How Much Should I Pay an Accountant? A Comprehensive Guide for Business Owners

“Price is what you pay. Value is what you get.” - Warren Buffet

As a business owner, one of the most common questions you'll eventually face is, "How much should I pay my accountant?" It’s an essential question because financial management plays a pivotal role in the success of any business, whether you're just starting or scaling to new heights. Let’s dive into the details to help you understand when to hire an accountant, what services to expect, and how much you should budget for these services.

Different Phases of Your Business Journey

Most business owners start their entrepreneurial journey because they believe they can do a better job than their boss, or simply because they want more freedom. You might think you can handle everything yourself initially—and in some cases, you can. However, as your business grows, so do its financial needs, and this is where an accountant or bookkeeper becomes essential.

1. Start-up Phase

When you're in the early stages of your business, things are straightforward. At this point, your primary financial need is often filing your tax return. As money is often tight, you'll probably ask around for the most affordable accountant or tax specialist. The focus here is on compliance, and you’re likely paying for the bare minimum service—getting your tax return filed accurately and on time.

This type of service can cost anywhere between £250 to £1,000 depending on the business type & the complexity of your finances..

2. Growing Phase

As your business grows, your needs evolve. At this stage, you might be wondering:

• How much should I be saving for tax purposes?

• Can I afford to hire a new team member or invest in new equipment?

• Am I managing my cash flow properly?

If your current accountant isn't providing this type of advice, it may be time to upgrade. In this phase, you’ll need more than just tax returns—you need a professional who can help with financial forecasting, budgeting, and strategic planning. This may involve monthly or quarterly management accounts, cash flow analysis, and even scenario planning (e.g., “What happens to my cash flow if I buy a new van?”).

According to industry standards, for this level of service, you should expect to pay an accountant around 3-5% of your turnover. If you want detailed guidance, hand-holding through financial decisions, and help setting targets, your costs will lean towards the 5% mark.

3. Established Phase

Once your business reaches a certain size, you may consider hiring an in-house accountant or bookkeeper. This gives you access to immediate financial insights, and the costs become more predictable. The choice between outsourcing and hiring internally depends on the size and complexity of your business.

For many small to medium-sized businesses, outsourcing continues to be more cost-effective, but the level of service increases as your needs become more complex.

Why Accountants Charge Based on Turnover

You may be wondering, "Why is the cost of an accountant linked to turnover?" It’s simple: the larger and more successful your business, the more complex your accounts become. Larger businesses deal with more transactions, more intricate tax situations, and higher risks. As a result, accountants need more time and expertise to handle your finances efficiently.

For example, if your business turnover is £250,000, paying 3-5% means your accounting services could cost anywhere between £7,500 and £12,500 per year. If your turnover grows to £500,000, the cost rises proportionally, but so does the level of service and support.

What Services Do You Get for Your Money?

When you hire an accountant, you're not just paying for tax returns. Here are some of the critical services accountants and bookkeepers offer:

• Tax Planning: Ensuring you save enough for taxes and identify tax-saving opportunities.

• Financial Forecasting: Helping you project your cash flow, revenue, and expenses.

• Profit and Loss Statements: Providing insights into how much profit you’re generating and areas where costs can be reduced.

• Scenario Planning: Assessing financial outcomes of major decisions (e.g., hiring a new employee or purchasing expensive equipment).

• Compliance: Ensuring that your business complies with all financial regulations and deadlines.

If you’re looking for more strategic financial guidance, like setting up profit targets or scenario planning, this will naturally push you toward the higher end of the fee range.

Understanding the Costs: Accountant vs. Bookkeeper

It's important to distinguish between what a bookkeeper can do versus an accountant. A bookkeeper manages your day-to-day financial transactions like recording sales and expenses, invoicing clients, and reconciling your bank accounts. A certified accountant, on the other hand, is more focused on strategic planning, tax optimisation, and compliance.

If your business is still relatively small, hiring a bookkeeper might be enough, and then using an accountant for more complex tasks such as tax filing and financial planning. This approach is often more cost-effective in the early stages.

Learn More About Managing Your Finances

If you’re feeling uncertain about how to manage your business finances or how much you should be paying an accountant, I’ve created an in-depth online course designed specifically for business owners like you. The Confusion to Confidence Framework: Financial Mastery & Cash Flow Clarity for Coaching Business Owners helps you get a clear understanding of your business finances, so you can make smarter financial decisions and achieve your business goals.

This course walks you through everything you need to know, from managing cash flow and setting profit targets to understanding your tax obligations. Whether you’re in the start-up phase or your business is already growing, this course will give you the tools to ensure your finances are in order. You can register your interest on our website and take the first step toward financial clarity today.

Tips for Choosing the Right Accountant

When you choose an accountant, it’s tempting to go for the cheapest option, especially in the early days when funds are tight. However, as your business grows, it's essential to reassess your choice and ensure that your accountant has the skills and capacity to support you.

Here are a few tips for choosing the right accountant:

• Consider their experience: Do they specialise in businesses like yours?

• Evaluate their services: Are they just filing your tax returns, or are they offering strategic advice?

• Get recommendations: Talk to other business owners about their experiences.

• Budget accordingly: Aim to spend 3-5% of your turnover on accounting services.

Final Thoughts

At the end of the day, the cost of an accountant depends on what stage of your business journey you’re at and what level of support you need. Whether you're just starting out or your business is booming, having the right financial professional by your side can make all the difference.

Remember, investing in a good accountant isn't just about compliance—it's about gaining the financial clarity you need to make smarter business decisions and ultimately achieve your business goals.

And if you're looking to take control of your finances and gain confidence in managing your business, don't forget to check out The Confusion to Confidence Framework. It’s a perfect starting point for business owners who want to master their finances with ease.