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Financial Advice

How Much Should Bookkeeping Cost Your Business?

How Much Should Bookkeeping Cost - Beyond Accounting

Accounting and bookkeeping have changed dramatically in the last few decades. The systems we use in business and the way that government services are delivered has led to a more integrated, technology-based flow of information – internally and externally. This, in turn, has resulted in a change to the value put on bookkeeping and its place in a financially healthy organisation.

How we view bookkeeping at Beyond

We see bookkeeping as the backbone of effective financial management and therefore a highly skilled role. Bookkeeping is no longer a simple data entry exercise which can be assigned to a junior member of staff with no knowledge of accounting. There are many ways to approach the bookkeeping, which will depend on the business and how it needs its financial information structured. The quality of the information you put into the bookkeeping system will affect the quality of the reporting that you can get out of it.

At Beyond, most of our bookkeepers are in fact qualified accountants, so they bring with them a wealth of experience and an understanding of business finance that can impact significantly on an organisation. They are all Xero-certified and experienced with other common accounting software packages, which means they understand the systems they are using.

Back when bookkeeping was a data entry role, maintaining financial records was a long (and boring) job. Copying information manually from paper records into an accounting system was understandably slow, so finding the cheapest cost per hour for getting this done was the priority.

But modern accounting apps such as Xero have made this way of working obsolete. If your system is set up correctly, day-to-day bookkeeping is made lightning fast with benefits such as:

  • Imported bank statements or integrated live bank feeds
  • Data entry automation such as scan and upload with character recognition and capture
  • Pattern recognition that suggests inputs without you having to type them in
  • Repeat invoices that are automatically approved and emailed
  • Automatic payment collection through direct debit/online payments
  • Matching transactions using predetermined conditions, or rules
  • Batch coding or recording of transactions

This means that where historically a company may have needed their bookkeeper for two or three days a week, they may now only need support for a few hours a week. Instead of entering data, bookkeepers are focusing their attention on qualitative tasks such as checking for mistakes, making sure things are running correctly, verifying the quality of the information coming out of your system, submitting VAT returns, running payroll, etc.

How much does a bookkeeper cost per hour?

The way we assess how many hours of bookkeeping you will need is based on four main factors:

  • What type of business you are running
  • Your turnover (service business) or gross profit (product business)
  • The volume of transactions you have
  • The different bookkeeping tasks you need support with

We also consider the level of investment in accounting that makes sense for your business, based on our benchmark of 3% – 4% of turnover/gross profit for all your accounting needs.

An example of how we calculate the right level of investment in bookkeeping

Here’s how to calculate if your total spend in bookkeeping is within a sensible level.

Imagine a graphic design business with €1 million in turnover per year (because it’s a service business, we look at overall turnover, in a product business we would take the gross profit as the starting point).

Based on our benchmark, let’s assume the business takes 3% of this as the budget for ALL the accounting services needed: €30,000.

We would expect that roughly half of this goes to bookkeeping: €15,000 per year. We charge €40/hour for bookkeeping, so this would equal 375 hours of input per year, or 31 per month.

This is about one day per week of bookkeeping support, which would be about right for a business of this size.

The remaining budget is available for other accounting services such as annual compliance and financial advisory in the form of an outsourced CFO, business planning, financial coaching, etc. as required.

Why cheaper is not better when it comes to bookkeeping

I don’t recommend using an unqualified bookkeeper. Like in so many other areas of life and business, getting something done more cheaply can actually cost you more in the long run. It’s not as easy as you might think to find a good bookkeeper. If they’re good, they’ll also be in demand and so won’t be actively looking for new clients. They’ll probably have long term jobs and get any new work from referrals, so they may not even have an online presence you can find them by. And if you only need a couple of hours a week, it may be too small a job for them to be interested in.

I don’t recommend using an unqualified bookkeeper. Like in so many other areas of life and business, getting something done more cheaply can actually cost you more in the long run.

That’s why our service is so valued by clients. We work hard to find the best bookkeepers we can and we invest in their ongoing training and upskilling. We allocate work to them according to their expertise and availability, meaning no job is too big or too small. We also cover any absences or holidays, because it doesn’t take long for the bookkeeping to unravel if no one is paying attention to it – which can result in filings not being done, fines being imposed, people not getting paid, etc.

Good bookkeeping is central to running a successful business

Just because bookkeeping isn’t a full-time task for the average business, doesn’t mean it isn’t important. This is a crucial role in any organisation and it’s essential it’s done well. Any higher-level accounting such as management accounting or financial strategy simply cannot be done if the bookkeeping isn’t up to date and done properly.

When you pay someone who has expertise and experience in this area, you get a lot of peace of mind and it takes things like payroll and filing off your plate. You can also get added support as and when you require it – for instance, if you needed a couple of extra hours help with credit control. When your bookkeeper is a good fit, they can stay with the business for many years and really make a difference to how your business is run and how successful you are.

Bookkeepers can come with specialist experience, too. Some may work predominantly in a particular niche, such as legal firms, which means they’ll already know the different systems and processes used (different practice management software, for example). Someone like this may charge a premium but, depending on your needs, this could prove to be a real benefit and great return on investment. They’ll hit the ground running and also be able to spot if things aren’t right more easily.

Outsourcing your bookkeeping brings savings of its own

Should you decide to employ a part-time bookkeeper, remember that the costs involved will go beyond their salary costs, to include office space, equipment, insurance, holidays, and supervision. It’s important to remember that a bookkeeper should never be left to work for long periods of time without review. If no-one in your business is knowledgeable in this area, you may not find out there are issues until you hand everything over to your accountant for the year-end accounts. This is much too late to learn that the figures you’ve been basing business decisions on are compromised.

At Beyond, we have bookkeepers working in over 100 Dublin SMEs of every size and in every kind of sector. We know how to ensure you get great results from your bookkeeper and that the real-time data bookkeeping provides improves other areas of your accounting function.

Great bookkeeping is the basis of our outsourced accounting service. If you’re interested in getting more input into your financial management, get in touch today.