The cost of bookkeeping services varies depending on many factors, including the volume of documents, security levels required, and the company’s preference. This complete guide will help you better understand what bookkeeping options are available and how much they’ll cost you.

Small business owners spend over 10 hours per month doing their own bookkeeping, according to a recent study by Mazuma Money. That works out at more than 120 hours a year. Whether you outsource your bookkeeping services or do them yourself, keeping on top of your business finances costs you in both time and money.

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What is bookkeeping?

Bookkeeping is the recording, storing and retrieving of all financial transactions for your business. This include invoices and receipts for expenses and employees’ salaries, as well as any other transaction that involves money coming in or going out of the business.

Bookkeeping provides all the information needed to prepare your accounts, and all transactions must be recorded and stored for tax purposes. It also requires a basic understanding of accounting and business tax laws set out by HMRC.

Top tip: While both accounting and bookkeeping deal with the finances of a business, bookkeeping is primarily concerned with accurately recording financial data. Accounting, on the other hand, involves interpreting and reporting on that data.

Bookkeeping can be done without the help of an accountant, although it’s important to understand exactly what records need to be kept and how they should be stored. Here you can learn how long you need to keep your tax records. For this reason, and to streamline processes, most businesses use accounting and bookkeeping software, whether they are doing their bookkeeping themselves or outsourcing to an accountant.

What are my bookkeeping options?

Bookkeeping is an essential part of running your business, so it’s important to determine exactly how you’re going to get the job done. You essentially have three options:

  1. Do it yourself
  2. Outsource it to a bookkeeper or accountant
  3. Hire an in-house bookkeeper

Each of these options has their own pros, cons and costs, including the cost of bookkeeping services in each case. Let’s take a minute to understand each of these in detail.

1. Doing your bookkeeping yourself

You can do your business bookkeeping yourself using an old fashioned spreadsheet or accounting software with a bookkeeping integration. Interestingly, research shows that as much as 72% of UK self-employed manage taxes on their own.

While using a spreadsheet may look on the surface to be the most cost-effective method of recording your invoices and receipts, it’s also extremely time-consuming and leaves room for human error. For businesses who have many clients, or retail businesses who process a lot of transactions, this method isn’t viable.

Instead, you need a DIY approach that is fast, accurate and responsive. That’s why more and more small businesses are turning to software platforms for their accounting and bookkeeping needs. The average accounting package costs £25 a month, while additional bookkeeping costs between and £20 and £60 a month, depending on the amount of data you need to process.

Some intelligent OCR bookkeeping tools, such as Arbitrue, charge per document. Arbitrue costs £0.15p each time you capture invoice data and allows you to export information from invoices and receipts directly to your accounting records.

Pros of DIY Bookkeeping

  • Reduces the cost of accounting fees.
  • Entering your data makes you look again at your business transactions, which could help you see patterns emerging that weren’t clear before.
  • You can produce reports in real time and keep on top of your business finances (so long as you are disciplined in doing so).

Cons of DIY Bookkeeping

  • There’s likely to be a learning curve involved, that could take some time. However, most bookkeeping tools are amateur-friendly.
  • Doing your own bookkeeping is time consuming.

Average cost of doing your own bookkeeping: £10 – £60 depending on the size of your business and the volume of data you need to input.

2. Outsourcing your bookkeeping

Most accountants will offer bookkeeping services at an additional cost. This is a more expensive option but has the benefit of freeing up time and headspace to focus on what you do best – your business.

For medium to large businesses, or those looking to scale quickly, outsourcing bookkeeping could be the best option. It will cost you between £15 and £30 an hour if you use a bookkeeper in the UK, and the amount of time spent will depend on the size of your business.

Another option is outsourcing your bookkeeping abroad. While this comes with a certain amount of risk, if you do your research effectively and find an outsourcing overseas bookkeeping company with a good reputation, you could save yourself up to 50% off the total cost.

Most of your documents will be stored on the cloud, which means there’s be no need to physically ship your documents. However, sharing documents via online servers carries its own risks, so make sure you opt for a company with extremely secure data storage. It’s also important you choose a company that abides by the EU GDPR regulations.

Pros of outsourcing your Bookkeeping

  • Takes the pressure off you.
  • Frees you up to focus on growing your business.
  • You know your accounts will be accurate and compliant.
  • Pay what you need and can scale accordingly.

Cons of outsourcing your Bookkeeping

  • Can be quite costly, especially for larger businesses with lots of transactions.
  • Could lose sight of your incomings and outgoings.

The cost of bookkeeping services when they’re outsourced: £15 – £30 per hour

3. Hire an in-house bookkeeper

For large businesses with a lot of transactions, hiring a bookkeeper by the hour will be a costly option. Doing it yourself is also not a viable option, as it would be far too time consuming and you run a much bigger risk of making a mistake when you have a lot of data to process.

Instead, consider hiring an in-house bookkeeper who will process your day-to-day finances and be part of your payroll. You can hire a junior bookkeeper for upwards of £18,000 per annum, although you’ll need to factor in additional costs of employment such as sick pay, annual leave and employer’s NIC.

For a bookkeeper who’s also a qualified accountant, this figure could be much higher – up to £50,000 a year. To calculate the actual cost, bear in mind that an accountant can actually save you some money.

According to Entrepreneur.com, businesses should consider hiring an in-house bookkeeper when their revenue exceed £1 million.

Pros of hiring an in-house bookkeeper

  • More cost effective when your business exceeds a certain revenue.
  • You know your accounts will be accurate and compliant.
  • Your bookkeeper knows your business inside out and can advise accordingly.

Cons of hiring an in-house bookkeeper

  • Expensive. This option is only really viable for larger businesses.
  • Employment liabilities.

Average cost of bookkeeping services when it’s done in-house: £18,000 – £50,000 per year, depending on skill level.
 


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