Bookkeeping services are a critical function for any small business, yet many business owners are unsure about how much to budget for basic bookkeeping. Whether you’re just getting started or looking to streamline your finances, understanding the full cost of outsourced bookkeeping services, both monthly and annually, can help you plan ahead and make informed financial decisions.
Let’s walk together through the typical costs associated with bookkeeping, explain what’s included, and help you steer your business in the right direction as a small business owner.
Is it worth paying for a bookkeeper?
The focus in answering this question is usually to judge the cost of an in-house bookkeeper or outsourced bookkeeping against the perceived value that you get from these functions. But what is perceived value in the mind of the small business owner?
Perhaps we should approve this differently and look at what the cost is of NOT having these services supporting your business.
Bookkeeping involves recording and organizing all financial transactions within your business. This includes tracking income and expenses, reconciling bank statements, managing invoices and receipts, and preparing financial reports for sound business management. This can be a haphazard process or a structured process guided by an expert, and both are seen in businesses everywhere.
Proper bookkeeping is done according to Generally Accepted Accounting Principles (GAAP), and guided by the hands of experienced bookkeepers whose job it is to:
Manually capture financial transactions into an accounting system, or use automation to process entries.
Issue customer invoices.
Ensure accurate tax filings as per the financial records generated in a financial year.
Monitor and guide the company’s financial health through proactively managing accounts and cash flow.
Create financial reports for an audit or funding.
Small business owners often juggle a number of tasks, and accounting tasks can be just one of many on a ‘to-do’ list, causing a backlog in capturing transactions. Thus, a delay in getting to those all important financial reports that tell you day-to-day and month-on-month, how well your business is doing.
To summarize, the cost of NOT having structured accounting processes are:
Inaccurate or delayed processing of financial transactions.
Lost or misplaced documents such as receipts, invoices, and other financial supporting evidence.
An incorrect tax filing can lead to an audit with the IRS and penalties.
Bad business decisions were made on incorrect financial information.
Loss of trust of funders and other stakeholders because the financial processes are inadequate.
How much does a bookkeeper cost?
Establishing that proper financial management is valuable for all the reasons we’ve discussed helps to put the cost of such services into context. Also, the cost of fixing such mistakes when they happen can run into much more than you’ll pay for bookkeeping services. So, what can you expect to pay? Let’s find out.
We will break down the typical cost of the different types of bookkeeping services available and then explain what each one is.
Service Type | Bookkeeping Costs | Notes |
DIY Bookkeeping: Owner driven In-house bookkeeper driven | Up to $35 a month (software) Up to $46,000 [1] | Accurate bookkeeping tasks depend on the skills of the person Pro: Control over your own finances Con: Time-intensive |
Freelance Bookkeeping | $300 - $800 per month | Based on an average hourly rate of $30-$70/hour. Pro: Experience with a range of clients Con: Accuracy depends on individual's knowledge |
$500 - $2,500 per month | Varies based on business size and service needs. Pro: Varied high-level functions and specialists available Con: Fees are higher | |
Online Bookkeeping Service | $200 - $500 per month | Fixed pricing, scalable, and often includes support Pro: Useful for pulling together your books and financial reports. Con: May be overutilized with a long turnaround time. |
📌 Useful Tip: If your business has high monthly transaction volumes (such as a large accounts payable function), or inventory, expect to be at the higher end of these ranges.
Types of bookkeeping services
Before diving into costs, it’s important to understand the service types.
1. In-house bookkeeping
You or a staff member uses accounting software like QuickBooks or Xero (or similar platforms). This is often the cheapest route but also the most time-consuming and prone to error, depending on the amount of experience and skill you, or the bookkeeper, possesses.
2. Freelance bookkeepers
Ideal for small businesses with straightforward finances. This means you are tracking income and expenses, drawing up basic financial reports (such as a profit and loss statement), and tax preparation. A fair level of skill is required to manage the financial affairs of different clients and their individual business needs.
An example of someone who could use a freelance bookkeeper is a self-employed person, freelancer, or sole proprietor who doesn’t employ staff.
3. Bookkeeping firms or accounting agencies
Accounting firms provide more robust services, sometimes bundled with tax prep, payroll, and advisory services. They are highly qualified, skilled, and experienced in different industries, and dealing with taxation.
These firms may employ specialists who take care of a range of functions for one client, either offering individual services (such as bookkeeping), or offering packages (e.g., bookkeeping and taxation), or full service accounting, which may include bookkeeping, taxation, and CFO services.
4. Online bookkeeping services
Cloud-based bookkeeping platforms like QuickBooks, Bench, Bookkeeper 360, or Xendoo combine software with human bookkeepers. They offer fixed pricing and are ideal for startups or small businesses that need consistent, remote services.
Annual cost estimates for small business
Now that you know what the average fees are per month and what you can expect from these services, let’s pull this all together with annual cost estimates.
Low-complexity business (DIY and light help): $2,000 - $3,000 a year.
Moderate complexity (freelancer or basic service): $4,000 - $10,000 a year
Full-service firm with advanced support (such as CFO services): $10,000 - $30,000+ a year
Factors that influence bookkeeping costs
Several variables can drive the cost up or down for bookkeeping services. Examining these variables will help you to discern what monthly and yearly costs you are looking at.
1. Transaction volume
The number of transactions your business processes each month plays a major role in determining the cost of bookkeeping. A business with 50 transactions per month will naturally require less time and attention than one with 500. Basic bookkeeping costs are calculated on lower transaction volumes as opposed to higher ones.
2. Payroll processing
If your business has employees, running payroll adds an extra layer of complexity to your books. Bookkeepers often charge additional fees to process payroll because it is a specialized skill that requires adherence to payroll tax compliance and the integration of payroll data into financial reports.
The more employees you have - and the more frequently you pay them - the more time your bookkeeper needs to spend on this task.
3. Number of accounts
Every business account your bookkeeper has to manage - bank accounts, credit cards, loan accounts, merchant services - increases the workload. More accounts mean more data to reconcile each month. With the advancement of automation and machine learning in accounting, these functions have become easier to manage, however, you still need a trained eye to spot problems when it comes to recording transactions.
4. Inventory management and invoicing
If you’re a small retailer or online seller, you may have to generate a high volume of invoices, and this can affect the cost of bookkeeping. Generating invoices is one thing, but reconciling payments and managing cash flow is another.
Bookkeepers may need to track the cost of goods sold (COGS), manage inventory levels, and match invoices to payments. It takes time to accurately process financial data until you’re in a position to use it for financial analysis.
5. Software and tools
The bookkeeping software you use, and any additional tools or integrations, can affect the costs. While many bookkeepers will include the use of their software in their fees, others may not. You may also need your bookkeeper to use an existing platform, in which case they will need to purchase a subscription. This is negligible when you’re a small, low-key business, but if you use a platform with complex functionality, this will drive up costs.
6. Frequency of reporting
Doing your own bookkeeping allows you to generate reports as little or as frequently as you want, but if you sign up for accounting services that involve more than basic bookkeeping tasks, then accurate financials are part of the package.
You should get what you pay for - so ask for weekly, biweekly, or monthly reports that tell you how your business is doing. This also encourages timely communication about potential problems.
7. Catch up or cleanup work
If your books are behind, which is often the case when businesses first sign up for bookkeeping services, you’ll likely need to pay for catch-up bookkeeping. This involves going back weeks, months, or even years to sort through old records, reconcile accounts, and correct errors. Clean up work is more time consuming and will likely be billed as a one-time fee separate from regular monthly services.
Do your homework
Choosing a bookkeeper is akin to finding a new doctor or dentist. You want a trustworthy, experienced, highly skilled individual who has many years of experience working in the accounting industry.
It is wise to do your homework for a while before making your final decision. Get a number of quotes so you can come to grips with how the different types of bookkeepers bill for different services. You will then be able to make a decision based on these key questions:
What is included in the service?
Are reports delivered on a weekly, monthly, quarterly, and annual basis?
Is tax support included or separate?
How did they handle initial communication and your request for a quote?
If you met with them, did they answer all your questions and make helpful suggestions for dealing with your financial affairs?
What kind of qualifications and experience do they possess?
Where can you start? 👇
Hall Accounting Company is eager to discuss these questions and any others you may have. Contact us to schedule an appointment or get a quote online.
Final thoughts
Bookkeeping is a vital part of your business’s financial health. Whether you handle it in-house, hire a freelancer, or partner with an accounting firm, like Hall Accounting Company, understanding the cost of bookkeeping will help you to make a smart investment.
During this discussion, we’ve provided the average cost of bookkeeping services in the USA, given you an idea of what these services should entail, and what factors influence costs. We hope that it has given you a good foundation for building your business.
We look forward to hearing from you.
The team at Hall Accounting Company
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