Most startups realize early on that they could benefit from a bookkeeper to organize their finances. But if you’re working on a tight budget, you might not be certain if you can afford to hire a bookkeeper at this point. So, it’s important to ask the question: How much does a bookkeeper cost?
The short answer is that it depends on the type of bookkeeping service you need. There are six factors that impact the cost of hiring a bookkeeper for your startup.
How Much Does A Bookkeeper Cost? 6 Factors To Inform Your Estimate
Most bookkeepers will handle the same tasks for your business, including:
- Completing data entry
- Categorizing transactions
- Managing bill pay (accounts payable)
- Invoicing customers (accounts receivable)
- Bank account and credit card account reconciliations
- Preparing financial statements
The rates bookkeepers charge vary based on how and where they work, and the range of expertise they offer. The following six factors will help you gauge how much your preferred type of bookkeeping service will cost.
1. Do you want to hire an in-house bookkeeping employee or outsource your bookkeeping?
Large, well-established businesses often have bookkeepers on their team as permanent employees, but most startups find it more cost effective to contract with a freelance bookkeeper or finance firm to manage their startup bookkeeping tasks. When you hire a full-time or part-time bookkeeping employee, you benefit from having their dedicated attention to your finances and more control over their work. However, on top of paying your bookkeeper a fixed salary, you also need to account for additional costs, including payroll taxes, employee benefits, training, and equipment costs. The U.S. Small Business Administration estimates that the actual cost of a full-time employee is typically 1.25-1.4 times the base salary.
If you outsource your bookkeeping to an external party, you only pay for the work they do and not the cost of an extra employee. You also have more flexibility to switch bookkeepers or adjust the hours they work as your business evolves.
2. Do you want to work with an individual bookkeeper or a bookkeeping service?
Businesses that want to outsource their bookkeeping have two options:
- Hire an individual freelance bookkeeper to work part-time for your company.
- Work with an outsourced bookkeeping service. Outsourced bookkeeping services have a team of bookkeepers who handle your everyday finance tasks.
Individual freelance bookkeepers often charge lower fees since they don’t have as much overhead as a bookkeeping service. However, the services each individual bookkeeper can offer are limited according to their experience, skill set, the tools they use, and the time they can dedicate to your business. If they are unfamiliar with a specific transaction type or accounting process, they won’t be equipped to properly handle it, and you may need to bring on another freelance bookkeeper to supplement their work.
Working with a bookkeeping service gives you access to a team of professionals who will have the bandwidth and experience to meet your requirements.
3. Do you want on-site or virtual bookkeeping?
Traditionally, a bookkeeper will come into your workplace and complete your finance tasks onsite. However, in recent years, many businesses have begun contracting with bookkeepers to handle their finances using cloud-based accounting software—this is known as virtual or online bookkeeping.
If you choose on-site bookkeeping, the location of your business will determine what the going rate is for a bookkeeper since the average bookkeeping rate varies significantly between cities and states. Take a look at the average price of bookkeepers by location to see how much to pay a bookkeeper working in your location.
Virtual bookkeepers can work in any location (including their own home), so they don’t have as many expenses to cover and can offer lower prices. Plus, because you are not limited to working with a bookkeeper who lives locally, you can find the best value virtual bookkeeping service for your business, regardless of location.
4. Do you want to pay hourly rates or a fixed fee?
If you outsource your bookkeeping, the traditional structure is to charge bookkeeping fees per hour. However, some modern finance firms like Zeni offer bookkeeping price packages with a fixed monthly fee based on the types of services you need and the size of your business. With hourly rates, the complexity of your business finances makes a significant difference in the price you pay. The more time it takes for your bookkeeper to categorize, reconcile, and enter all the transactions in your accounting software, the more it will cost your business, so it can be difficult to predict your monthly bill. With flat rate pricing plans, you’ll know exactly how much bookkeeping will cost your business each month, so you can budget for this expense.
5. What level of expertise do you need from a bookkeeper?
Whether you’re hiring an employee or outsourcing your bookkeeping, the level of expertise you require from a bookkeeper will impact the price you pay. For example, you will have to pay more to contract with a bookkeeper who has qualifications from recognized bodies, such as the National Association of Certified Public Bookkeepers and the American Institute of Professional Bookkeepers.
The years of experience they have will also determine how much it costs to hire a bookkeeper. According to data from Payscale, junior bookkeepers with less than one year of experience charge an average of $14.92 per hour, whereas bookkeepers with over 10 years of experience charge an average of $19.98 per hour. However, although the average hourly rate for less-experienced bookkeepers is significantly lower, a bookkeeper without adequate experience in your industry may take longer to complete tasks or even make costly finance mistakes, turning this into the more expensive choice.
6. Can a bookkeeper offer the level of financial insight you need?
If you’re looking for support that goes beyond basic financial management, such as deeper insights into your business performance or advice on setting up finance processes, you may need the support of an accountant or more robust accounting services.
A bookkeeper’s primary role is to maintain accurate records and handle everyday finance tasks, while accountants manage more complex duties including creating financial reports (profit & loss statement, balance sheet, cash flow statement), performing financial analysis, and helping establish and monitor budgets. Because accountants have a more advanced skill set and qualifications, they charge higher hourly rates than bookkeepers for their services.
In the next section, we’ll introduce you to an alternative way to get the benefits of working with an accountant without paying the usual hourly rates.
Zeni: The Modern Bookkeeping Solution Designed For Startup Budgets
With some basic bookkeeping solutions, you may still need to supplement their services with a lot of founder oversight or in-house administrative support. That’s not the case with Zeni. Zeni is a full-service finance firm that handles all your startup’s bookkeeping, accounting, CFO, and tax return needs with speed and accuracy.
Zeni offers three plans to suit the range of services for startups headquartered in the United States: Bookkeeping, Full Service, and CFO. Unlike other bookkeeping services, all Zeni customers have access to a team of always-on finance experts who perform daily bookkeeping to manage every finance function on your behalf, and share real-time financial insights via the Zeni Dashboard. Your team of Chartered Accountants (CAs), Certified Public Accountants (CPAs), CFOs and tax accountants maintain your financial records in compliance with GAAP regulations (leveraging accrual accounting method), which is crucial for fast growing startups.
With Zeni, you pay a flat fee for your monthly bookkeeping package—no matter the complexity of your finances or the number of bank or credit card accounts you use—and your monthly fee includes unlimited financial transactions from unlimited accounts. The price you pay is based on your monthly business expenses, so whether you’re a small startup spending $20,000 per month or a growth stage startup spending an excess of $1 million each month, you’ll receive a price that suits your business.