How much does an accountant cost?

One of the first things a business owner wants to find out when they contact us is “How much does an Accountant cost?”.This is a tricky question to answer, so in this article I will do my best to explain how modern day accounting firms charge for their services.

Like any service business, an accountant is providing something that you cannot immediately see, or pick up and walk away with. It is not like you are buying a new car, and you can make a decision to buy a red one or a blue one, or get some extras like leather seats and a roof rack.

But, just like buying a car, it is important that a business owner chooses the correct sort of accounting service for their needs, and does not have any regrets further down the line.

What type of services does an accountant provide?

Put simply, an accountancy firm will provide two types of service.

Type 1- Compliance

This is everything you need to stay legal and on the right side of the taxman

  • Annual Accounts
  • Corporation tax returns
  • VAT returns
  • Payroll and PAYE
  • Income tax
  • CIS
  • Book-keeping
  • Auto-Enrolment
  • Dealing with HMRC

Type 2 - Advice and Consultancy

A range of services designed to help improve your business, make more profit, create efficiencies and act as a sounding board.

  • Management accounts
  • Profit analysis
  • Strategic plans
  • Running your board meeting
  • Recommending and installing software apps to make your business run smoother
  • Training
  • Working with other advisors to drive your business forward

How much does it cost?

The price of your accounting services will depend on the mix of Type 1 and Type 2 services you need.

Unfortunately some business owners just focus on the cost of Type 1 Compliance services, and search for the cheapest accountant, be it a local office or an online service. They then find that they need more advice to help their business grow, or solve a problem,and find out their chosen accountant can’t provide the Type 2 service that they need. Or, end up getting charged hundreds or thousands of pounds more that they originally budgeted.

So, as you can see, there are many different choices and options available. Whenever we provide a quotation, we provide three service options which are imaginatively called Bronze, Silver and Gold.

Bronze – Type 1 services which will take care of the taxman and help you sleep at night

Silver – Type 1 services plus some Type 2 advice and support to keep you on track each quarter

Gold – Type 1 services plus lots of Type 2 services and support - so we are acting as your outsourced Finance Director.

How does the type of service affects the cost of accountancy services?

A “Bronze” package of Type 1 compliance services for a Limited company will range between £150 and £300 per month. The factors that affect where your business fits on that scale include

  • What type of sector you operate in
  • How many staff you employ
  • Are you VAT registered
  • What your annual sales are
  • Does your business have stock
  • How good your accounting records are

A Silver package which incorporates the Bronze services and adds in perhaps a quarterly meeting or call, P&L review and maintenance of your software apps like Xero, Vend or Receipt Bank will range between £300 and £600 per month.

A Gold package which adds in management accounts, running your board meeting and some intensive care projects like improving cash flow, cost reduction and providing software app installation will range between £600 and £1250 per month.

So, how much does an accountant cost? Well, based on our own services, the annual costs can be between £1,800 and £15,000 per year. In some special cases the fee can be lower or higher than that range.

OK….…..can’t I do some of this stuff myself?

Yes, you can do it yourself! But at a price.

With the recent advances in great accounting software like Xero and Freeagent, all of the tools exist for a business owner to prepare and file their VAT, payroll, annual accounts and tax returns themselves. You could also google some articles on what expenses are tax deductible to have a stab at keeping your taxes legal.

In our experience, when we take on work where the business owner has done things themselves we see a range of outcomes (these are real life examples).

  • Salary declared in the accounts when in fact the business has not been registered as an employer (£2,000 tax underpaid for 3 years)
  • VAT reclaimed on dividends and salary (£2,600 tax underpaid)
  • Accounts and VAT deadlines constantly missed (£4,200 of Companies House and VAT fines)
  • Sales recorded twice (tax overpaid by £7,100)
  • But we do see some brilliant financial managers who get most things right, and file their VAT and payroll on time and correct

However although you are not paying any money, you are most definitely not getting the work done for free.You are paying a price. And a lot of the time, that price is greater than you think.

Add up the hours of research, book-keeping, calling HMRC for help, fixing things which you get wrong….and then imagine how much extra revenue and profit you could have generated by using those hours to drive sales and business development. Plus the nagging doubt that you might have dropped a clanger in your last VAT submission which HMRC might discover 18 months from now when they do a random inspection on your business.

If you are a business owner that “gets it” then you would definitely see your accountancy fees as an investment rather than a cost.