How Much Does it Cost to Outsource Your Accounting & Bookkeeping?
The typical cost of outsourcing your accounting and bookkeeping can range from $500 to $5,000 per month for small businesses. There are a wide variety of factors to consider to determine the price to outsource the accounting for any business. Although this may appear complex or intimidating, the accounting partner you are talking to does this every day and should be able to simplify the scoping process and perhaps make it a bit fun. Change can be scary for some and exciting for others.
The obvious goals are to add skillsets you didn’t have before, save money, or improve systems or internal controls.
Your ultimate goal should be to find the right partner for you that fits your culture and is the best fit for your business.
“Outsourcing your accounting can save you 40% - 60%.”
What Factors Impact the Price of Outsourcing?
Revenue
For some industries, revenue may be one of the key indicators of scope for pricing. The more revenue you have, the more work your accounting team will need to perform. This isn’t always the case, take a funded startup that’s pre-sales. There still may be a lot of work with no revenue on the books.
Headcount
Employees can be an indicator of volume or complexity. Some businesses need a lot of people to grow and others may grow rapidly with very little human resource needs.
Desired Services
Handling the accounting for a customer is not a one-size-fits-all package. Pricing will require an understanding of what you want your accounting partner to do for you. Aside from coding bank activity, you may want to outsource stand-alone functions like:
Sales Invoicing
Accounts Payable
Payroll Processing
Budgeting / Forecasting
Financial Analysis
Industry
Industries tend to have common needs and inherent complexities in the business model. Professional services need to really understand job costing to excel which has specific accounting requirements. Ecommerce businesses required inventory-based accounting and need to be built to scale.
Staffing Method
Although the goal is to automate the accounting function as much as possible, it’s still a human-based service. The more work needed - the more time it takes to complete it. The location of your team can dictate your price. Outsourcing can be onshore, offshore, or a combination of both.
Naturally, an onshore team will cost more than an offshore.
A combination of both, a blended partner, will provide the benefits of both while mitigating most of the concerns about offshoring. This is generally the most cost-effective solution for what you get.
Team Makeup
One of the primary advantages of partnering with an outsourcing accounting company as they can dial in the exact level of skill set for each role you’ll need at any given time. As your accounting needs ebb or flow, we can ramp up or down each level on the fly. That’s virtually impossible when you hire a team.
An additional benefit to small businesses is they do not need full-time employees for all of the roles in an accounting department. It’s impossible to hire a percent of this and a percent of that. You either need to over-hire (wasted money) or under-hire (lacking skills).
Outsourcing the accounting function is the most cost-effective way to scale your business.
$1M Revenue or 10 EEs
$5M Revenue or 50 EEs
Rough Guide to Price Ranges
PRICING METHOD
Determine how your prospective accounting partner prices their service and pick what is right for you.
Hourly Rate
The way they’ve always done it.
Can motivate vendors to be INEFFICIENT;
more hours = more revenue.
Surprise bills for hours you didn’t expect.
Fixed Monthly Price
Used by modern accounting teams.
Motivates partner to be EFFICIENT.
Know what to expect and easy to plan for.
A FEW WAYS TO BALLPARK PRICING
% of Revenue
1% of revenue gets you in the right ballpark range as your business approaches $1M in revenue. That % generally tapers down as revenue exceeds $3M.
2. Ballpark Ranges
We’ve created a table providing ranges to give you an idea of what to expect based on revenue (ecommerce) or employees (professional services). Tech companies may be a combination of both. The ranges have a little overlap.
Monthly Price Ranges *
$500 - $1,500
$1,000 - $4,000
$2,500 - $6,000
$4,000 - $7,500
$6,500 +
* Range estimates overlap due to service variables noted above. Our services have a $1,500 / month minimum.
Business Size
$0 - $1M Revenue or 1-10 EEs
$1 - $3M Revenue or 10-30 EEs
$3 - $5M Revenue or 30-50 EEs
$5 - $10M Revenue or 50-100 EEs
$10 - $20M Revenue or 100-200 EEs
“No matter how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team.”
Partnering is an Investment
Your partner is more than a vendor. They are a part of your team and there to help you grow or see-through trying times.
Ultimately, think of this as an investment in your business, not a cost. Surrounding yourself with a team of experts is how successful businesses succeed.