How Much to Spend on Your Small Business Accounting?

How Much to Spend on Your Small Business Accounting?

It is essential that a small business owner understands how much involvement is needed in their small business accounting area to maintain good business finances and for successful business decisions. 

In this guide, we will walk you through the various aspects of accounting for small businesses. From the basic needs to the potential costs involved, we will help you make informed decisions.

Understanding Small Business Accounting Needs

Every small business has unique accounting needs, but some basic requirements are universal. These include:

  • Bookkeeping: Recording daily transactions accurately.
  • Financial Reporting: Preparing financial statements such as balance sheets, income statements, and cash flow statements.
  • Tax Preparation: Ensuring that taxes are calculated correctly and filed on time.
  • Payroll Services: Managing employee payments, benefits, and related tax filings.

Importance of Professional Accountants

While it might be tempting to handle accounting tasks yourself, professional accountants can provide expertise and save you time and potential errors. 

Professional accountants ensure that your financial records are accurate and compliant with legal standards, which is critical for avoiding penalties and making sound business decisions.

Factors Influencing Accounting Costs

The size and complexity of your business play a significant role in determining your accounting costs. A larger business with multiple revenue streams, numerous transactions, and a sizable workforce will naturally incur higher accounting expenses than a smaller, simpler operation.

Type of Services Required

Different accounting services come with different business costs. Basic bookkeeping is usually less expensive than comprehensive financial planning or tax advisory services. Understanding what services you need can help you budget more effectively.

Frequency of Services

How often you require accounting services also affects the cost. Regular, ongoing services such as monthly bookkeeping or quarterly tax filings will cost more than one-off services like annual tax preparation.

Average Costs of Small Business Accounting

You have two primary options for managing your small business accounting: hiring an in-house accountant or outsourcing to an accounting firm. Each has its own cost implications.

In-House Accounting

  • Salary: An in-house accountant’s salary in New Zealand can range from NZD 70,000 to NZD 100,000 per year, depending on experience and location.
  • Benefits: Additional costs include benefits such as health insurance, retirement contributions, and paid leave.
  • Training and Software: Investing in training and accounting software for your in-house accountant can also add to the expenses.

Outsourced Accounting

  • Hourly Rates: Accounting firms typically charge between NZD 150 and NZD 400 per hour, depending on the complexity of the work and the firm’s reputation.
  • Monthly Retainers: Some firms offer monthly retainer packages ranging from NZD 700 to NZD 4,000 per month, providing a comprehensive suite of services.

One-Time vs. Ongoing Costs

  • One-Time Costs: These include initial setup fees, such as setting up accounting systems or one-off consultations for specific financial advice.
  • Ongoing Costs: Regular expenses like monthly bookkeeping, payroll services, and quarterly tax filings.

Estimated Costs for Small Business Accounting in New Zealand

Expense TypeIn-House AccountingOutsourced Accounting
SalaryNZD 70,000 – NZD 100,000 per yearN/A
BenefitsNZD 10,000 – NZD 20,000 per yearN/A
Training and SoftwareNZD 1,500 – NZD 5,000 per yearN/A
Hourly RatesN/ANZD 150 – NZD 400 per hour
Monthly RetainersN/ANZD 700 – NZD 4,000 per month
One-Time Setup FeesNZD 500 – NZD 2,000NZD 500 – NZD 2,000
Total Annual CostNZD 81,500 – NZD 125,000 (including benefits)NZD 8,400 – NZD 48,000 (depending on service)
Annual cost comparison for small business accounting

How to Budget for Small Business Accounting

  1. Determine Your Accounting Needs: Identify the specific accounting services your business requires. This could range from basic bookkeeping to more advanced services like financial forecasting and tax planning.
  2. Set a Realistic Budget: Based on your identified needs, set a realistic budget. Consider both one-time and ongoing costs, and decide whether in-house or outsourced accounting is more cost-effective for your business.
  3. Compare Providers: If you decide to outsource, compare different accounting firms. Look at their rates, services offered, and client reviews to ensure you choose a provider that fits your budget and meets your business needs.

Benefits of Proper Small Business Accounting

Proper accounting helps you track your income and expenses, providing a clear picture of your financial health. This information is crucial for making informed business decisions and planning for the future.

Tax Compliance

Professional accounting ensures that your business complies with tax regulations, reducing the risk of penalties and audits. Accurate tax preparation and filing can also help you take advantage of tax deductions and credits.

Time and Cost Efficiency

Hiring a professional accountant saves you time, allowing you to focus on running your business. While there are costs involved, the efficiency and expertise they bring can ultimately save you money by preventing costly mistakes and ensuring optimal financial management.

Business Growth

Accurate financial records and expert advice from professional accountants can support your business growth. By understanding your financial position, you can make strategic decisions about investments, expansions, and other growth opportunities.

Checklist for Small Business Accounting

  • Identify basic accounting needs (bookkeeping, financial reporting, tax preparation, payroll services).
  •  Determine if in-house or outsourced accounting is more suitable for your business.
  •  Set a budget based on your accounting needs and business size.
  •  Research and compare accounting providers if outsourcing.
  •  Regularly review and adjust your budget and services as your business grows.
  •  Ensure compliance with all tax regulations and deadlines.
  •  Utilise accounting insights for informed business decisions.

Bottom Line

Accounting is a critical component of running a successful small business. By understanding your small business accounting needs, setting a realistic budget, and choosing the right services, you can ensure that your business remains financially healthy and compliant with all regulations. 

Whether you opt for in-house accounting or Professional Accountants, the key is to invest in quality services that support your business’s growth and stability.

NZBIO Website: Empowering New Zealand Businesses

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