How much should I spend on Accountancy fees?

How much do they cost?

Too much… I’m sure that’s what you’re going to say! We beat you to it!

But, when it comes to managing your finances effectively, investing in an Accountant can be invaluable, and choosing the right Accountant for you will allow you to sleep easy at night.

How much do accountancy fees cost?

Whether you’re an individual seeking Personal Tax advice or a Business Owner looking for expert Advisory services, it’s crucial that you understand how much you should be paying for your accountancy fees.

It’s funny the number of times we’ve heard stories like:

“My mate Dave, from down The Crown Pub, says he only pays £300. Why do you cost so much?”

In this blog post, we will explore the various factors that can influence your accountancy fees, why Dave from The Crown might be only paying £300, why some Accountants will charge more, and provide you with a general idea of what you can expect to pay for accountancy services in the UK.

Types of Accountancy Services

The cost of accountancy services will vary depending on the specific type of services that you require. Most Accountants offer a range of services, including Bookkeeping, Accounts Completion, Management Accounts, Tax Return Preparation, Payroll, and more. The complexity and scope of the services you need will impact the overall cost.

At EOG Accounting, we offer the Full Finance Function, which includes all of the above services, and we have regular conversations with our customers to ensure that we provide our customers with the exact services they require as and when they need them.

*Interestingly, using your Accountant as your Bookkeeper can also decrease overall Finance Function costs. To see why check out point 10 in this blog!

Advisory Services

Good Accountants will offer additional services beyond what many see as traditional accounting services. They will offer the services you, as business owners, need.

Services such as long-term vision setting will allow you to clearly define what you want to achieve within your business and, more importantly, what you really want out of life and what your business would look like so that you can achieve your goals.

They will offer short-term budgeting, or ‘one-year plans’ so that your short-term goals fall in line with you achieving your long terms goals. Management accounts so that you know where you’re at, and annual tax planning so that you minimise your tax liability. These services are likely to incur additional fees. Similarly, consultations or one-time projects, such as tax investigations or financial restructuring, may be charged separately too. Make sure to clarify the pricing for any extra services that you may require.

Accountant’s Experience, Qualifications, and Specialist Knowledge

The experience and qualifications of an accountant can significantly affect the fees they charge.

Highly experienced and certified professionals from governing bodies such as the ACCA with specialised knowledge and skills are likely to charge higher fees compared to those who are less experienced, have fewer qualifications, or have general expertise. It is important to assess the credentials and track record of the Accountant or accountancy firm you are considering to ensure they are well-suited to meet your needs.

Your Business Size, Entity Type, and Complexity

For Businesses, the size, entity type, and complexity of your financial operations will play a vital role in determining how much you should be paying for your accountancy fees. Larger Businesses with multiple subsidiaries, international operations, or complex financial transactions may require more extensive accounting support, leading to higher fees. Small businesses or self-employed individuals with simpler accounting needs generally pay lower fees.

Location

Historically the location of the accountancy firm could impact the fees as well. Accountants based in larger cities, such as London, would likely charge higher rates compared to those in smaller towns or rural areas.

However, in recent years there is no reason why you should be paying more for an Accountant if you’re based in a city or built-up area. Nowadays, it’s irrelevant where your Accountant is based and a good accountant using the latest technology should be able to deliver the same level of service regardless of location.

Software

As experts in their field, good accountants realise they are best placed to advise on and provide Bookkeeping Software. Accountants often pay for your Software on your behalf and recharge you the fee. How much you need to spend on this Software will depend on your specific circumstances but be sure to ask your Accountant for advice on which package will suit you best.

EOG and XERO

Billing Structure

Hourly Rates

Traditionally, Accountants typically charged fees based on an hourly rate structure. Hourly rates can range from £50 to £200 or more, depending on the Accountant’s expertise and the work’s complexity.

Although this structure works well for Accountants, using this billing structure, there is no incentive for the Accountant to get the work done quickly, and as a customer, you will never really know how much your Accountancy fees will be. The worry of using an Accountant with this billing structure is that you may get a shock with their invoice after they’ve completed their work.

‘One Price fits all’ Fixed Monthly Fee

Some Accountants will charge a one-price fixed fee of £x per month for a set level of services. This is great for you as a customer as you will know exactly how much you will pay for your fees each year. Our issue with this type of fee is that each person or business requires different:

• Accountancy Services
• Accountant skill levels
• Software
• Frequency of contact

You may get lucky and hit the exact service level you require, but what happens when your business grows or shrinks?

Fixed Monthly Fee Depending On your Circumstances

This is how we at EOG Accounting price our services, and ok, we may be slightly biased, but we think this is the best method, and here’s why:

1. You get a fixed price, so you know exactly how much you’re paying before you sign up
2. As the Accountant discusses your situation with you, they will only choose the services you require, so you’re only paying for what you actually need
3. If the Accountant is slow, you don’t pay more
4. You will only be paying for the Software that you actually require
5. As your circumstances change, so will the services and Accountancy fees
6. The fees are fair as they will vary depending on the amount of work needed, the complexity of the work, and also the frequency of delivery
7. I could go on…

But how much should you be investing in accountancy fees?

As you can see, knowing how much to invest in accountancy fees is challenging as it depends on several variables. The type and complexity of services, whether you want advisory services, the Accountant’s qualifications and experience, the size and complexity of your business, and the billing structure are all key factors that influence the fees.

Investing in Accounting

If Dave, from down The Crown Pub is spending £300 on his Accountancy fees but feels out of control with his finances, never knowing whether he’s making money or not and dreading his annual letter from his Accountant telling how much tax he’s got to pay with money that he doesn’t have…. Well…. Maybe Dave should be investing a bit more in his Accountancy fees.

A great guideline as to how much you should be investing in Accountancy fees, i.e. in your finance function, is to invest between 2% and 4% of your business’s Turnover.

So, if Dave’s Business Turnover was £100,000, he should be looking to spend at least £2,000 per year on his finance function.

If you are serious about getting your finances in order and achieving your life goals, you should not be skrimping on your finance function costs.

What percentage of your Turnover are you investing in your finance function?

Do you want more from your Accountant?

If so, contact us today, and we can see how we can align our services with your needs.

This information is subject to change and is not professional advice. Refer to our disclaimer for more details.