“This week’s Ask Manny question comes from Carol.”

Question:

I’m tired of doing my own bookkeeping and taxes, and I want to outsource them. But I’m afraid it’s going to cost too much. How much should I be prepared to spend on accounting services for my business?

Answer:

There is no hard and fast rule for how much you should spend on accounting services for your business. However, we can point to some general guidelines.

Overall, I believe that a business should be spending about 3% to 5% of their annualized revenue on accounting services. So, if you are generating $100k in annual revenue, be prepared to spend $3,000 to $5,000 per year (or $250 to $415 per month) on getting your accounting done. If you are at $1M in revenue, then this jumps to $30,000 to $50,000 per year ($2,500 to $4,150 per month).

Now, these percentages encompass the entire accounting function… which is a lot! If you break accounting down into its various components, it consists of: bookkeeping, payroll management, strategy and growth advisory (i.e. the “CFO”), tax preparation and planning, and compliance (e.g. an annual audit if you are a non-profit). That’s a LOT of different work that needs to get done!!! And different accounting professionals will handle the various components. It’s rare to have one person or firm handle all of these functions under one roof. Hence, you will be splitting up this overall spend amongst the various different service providers.

Here’s what a good balance could look like (and what I recommend): 2% revenue spending on bookkeeping and payroll, 2% revenue spending on growth and advisory, 1% revenue spending on tax preparation and compliance.

Why spend so much on your accounting function? Because accounting is the life-blood of your business. It’s what keeps the engine turning (paying your bills and people, generating invoices, tracking your cash), ensures that you are in compliance with tax regulations, and provides you with valuable information and frameworks that you will use to make important decisions to grow your business and achieve your goals. Without proper accounting, your business will grind to a halt, people will revolt, sales will not be collected on, your risk of being out of compliance increases, and you will be essentially flying blind without good information on which you can base decisions.

This last piece is absolutely crucial and what we focus our attention on here at CFO Services Group. We are hyper focused on ensuring that you have valuable information at your disposal so you can steer your business in the proper direction and overcome any challenges that get in your way to success. And of course, providing you with a professional CFO Advisor to help support you in those decisions.

Bookkeeping Support plans start at $99.00

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