained professional business records are handy in sourcing for funds or attracting potential investors, in a bid to show the company’s stability and growth.

Long-Term Business Growth

Accounting is not just about good record-keeping, it lays the foundation for scalability. Commitment to sound financial methods will help a small limited company expand into a larger organisation without problems, indicating sustainable growth.

In summary, for a small limited company, accounting is essential not only for meeting legal requirements but also for building a financially sound business equipped for growth.

What are the factors affecting how much accountants charge?

The price of an accountant for a small business is diverse, some factors determine the final amount that one will be charged. 

Below are some of the key considerations:

Business Structure

The kind of business you operate also determines the accountant cost, whether you are a sole trader, a limited company, and so on. Limited companies also have higher accounting needs than the sole trader which results in high accountant costs. Sole traders, on the other hand, require simpler and more affordable methods for doing their accounts.

Type of Services Required

Accountants provide a wide range of services from payroll fees, and tax returns, calculating the annual turnover of a business as well as offering business insights. Small businesses need only specific services such as payroll, while others may need more comprehensive accounting packages to meet their business needs. 

There are many firms that have chosen to adopt a service-by-service fee structure through which small businesses can hire the services they need.

Frequency of Services

The frequency that a business demands accounting services, whether daily, weekly, monthly, quarterly, or annually helps determine the accountant’s cost. For example, ongoing services like payroll or frequent financial statements may have different fee structures compared to one-off services.

Level of Experience and Specialization

Different accountants charge differently based on experience and specialisation. A good accountant with experience in your industry can offer expert advice, especially if your business is in a niche field. If it is a limited company ensuring compliance and corporation tax returns, for example, hiring the right accountant can be of great help.

Firm Size and Location

It is seen that the size and geographic location of accounting firms may sometimes affect fees. It is also evident that large accounting firms charge more because of their resources, and name while local or other small firms may offer cheap rates with the objective of attracting small businesses. 

However, there may be differences in the level of services that are offered and the level of expertise that is offered.

DIY accounting-All You Need to Know

It is important to note that costs can be unpredictable when carrying out accounting activities with your supervision because you perform the tasks yourself using available tools and systems. 

Here are some of the direct and indirect expenses you may encounter:

Firm Size and Location

It is important to note that costs can be unpredictable when carrying out accounting activities with your supervision because you perform the tasks yourself using available tools and systems. 

Here are some of the direct and indirect expenses you may encounter:

Accounting Software

  • Some basic free tools include Wave Accounting which provides small business features or for the sole trader.
  • More advanced accounting software, like QuickBooks, Xero accounting system, or Sage, typically costs between £10-£50 per month, depending on features.

Payroll Software

  • Mandatory if you have employees, to deal with the payment of wages, taxes, and other deductions.
  • Subscription payroll fee varies between £5 and £30 depending on the number of workers in a company and software features.

Expense Tracking Apps

  • Some of the useful applications for expense tracking applications are Expensify and Receipt Bank.
  • Monthly fees range from £5-£15.

Indirect Costs

  • Time Investment: Managing and learning accounting yourself is time-consuming and will take time from other important business activities.
  • Risk of Errors: Mistakes, missed deadlines, or audits can lead to penalties and fines, potentially outweighing the savings of DIY accounting.

While, doing accounting yourself might be cost-effective, uncalculated or hidden costs might affect your business, and risky chances of making wrong estimations, make it necessary to employ the services of an accountant.

Essential Business Accounts-What Small Businesses Need to Maintain

Maintaining proper company accounts is highly important for the successful operation of any enterprise and its compliance with legal requirements. For a small business, this typically involves maintaining:

  • Profit and Loss Statements: The process of tracking income and expenses serves to evaluate the organisational revenue and expenditure, monitor one’s spending, and make informed decisions.
  • Balance Sheets: This represents the financial statement of the business showing the assets, liabilities, and equity of the business.
  • Cash Flow Statements: It is crucial in the analysis of cash receipts and cash payments as cash flow remains a key concern to most small businesses.

A good accountant will help with these, ensuring the company’s financial data is reliable, up-to-date, and compliant with UK regulations. Additionally, well-maintained financial accounts can aid in securing funding, as investors or lenders look for accurate financial data when assessing risk.

Tax Planning and Compliance-Preparing for Tax Returns

Tax planning is one of the fields in which professional accountants could provide significant value. Tax optimisation enables small businesses to claim as many deductions as possible and pay as few tax bills as possible while adhering to the law.

Chartered accountants help manage taxes by providing specialist services for:

  • Corporation Tax and VAT Returns: For limited companies, corporation tax returns are paid annually, however, the VAT returns should be submitted either quarterly or on an annual basis depending on the annual turnover.
  • Self-Assessment Fees: To sole traders and freelancers, accountants assist with self assessment returns as these include real and accurate records of income and allowable expenses.
  • Quarterly VAT Returns: Bookkeeping for VAT involves a lot of time, and accountants submit them on time and correctly to avoid fines.

Conclusion

Accounting plays an important role in the performance and development of any small business organisation. Accountants do more than number crunching, they offer compliance and tax services, consulting services, and many other services. 

MMBA’s team provides a variety of professional services for UK small businesses that help to make financial management easier and more efficient. By understanding the costs and choosing the right service package, business owners can not only save time and money but also gain peace of mind, knowing that their finances are in capable hands. 

With the right accounting support, small businesses can focus on what they do best while their accountants handle the financial details that lead to long-term success.

FAQs About Cost and Management Accounting

Is it worth getting an accountant for a small business?

Yes, hiring an accountant can offer great value to a small business, as they offer expertise in financial management, tax planning, and compliance. By hiring the right accountant, businesses can save time and reduce errors. Accountants also provide insights that can support business growth and ensure you’re meeting regulatory requirements.

In the UK, an accountant for a small business will cost anything between £150 – £300 a month for a basic service. It is an important aspect that is highly relative to the level of service which can encompass bookkeeping services, preparing tax returns, or full management of the company’s financial affairs.

Generally, UK accountants request between £100 to £500 to complete and submit a VAT return depending on the complexity or the number of transactions. Some accountants are known to provide VAT services by incorporating it as part of a monthly service offering to clients.

While setting the hourly rate, accountants in the UK can earn between £25 to £150 depending on the number of years they have been in the field, their geographical location, and the type of service they offer. 

In the UK, a small business audit can cost as little as £1000 and as much as £5000. Its price depends on the size of the business and on the degree of the audit needed. For larger or more complex audits, the fees may be higher.

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