Bookkeeping Tips for Toronto Small Businesses
28 May, 2024
Bookkeeping Costs for Startups: What to Expect
For small business owners, keeping track of assets, liabilities, income, expenses, and taxes can be challenging. For this reason, business owners employ bookkeepers for startups or contract out bookkeeping work. But how much do bookkeepers charge for startups?
Bookkeeper rates can vary depending on several variables, including location, business intricacy, the volume of transactions, and the exact services required.
Before discussing into the costs associated with hiring bookkeepers for startups, it’s important to first understand what bookkeeping entails and why it’s essential for your business.
What is Bookkeeping?
Bookkeeping is the process of recording and organizing a business’s financial transactions. It serves as the foundation for effective financial management, helping businesses track income, expenses, and cash flow.
Accurate bookkeeping ensures that financial records are up-to-date, simplifies tax filing, and supports informed decision-making. It often includes tasks like invoicing, reconciling bank statements, and maintaining ledgers.
Startups and businesses can choose to handle bookkeeping internally or hire professional bookkeepers for startups to ensure accuracy and compliance with financial regulations. Startups and businesses can choose to handle bookkeeping internally or hire professional bookkeepers to ensure accuracy and compliance with financial regulations.
Let’s see the difference between basic bookkeeping and full-service bookkeeping, what the bookkeeper does for your startup and their costs.
Basic Bookkeeping vs. Full-Service Bookkeeping
Basic bookkeeping focuses on recording day-to-day financial transactions such as income and expenses, while full-service bookkeeping includes more comprehensive tasks like financial reporting, payroll management, and tax preparation.
Understanding the difference helps startups choose the level of service that best fits their needs and budget.
Basic bookkeeping typically includes essential financial tasks to maintain accurate records of business transactions. It includes,
- Keeping track of income, expenses, assets, liabilities, and equity.
- Capturing and categorizing transactions such as sales, expenses, and payments.
- Generating basic financial statements, that is, income statements and balance sheets.
- Matching bank statements with recorded transactions to ensure accuracy.
- Assisting with organizing financial information for tax purposes.
Full-service bookkeeping provides a wide range of support which goes beyond the basics. It includes,
- Tracking and managing payments, collections, and invoicing.
- Monitoring inventory valuation, cost of goods sold, and inventory levels.
- Calculating and managing employee wages, tax withholdings, and payroll tax filings.
- Providing information on the budgeting, cash flow management and financial health of the company.
- Assisting with tax filings, including annual tax returns, payroll taxes and sales tax.
- Generating detailed financial reports, customized to the business’s needs.
To understand the value of bookkeepers for startups, it’s crucial to explore the specific tasks and responsibilities they handle to keep your finances in order.
What Does a Bookkeeper Do for Your Startup?
Bookkeeping provides startups with a solid foundation for financial management, decision-making, compliance, and growth. It improves transparency and helps in identifying financial strengths and weaknesses.
- Startups can preserve a clean, systematic record of their financial activities by using bookkeeping.
- Bookkeepers for startups keep track of all financial activities, including sales, purchases, expenses, and payments.
- They track invoices, payments, and collections to make sure that bills are paid on time.
- They also reconcile bank statements with the transactions that were recorded.
- Additionally, they process payroll, compute wages, withholding taxes and deductions, and file payroll tax returns.
- The general ledger, financial reports including income statements (profit and loss statements), and balance sheets are all maintained by bookkeepers.
- Bookkeepers can help with budgeting, cash flow management, and discovering trends or potential areas for financial improvement in your startup.
To get real-world insights on bookkeeping rates, let’s take a look at a Reddit conversation where users discuss how much they charge for bookkeeping services.
Now that you know the role of bookkeepers for startups, let’s break down the costs associated with bookkeeping services and the factors that influence pricing.
Bookkeeping Cost for Startups
The cost of bookkeeping for startups can vary widely based on the level of service, business size, and complexity of financial transactions. Startups can choose between hourly rates, monthly packages, or fixed fees depending on their budget and specific needs.
1. Hourly Bookkeeping Cost for Startups
A part-time bookkeeper might be a suitable fit for your business if you can handle your work and some of the accounting each month but could use a little extra assistance.
A part-time bookkeeper may vary greatly in price. Part-time pay ranges from $15 to $20 per hour, depending on the position and location.
2. Full-time Bookkeeping Cost for Startups
A full-time bookkeeper handles the day-to-day accounting functions for your office. In this case, hiring a full-time bookkeeper can be the best course option for you.
Depending on where you live, the typical full-charge bookkeeper’s annual income ranges from $35,000 to $55,000 plus benefits and overhead.
3. Outsourcing Bookkeeping Cost for Startups
The major advantage of outsourcing is to customize the services you receive to your bookkeeping needs. Consider shifting to complete accrual-based accounting if your company is entering a growth phase.
Depending on the volume of transactions and the complexity of the services needed, the average monthly cost to outsource your bookkeeping needs is between $500 and $2,500.
Conclusion
Outsourcing bookkeeping makes sense because it has several advantages that help startups succeed. Bookkeepers for startups can assist businesses in maintaining accurate records, which is essential for securing financial aid.
Employer costs including pay, benefits, training, and office space are all eliminated by outsourcing. It helps free up valuable time, allowing business owners to concentrate on key operations.
One Accounting is a leading provider of bookkeeping services. For a free consultation, get in touch with One Accounting!
Frequently Asked Questions
Bookkeeping helps startups maintain accurate financial records, ensuring they meet tax obligations and make informed business decisions.
Yes, you can handle basic bookkeeping tasks yourself using software, but hiring a professional can ensure accuracy and save time.
Bookkeeping involves recording daily financial transactions, while accounting focuses on analyzing, interpreting, and reporting financial data.
It’s recommended to update bookkeeping records regularly, such as daily or weekly, to maintain accurate and up-to-date financial information.
Popular options include QuickBooks, Xero, and Wave, each offering features tailored to different business sizes and needs.
Many bookkeepers assist with preparing financial records for taxes, though complex tax filing may require an accountant’s expertise.
Look for bookkeepers with relevant experience, certifications, and strong client reviews, and consider asking for references before hiring.
Common red flags include frequent errors in financial records, unexplained transactions, and discrepancies between bank statements and bookkeeping records.