How Much Will Bookkeeping and Accounting Cost for My Small Business?

How much do bookkeepers and accountants charge for their services?  As usual, the answer is it depends, but this article will provide information on the traditional hourly billing method as well as how we price our services here at Avalon.

If you want to skip all of the reading and view our pricing examples, click here.

Topics in this article include:

  • What is the difference between bookkeeping and accounting?

  • What are the costs under traditional, per hour billing for bookkeeping and accounting?

  • How much does Avalon charge for bookkeeping and accounting?

What is the difference between bookkeeping and accounting?

To understand pricing, it's helpful to know the difference between bookkeeping and accounting.  These two terms are often used interchangeably, but there is a significant difference between bookkeeping and accounting services.

Bookkeeping
We have written in detail about what a bookkeeper does in Canada, but the very basic function of a bookkeeper is to record the transactions of a business in a consistent way.  This includes:

  • Recording financial transactions and reconciling accounts at the end of each month or week

  • Recording and paying bills on their due date

  • Creating and issuing invoices

  • Processing and recording payroll

  • Tracking sales taxes (GST / HST / PST etc.), and filing returns

The bookkeeper is in charge of making sure that all transactions are recorded accurately.  The complexity of this job depends on the size of the business, number of transactions to be recorded, and the nature of those transactions.

Accounting
Accounting can be described as processes that use the information recorded by the bookkeeper to produce higher-level information and reports.  Examples of these services include:

  • Preparing adjusting entries to record information such as inventory adjustments, tax estimates, and other accruals (expenses that have occurred but aren’t yet recorded by the bookkeeper)

  • Preparing and analyzing financial statements to help the business owner make decisions

  • Completing income tax returns

  • Tax planning

  • Business advisory

Accountants aim to provide business owners with an understanding of their financial reporting to drive intelligent, informed decision making.  They also play a key role in reducing taxes where possible. At Avalon, we also add empathy and even emotional support to the role of an accountant; it can be a lonely road running a business, and we want to help entrepreneurs thrive however we can.

Traditional costs of bookkeeping and accounting (billed hourly)

The traditional and most common method of charging for bookkeeping and accounting services is using an hourly rate.  The bookkeeper or accountant will track the time they spend on your business in increments of 0.1 hours, add up the time spent and then apply their hourly charge-out rate. BOOM, there’s your bill!  This means that you are on the clock anytime your bookkeeper or accountant answers your phone call, responds to your email or works on your file in any way.

At current market rates, you’ll find a range of hourly rates:

  • Bookkeepers charge between $25/hr and $80/hr

  • Accounting work completed by a CPA, you’ll find a range of $150/hr to $450/hr

This means that the bill for services provided will vary depending on how long it took your bookkeeper or accountant to complete those services.  Based on current market rates, you’re likely to see the total cost for services fall within the following ranges:

Bookkeeping

  • Startup Business - $100 to $300 per month

  • Small Business - $300 to $600 per month

  • Medium Business - $600 to $2,000 per month

  • Large Business - $2,000+ per month

Accounting

  • Compilation engagement and corporate tax return $1,800 - $4,000

  • Review engagement and corporate tax return $3,000 - $8,000

  • Audit engagement and corporate tax return $4,000+

Not sure what compilation, review and audit engagements are? Find out here.

Under the traditional method, you won’t know the amount of your bill until the work is complete and the service provider has added up all of the minutes spent working on your file.  Although this is a common pricing method, we find a couple of things wrong with it:

  • Fear of asking questions - It creates a situation where clients feel that they shouldn’t ask questions or learn from their bookkeepers and accountants because they will be on the clock as soon as the phone is answered.  We want to foster an environment where clients get to ask questions without worrying about the resulting bill.

  • Surprise bills - It can also cause surprise bill amounts when more work was required than expected.  Surprise bills kill cash flow for businesses and create animosity between accountants and their clients.

Now that we've explained why we don't like the traditional model, let's look at how we price our services at Avalon.

How much does Avalon charge for bookkeeping and accounting services?

We will get to price ranges and examples below, but first, we should explain how we price our services.

We agree upon a fixed price with prospective clients before beginning work.  This pricing method allows us to stop worrying about inputs and start talking about results: making efficient processes and delivering relevant information.

We use a pricing model that lists out all of the services that we provide and the cost of each piece.  This way, we can provide detailed quotes and our clients can choose the exact level of service that is right for them at any given time.  Let’s look at a few examples and the cost of each. These examples are all technically small businesses, but we’ve labelled them “Startup”, “Small”, “Medium” and “Large” for the purpose of this demonstration.

Startup Business
Often, businesses that are just starting out need help with a few high-value services but don’t have the revenue yet to pay a bookkeeper and accountant to look after all finance related tasks within the business.  A common service level for this type of business includes:

  • Accounting system setup and training - we set up your cloud accounting system and teach you how to efficiently complete your bookkeeping.

  • Accounting software subscription costs - we cover the cost of the accounting software.

  • Ongoing support for bookkeeping and accounting - we will check in monthly to make sure things are going well.  Also, if you have questions, call or email us!

  • Year-end financial statements and corporate tax return - we prepare your year-end financial statements and tax return.

The cost for this package is:

  • $750 for setup
  • $275 per month (includes year-end costs billed monthly)

Small Business
We see a lot of small businesses that have annual revenue between $150k and $350k, that have 1 or 2 employees and are owner managed.  We love working with these types of businesses because the owners are often highly involved and passionate about what they’re doing. Because of the high owner involvement, they often need a few more of the financial duties looked after so that they can focus on what they are good at.  A common service level for this type of business includes:

  • Accounting system setup and training - we set up your cloud accounting system and teach you how to submit documents electronically and view reports.

  • Accounting software subscription costs - we cover the cost of the accounting software.

  • Monthly bookkeeping - we record monthly transactions and send out useful financial reports once per month. Also, if you have questions, you can still call or email us anytime!

  • Sales tax filing - we file the GST and/or PST returns

  • Year-end financial statements and corporate tax return - we prepare your year-end financial statements and tax return.

  • Payroll system setup and support - we set up your payroll system, teach you how to process payroll, onboard and offboard employees as needed, and prepare employee T4s on an annual basis.  We’re also available to answer questions as they come up. (assumed 1 employee in this scenario)

The cost for this package is:

  • $1,025 for accounting and payroll systems setup

  • $535 per month (includes year-end costs billed monthly)

Medium Business
In this common scenario, we see businesses that have revenue in the $350k to $1million range, they often employ 3 to 10 people, the owners are still involved in the day to day but are focusing on growing the business, perfecting their services or products and training employees.  This business owner needs insight into what is working in their business and what could be improved or changed. Solid monthly reporting that includes insight from an outside advisor is a key success factor here.

  • Accounting system setup and training - we set up your cloud accounting system and teach you how to submit documents electronically and view reports.

  • Accounting software subscription costs - we cover the cost of the accounting software.

  • Monthly bookkeeping - we record monthly transactions and send out useful financial reports once per month. Also, if you have questions, you can still call or email us anytime!

  • Monthly management accounts - Each month you will receive a customized reporting package that includes our analysis and commentary on the monthly performance, as your external trusted advisers.  

  • Sales tax filing - we file the GST and/or PST returns

  • Year-end financial statements and corporate tax return - we prepare your year-end financial statements and tax return.

  • Payroll system setup and support - we set up your payroll system, teach you how to process payroll, onboard and offboard employees as needed, and prepare employee T4s on an annual basis.  We’re also available to answer questions as they come up (assumed 5 employees in this scenario).

The cost for this package is:

  • $1,125 for accounting and payroll systems setup

  • $848 per month (includes year-end costs billed monthly)

Large Business
As businesses grow, there is often an in-between size where they are not yet large enough to have their own internal finance department but are complicated enough that just hiring a bookkeeper on Craigslist won’t cut it.  

We usually see this scenario with organizations that have revenue between $1million and $5million and employ between 10 and 30 people.  For these larger organizations, we can act as an outsourced accounting department either indefinitely, or until the business grows large enough to hire an internal accountant.  In cases where the business grows into needing an internal accountant, we are there to help with training and transition to make sure things go smoothly.

  • Accounting system conversion and training - we convert your accounting system to Xero and teach you how to submit documents electronically and view reports.

  • Accounting software subscription costs - we cover the cost of the accounting software.

  • Weekly bookkeeping - we record transactions on a weekly basis and send out useful financial reports each week. Also, if you have questions we are available Monday through Friday to help out.

  • Payables: posting bills and making payments to suppliers - we collect bills from suppliers, post them in the accounting system and make payments on a weekly basis.

  • Receivables: sending invoices and collecting customer payments - we send invoices to customers and communicate with customers to collect payments.

  • Monthly management accounts - each month you will receive a customized reporting package that includes our analysis and commentary on the monthly performance, as your external trusted advisers.  

  • Sales tax filing - we file the GST and/or PST returns.

  • Year-end financial statements and corporate tax return - we prepare your year-end financial statements and tax return.

  • Payroll system setup and support - we set up your payroll system, teach you how to process payroll, onboard and offboard employees as needed, and prepare employee T4s on an annual basis.  We’re also available to answer questions as they come up. (assumed 15 employees in this scenario)

The cost for this package is:

  • $4,000 for accounting and payroll systems setup

  • $2,369 per month (includes year-end costs billed monthly)

These examples have been chosen as common scenarios to show a range of costs and possible service levels that we offer, but it’s not an exhaustive list of our services.  We’re happy to have a chat to scope out the services that would best suit your business and provide a quote.  We can mix and match any of our services that your business needs.  If you want to find out more, send us a message and we can book a video call to discuss your options.