Complete Guide to Bookkeeping Costs: Full-Time vs. Part-Time Services
Bookkeeping Costs: Understanding Full-Time and Part-Time Expenses
Bookkeeping costs can vary significantly depending on the size of your business, the complexity of your financial transactions, and whether you need full-time or part-time support. Understanding how much to budget for bookkeeping services is essential for maintaining accurate financial records and ensuring compliance with tax regulations. In this guide, we’ll explore everything you need to know about bookkeeping costs, from full-time in-house options to part-time outsourced solutions, helping you make an informed decision that suits your business needs.
Table of Contents
Factors Affecting Bookkeeping Costs
The cost of bookkeeping services can vary widely depending on several important factors. Businesses should carefully evaluate these factors to understand what drives the cost and how to optimize for their specific needs. Below is a detailed look at the most common factors that influence bookkeeping costs.
1. Complexity of Financial Records
The complexity of a business’s financial transactions is one of the biggest determinants of bookkeeping costs. More complex financial records require more time and expertise to manage. For example:
- Multiple revenue streams: A business with various sources of income (e.g., retail, services, subscriptions) will have more complex financials than one with a single income stream.
- Industry-specific needs: Businesses in certain industries, such as real estate, construction, or non-profits, often have unique accounting requirements, such as managing escrow accounts or tracking grant funding.
- International transactions: Companies dealing with foreign currency, cross-border transactions, or multiple tax jurisdictions will require a bookkeeper familiar with international accounting, which tends to increase costs.
- Intercompany transactions: Businesses with multiple entities or divisions that trade with one another will also face increased bookkeeping complexity.
2. Volume of Transactions
The sheer number of transactions your business handles each month has a direct impact on the cost of bookkeeping services. A higher transaction volume requires more frequent reconciliation and data entry:
- High transaction volume: Businesses in retail, e-commerce, or restaurants often have hundreds or thousands of small transactions per month, which can be time-consuming to reconcile and track.
- Low transaction volume: Service-based businesses with fewer, high-value transactions, such as law firms or consulting companies, generally have lower bookkeeping costs due to fewer records to process.
3. Location and Experience of the Bookkeeper
Where your bookkeeper is located and their level of experience will significantly influence their rates:
- Location: Bookkeepers in larger cities or more expensive regions often charge higher rates due to the cost of living. For example, a bookkeeper in San Francisco may charge much more than one in a rural area. Outsourcing to countries with lower labor costs, such as India or the Philippines, can drastically reduce expenses.
- Experience: More experienced bookkeepers generally command higher fees. A certified bookkeeper or someone with extensive experience in a particular industry may charge more, but they can also work more efficiently and accurately. Entry-level bookkeepers or those working on a freelance basis may offer lower rates but might require more oversight.
4. In-house vs. Outsourcing
Choosing between an in-house bookkeeper and outsourcing can have a big impact on costs:
- In-house bookkeeping: In-house bookkeepers come with higher fixed costs because you have to provide benefits, office space, and payroll taxes in addition to their salary. The average cost of hiring an in-house bookkeeper can range from $3,000 to $5,000 per month.
- Outsourcing: Outsourcing to a third-party bookkeeping service is typically more cost-effective. You only pay for the services you need, without the overhead associated with full-time employees. Outsourcing can also give you access to highly skilled professionals at a fraction of the cost of an in-house team.
5. Hours Required
The number of hours your bookkeeper works each week is a major cost factor:
- Part-time vs. full-time: Small businesses that don’t require daily updates may hire a part-time bookkeeper, which can significantly lower costs. For example, a business that only needs 5-10 hours of bookkeeping per week might pay between $500 and $2,000 per month.
- Outsourced hourly rates: Outsourced bookkeepers often offer flexible packages, charging on an hourly basis. Rates can vary from $20 to $50 per hour depending on the level of expertise and the complexity of the tasks involved.
6. Type of Bookkeeping Services Needed
The range of bookkeeping services you require will directly influence the overall cost:
- Accounts Payable (AP): If your business needs someone to manage outgoing payments to vendors and suppliers, this adds to the workload and cost.
- Accounts Receivable (AR): Managing incoming payments, sending invoices, and following up on late payments also increase the amount of time your bookkeeper will spend on your accounts.
- Payroll Processing: Payroll services, which include calculating wages, deducting taxes, and managing benefits, are often an additional service provided by bookkeepers. This requires specific expertise and adds to the cost.
- Sales Tax Filing: If your business is required to collect and file sales tax, this adds another layer of bookkeeping complexity. Sales tax must be calculated and submitted to the appropriate tax authority, often on a monthly or quarterly basis.
- Financial Reporting: Generating monthly, quarterly, or annual financial reports, such as profit and loss statements (P&L), balance sheets, and cash flow statements, requires specialized expertise and additional time.
- Bank Reconciliation: This service ensures that your accounting records match your bank statements, which can be time-consuming if your business has multiple accounts or numerous transactions.
- Tax Preparation Support: Bookkeepers often work with accountants to prepare for tax season, gathering documents and ensuring that records are accurate and up to date. This service can be a major cost driver for businesses with complex tax situations.
7. Technology Integration
The type of software and tools your bookkeeper uses can also affect costs:
- Cloud-based software: Businesses using cloud-based accounting platforms like QuickBooks Online, Xero, or FreshBooks may benefit from reduced manual data entry, as these tools can automatically sync with bank accounts and integrate with other software. However, there may be additional fees for software licenses.
- Automation: The use of automated bookkeeping software can help reduce costs by minimizing human errors and speeding up repetitive tasks. However, setting up and maintaining these systems may incur additional costs if your bookkeeper needs to manage integrations or troubleshoot issues.
- Document Management: Many businesses now rely on document management systems to store and organize receipts, invoices, and financial documents. If your bookkeeper provides support in managing these systems, it may add to the cost.
8. Additional Services and Consulting
If your bookkeeper offers additional services beyond basic data entry and reconciliation, this can increase the overall cost:
- Financial Consulting: Some bookkeepers offer financial consulting services to help you make better business decisions, such as cash flow forecasting or budgeting. These value-added services come at a premium but can provide long-term savings.
- Audit Preparation: If your business is being audited, a bookkeeper can assist with gathering the necessary documentation, organizing records, and working with your accountant. This is typically a specialized service that costs more than standard bookkeeping.
- Management of Multiple Accounts: If your business operates across multiple bank accounts or credit cards, reconciling these can take extra time and expertise.
9. Frequency of Updates
How often your books need to be updated will impact the amount of time required:
- Daily updates: If your business needs daily updates, such as in the case of high-volume retail or e-commerce, a bookkeeper will need to dedicate more hours to maintaining accuracy, increasing the cost.
- Weekly or monthly updates: Businesses with lower transaction volumes may only need weekly or monthly updates, reducing the amount of time the bookkeeper spends on your accounts, and thus lowering the cost.
10. Industry Regulations and Compliance
Some industries, such as healthcare, legal, and non-profits, are subject to specific regulations and compliance requirements. A bookkeeper with expertise in these industries may charge higher rates due to the additional responsibilities involved in adhering to industry-specific accounting standards.
11. Choice of Outsourced Bookkeeping Service
Last but not least, the outsourced bookkeeping service you choose can have a dramatic impact on your bookkeeping costs. Different bookkeeping service providers offer a wide range of pricing structures, service levels, and expertise, so choosing the right one is crucial to controlling costs while maintaining quality.
Service Packages: The best bookkeeping services offer tiered pricing plans based on the complexity and frequency of the bookkeeping required. For instance, some services offer a basic plan for minimal bookkeeping needs (e.g., a few hours per week), while more comprehensive plans may include additional services like financial reporting, tax preparation, or payroll management. These packages allow businesses to only pay for what they actually need, potentially leading to significant savings.
Pricing Models: Bookkeeping services may charge by the hour, offer fixed monthly fees, or operate on a subscription basis. For businesses with fluctuating bookkeeping needs, it’s often more cost-effective to choose a service with flexible, pay-as-you-go bookkeeping pricing. On the other hand, businesses with consistent bookkeeping requirements might benefit from a monthly subscription that offers more predictability in expenses.
Automation and Technology: Many modern outsourced bookkeeping providers use cutting-edge software to automate data entry, invoice management, and reconciliation processes. Providers that heavily integrate automation can reduce manual labor, potentially offering lower costs compared to traditional bookkeeping services. However, it’s important to ensure that these automated systems are well-managed and customized to fit your business needs to avoid errors or inaccuracies.
Geographic Location of Provider: Outsourced bookkeeping providers based in regions with lower labor costs (such as offshore providers) can offer substantially lower rates than domestic providers. While this can result in cost savings, businesses should consider factors such as time zone differences, communication preferences, and quality standards when opting for offshore services.
Reputation and Expertise: Well-established providers with a proven track record, particularly those with industry-specific expertise, often charge more than newer or less experienced services. However, these providers tend to deliver more reliable results, which can save you money in the long run by preventing errors, compliance issues, or missed tax deadlines. Businesses should consider reading reviews or exploring 9 Best Virtual Bookkeeping Services to compare their options and find the best fit for their needs and budget.
Hidden Costs: It’s essential to watch for any hidden fees that might not be immediately apparent when signing up for an outsourced bookkeeping service. Some providers charge additional fees for onboarding, software usage, or report generation, which can add up over time. Always clarify what’s included in the pricing package to avoid unexpected charges.
By choosing the right outsourced bookkeeping provider, businesses can significantly reduce costs while maintaining or even improving the quality of their financial management. It’s important to research providers carefully and select one that fits your specific requirements and budget.
Comparing Full-Time and Part-Time Bookkeeping
When deciding between full-time and part-time bookkeeping services, it’s important to consider your business’s specific needs, including:
- Volume of Transactions: Full-time bookkeepers are ideal for businesses with high transaction volumes. Part-time bookkeepers work well for companies with fewer financial entries.
- Budget: Full-time services are more expensive because they include benefits, office space, and downtime. Part-time bookkeepers cost less and offer more flexibility.
- Workload: If your business doesn’t require a bookkeeper every day, part-time or outsourced bookkeeping could be more efficient.
Comparison Table: Full-Time vs. Part-Time Bookkeeping
| Feature | Full-Time Bookkeeping | Part-Time Bookkeeping |
|---|---|---|
| Inhouse Bookkeeping Costs | $5,400/mo | $1,500/mo |
| Outsourced Bookkeeping Costs | $1,800/mo | $200/mo |
| Inhouse vs. Outsourcing | 67% Savings | 90% Savings |
| Hours Required | 40 per week | Depends |
| Payroll Taxes | Yes | Depends |
Comparing Full-Time and Part-Time Bookkeeping
Deciding between full-time and part-time bookkeeping depends on the size and complexity of your business. Here are some factors to consider:
Availability: Businesses that need a bookkeeper available for 8 hours a day will generally require a full-time bookkeeper. Part-time bookkeepers may not be able to provide the same level of availability.
Transaction Volume: A high volume of transactions often necessitates full-time bookkeeping support to keep up with the workload. In contrast, a lower transaction volume can be efficiently managed by a part-time bookkeeper.
Budget: Full-time bookkeepers come with higher costs due to benefits, payroll taxes, and additional expenses. However, outsourcing a full-time bookkeeper can often be more affordable than even hiring a part-time in-house bookkeeper. Outsourced bookkeeping services allow businesses to pay only for the services they need, often resulting in significant savings, as there’s no need to cover benefits, office space, or equipment costs.
On-site vs. Remote: Many tasks traditionally handled by an on-site full-time bookkeeper can now be managed by a remote part-time bookkeeper. Remote bookkeepers often provide the same services at a lower cost, with more flexibility and fewer overhead expenses, like office space or equipment.
Business Complexity: Companies with complex financial structures, such as those requiring frequent financial reports, payroll management, or tax planning, are likely to benefit from a full-time bookkeeper who can dedicate more time to these needs. However, even businesses with complex needs can often outsource to a remote full-time bookkeeper for a fraction of the cost of in-house services.
Update Frequency: If daily bookkeeping updates are required, and you need someone physically present in the office, a full-time bookkeeper might be the best option. It’s often difficult to find a part-time bookkeeper who will come to the office for just a few hours each day.
Flexibility: A remote part-time bookkeeper offers flexibility, with many willing to work as little as a few hours per week. This makes them ideal for smaller businesses with less frequent bookkeeping needs.
Workload Variety: For businesses that need a bookkeeper to handle additional office tasks, a full-time, in-house bookkeeper might be more practical. However, for companies that require only bookkeeping services, outsourcing to a part-time or remote bookkeeper can provide significant savings.
Stability: If stability is a priority, hiring a full-time bookkeeper or a part-time bookkeeper from an established company is often the best choice. Freelance part-time bookkeepers tend to have higher turnover, leading to less continuity in your financial processes. A full-time or company-backed part-time bookkeeper can offer long-term reliability and consistent support.
Technology Integration: Outsourced bookkeepers, especially remote ones, often have access to advanced bookkeeping software and tools that can streamline processes. In-house part-time bookkeepers may need additional resources and training to get familiar with the technology, adding to your overall costs.
Scalability: If your business is growing or your needs fluctuate, outsourced bookkeepers can scale with your business more easily than an in-house bookkeeper. Outsourcing allows you to increase or decrease services as needed without the complications of hiring or laying off staff.
Full-Time Bookkeeping Costs
Full-time bookkeeping services are ideal for businesses that handle a large volume of transactions or need consistent financial management. The costs can range from $3,000 to $5,000 per month, with the hourly rates for full-time bookkeeping averaging about $21.90 per hour. The state-by-state averages for hourly rates in bookkeeping vary widely.
A full-time bookkeeper is your employee and on your payroll. They come into your office every day, and you have to pay them for 40 hours a week, even if there’s not enough work. And what about lunch breaks or coffee time? It’s not their fault if you can’t keep them busy.
You also need to provide office space, a desk, a computer, and a phone. Plus, you’ll pay payroll taxes—7.45% for Social Security and Medicare—and possibly health insurance too. Hiring a full-time bookkeeper can get expensive, especially if there’s not enough work for them.
Full-time bookkeeping costs are more than part-time bookkeeping costs, but the difference is even bigger when you compare it with outsourcing.
Additional Costs of Full-Time Bookkeeping
- Benefits: Health insurance, paid vacation, and sick leave can add up to thousands of dollars annually.
- Payroll Taxes: Employers are responsible for paying an extra 7.45% for Social Security and Medicare.
- Office Space: You’ll need to provide a desk, chair, computer, and other office essentials, as well as cover utility costs.
- Downtime: Full-time employees are paid for 40 hours a week, but not all of that time will be spent working—breaks and slower periods also factor in.
Full-time bookkeeping cost savings with outsourcing
Outsourcing bookkeeping services can reduce costs by up to 67% compared to hiring a full-time bookkeeper. On average, a full-time bookkeeper earns around $21.90 per hour, though rates may vary. If a business pays more than this rate, the potential savings from outsourcing could be even greater. Even for those paying less, outsourcing can still offer significant savings. This is due to the elimination of expenses associated with full-time employees, such as benefits, office space, and downtime.
Below is a table that compares the cost of full-time bookkeeping with that of outsourced bookkeeping.
| Description | Full-time Bookkeeping | Outsourced bookkeeping | Savings |
|---|---|---|---|
| Hourly Rate | $21.90 per Hour | $10 per Hour | 54% |
| Monthly Cost (@ 40 hrs/week) | $3,942.00 | $1,800.00 | $2,142.00 |
| FICA Costs (@ 7.45%) | $293.68 | $0.00 | $293.68 |
| Office Space Rent | $600.00 | $0.00 | $600.00 |
| Health Insurance | $600.00 | $0.00 | $600.00 |
| Turnover Headaches | $200.00 | $0.00 | $200.00 |
| TOTAL | $5,335.68 | $1,800.00 | $3535.68 |
| That’s 67% Savings! | |||
| Built-in Supervision | No | Yes | Better Quality! |
| 19 Years of Experience | No | Yes | Better Quality! |
| QuickBooks Expert | No | Yes | Better Quality! |
| Coverage during Timeoff | No | Yes | Better Quality! |
| Turnover Management | No | Yes | Better Quality! |
| Staff On-Demand | No | Yes | Better Quality! |
Part-Time Bookkeeping Costs
Part-time bookkeeping services are a great option for businesses that don’t have a high volume of transactions or don’t need consistent, daily financial management. The costs typically range from $500 to $2,000 per month, depending on the number of hours required and the complexity of the work. Hourly rates for part-time bookkeeping can vary, generally falling between $20 to $50 per hour, depending on location and experience.
Who is a part-time bookkeeper?
A part-time bookkeeper is either an employee or contractor who works fewer than 40 hours per week handling a company’s bookkeeping. They can be either in-house or virtual, depending on the needs of the business.
An in-house bookkeeper comes into the office a few days each week to manage the books. Typically, businesses need to commit to hiring them for a set number of full days, usually a minimum of two days or about 16 hours per week. It can be challenging to find someone willing to work fewer hours or partial days, and businesses often need to assign additional office tasks to fill their time.
A virtual bookkeeper, on the other hand, works remotely, handling bookkeeping tasks online. Virtual bookkeepers often have more flexibility and may require fewer minimum hours, with some willing to work as little as 1 hour per week or around 5 hours per month. This makes virtual bookkeeping a more flexible option for businesses with less frequent bookkeeping needs.
Unlike full-time bookkeepers, part-time bookkeepers work fewer hours and are typically not on your payroll. You only pay for the time they work, which means you avoid covering downtime like lunch breaks or periods of low activity. This flexibility can help businesses control costs more effectively.
Since part-time bookkeepers often work remotely or on a contract basis, you won’t need to provide office space, equipment, or other resources. Additionally, you won’t be responsible for paying payroll taxes like Social Security and Medicare, or providing benefits such as health insurance.
Overall, part-time bookkeeping is more cost-effective than full-time bookkeeping for businesses that don’t need daily financial management, and it can offer even greater savings when compared to full-time in-house bookkeepers.
What are the hourly rates for part-time bookkeeping?
The hourly rates for part-time bookkeeping in the USA are about $21.90 per hour. The state-by-state averages for hourly rates in bookkeeping vary wildly across the various states. Since in-house bookkeeping requires you to come in to the office located in the USA, we will use these average rates with the understanding that rates vary across the various states.
For virtual bookkeeping, though rates can be as low as $7.50 per hour, we will use a rate of $10 per hour that enables regular updates.
What is the minimum number of hours required for part-time bookkeeping?
Since an in-house bookkeeper has to come into the office, there is overhead in getting ready and driving to work every day. So, we will assume a minimum of 2 days or 16 hours per week. It’s just too hard to find someone who will work for less hours than that. On the other hand, a virtual bookkeeper can easily accommodate a much lower minimum number of hours. It can be as low as 5 hours per month. However, we will use 20 hours per month as the minimum. This number of hours enables full-service bookkeeping on a daily basis.
With in-house bookkeeping not only do you have to pay a higher rate per hour but you also have to pay for at least 2 days per week. And, that’s even if you cannot keep them busy for the 2 full days per week! And, do you have to pay them for their extended lunch and coffee breaks? Of course. It’s not their fault that you cannot keep them busy. Office space, desk, computer and phone? Yes, yes, yes and yes! And then you have the payroll taxes. If you hire the part-time bookkeeper as an employee, you have to pay another 7.45% towards their Social Security and Medicare. You do not have to pay payroll taxes if you hire them as a contractor. So, while part-time bookkeeping costs are much less than full-time bookkeeping costs, they can still get expensive. Especially when you do not have enough work to keep them busy!
With virtual bookkeeping, you do not need to commit to any number of full days per week. In fact, you do not even have to commit to a full day’s worth of work. You only pay for the hours you use. There are significant savings when you compare virtual bookkeeping to in-house bookkeeping.
In a nutshell, even if you only use a part-time bookkeeper and pay by the hour, virtual bookkeeping can still save you about 90% off your bookkeeping costs. In other words, virtual bookkeeping costs only about 1/10th – that is ONE-TENTH – an in-house bookkeeper. You may pay more or less than $21.90 per hour! If you pay more, your savings could be a lot more. If you pay less, even then you can still easily save more than 80%. Virtual bookkeeping allows the bookkeeper to update your books daily and yet charge you only for the hours you use.
Part-time bookkeeping costs: in-house vs. virtual
| Description | In-house Bookkeeping | Virtual Bookkeeping | Savings |
|---|---|---|---|
| Hourly Rate | $21.90 per hour | $10 per hour | 54% Savings |
| Monthly Cost based on minimum requirements | $1,500 (16 hours minimum per week) | $200 (Min. for Daily Bookkeeping is 20 hours per month) | $1,300 Savings |
| FICA Taxes (@7.45%) | $111.75 (assume employee) | $0.00 | $111.75 Savings |
| Additional Office Rent (est.) | $300.00 | $0.00 | $300.00 Savings |
| Turnover Headache (est.) | $100.00 | $0.00 | $100.00 Savings |
| TOTAL | $2,011.75 | $200.00 | $1,811.75 or 90% savings per month |
| Daily Bookkeeping? | NO, only twice a week | YES | Better Quality! |
| Built-in Supervision? | NO | YES | Better Quality! |
| Turnover Management? | NO | YES | Better Quality! |
| 18+ years of Experience? | NO | YES | Better Quality! |
| QuickBooks Expert? | Unknown | YES | Better Quality! |
Bookkeeping Costs Calculator
Use the bookkeeping costs calculator below to estimate how much your business will spend on bookkeeping services and how much you can potentially save with outsourcing. Enter the number of hours you expect to need per week, and the calculator will give you an estimate based on average full-time and part-time rates.
Bookkeeping Costs Calculator
Input your weekly bookkeeping hours:
- Hours per week: 20
- In-house Bookeeping Hourly Rate: $21.90
- Outsourced Bookkeeping Hourly Rate: $10.00
* You can adjust these hourly rates based on the complexity and location of your business.
Bookkeeping Costs Calculator
Conclusion
Understanding the costs associated with bookkeeping is essential for managing your business’s finances efficiently. Whether you need full-time or part-time services, this guide helps you estimate your bookkeeping expenses and make an informed decision about the best solution for your business.
