How much does bookkeeping cost?

The REAL costs of bookkeeping explained

Considering how to manage your business’s bookkeeping is a crucial decision, so let’s explore the advantages and disadvantages of your options…

A staggering 82% of businesses fail due to poor financial management and cash flow.

The elephant in the room:

One of the very first things that pops into your head is: “How much is this going to cost me?” It’s the elephant in the room, the question everyone wants answered but many service providers tiptoe around.

Here at The Paperwork Team, we want to explain how our bookkeeping pricing works, what pushes costs up, what brings them down and give you an insight into how we arrive at a cost for your business.

Just to warn you, I can’t give you an exact figure because every business is unique. Your needs, complexities of your finances and the frequency of transactions all play a significant role in the final cost. However, I can break down the factors that influence bookkeeping service pricing, so that you can be far more informed and better understand the value you’re receiving.

So, what are your options, and which really is the best value for money?

Below we lay out the choices and the pros and cons of each, so that you can way up which is the best option for you.

Bookkeeping pricing options at a glance

Choosing how to manage your business’s bookkeeping isn’t just about time or convenience, it’s about cost, expertise, and long-term impact. Whether you’re a sole trader or scaling a growing business, the table below gives you a quick side-by-side comparison of your main options, typical costs, and what you need to consider with each approach.

Key elements that affect the cost of bookkeeping:

• The complexity of your business: A small, straightforward business will naturally have less intricate bookkeeping needs than a larger business with multiple revenue streams, inventory, or international transactions.
• The volume of transactions: The more invoices, payments, and financial activities your business has, the more time and effort will be required for accurate bookkeeping.
• The scope of services: Are you looking for basic bookkeeping, or do you need payroll processing, financial reporting, tax preparation assistance, or forecasting? Each additional service will impact the price.
• The frequency of service: Do you need daily, weekly, monthly, or quarterly bookkeeping support? More frequent service will generally mean a higher cost.
• The experience of the bookkeeper: Just like any profession, bookkeepers with more experience and qualifications may charge higher rates due to their expertise.

What Makes Bookkeeping Costs Higher?

• Lots of Activity: If your business has a lot of invoices, bills and payments flying in and out, it takes more time to track, sort, categorise and reconcile. Each transaction is dealt with separately.
• Too Many Accounts: Having multiple bank accounts and credit cards can also make bookkeeping more complicated, tracking each receipt or payment to the correct bank account.
• Messy Finances: Mixing personal and business spending takes time to untangle, so keep them separate.
• Complex Business set up: If your business structure is complicated. Multiple Directors, holding or umbrella companies etc., this adds to the work involved.
• Specialist Help: Running payroll for staff, dealing with VAT, or the Construction Industry Scheme requires extra expertise and will cost more. The more of these things you need, the higher the bill.
• Providing documents: If you’re sending a jumbled mess of paperwork, it takes more time to organise, additional work for your bookkeeper.
• Delayed Responses: Taking too long to answer questions or provide requested documents slows progress, forcing your bookkeeper to lose momentum and spend extra time re-familiarising themselves with the work, ultimately increasing your costs.
• Reporting: The more detailed and specific the reports you request about your business, the more time they take to prepare, and consequently, the more they are likely to cost.

Basically, the more brainpower your bookkeeper needs to spend on your business finances, the more it will cost you.

What Keeps Bookkeeping Costs Down?

• Be Organised: The cleaner and more organised your financial records are, the less time it takes sorting things out.
• Separate Finances: Use separate banks and credit cards for your business and personal finances. This avoids the time-consuming task of sifting through personal expenses.
• Good Filing Systems: Whether digital or physical, have a consistent way to store invoices, receipts, bank statements, and other financial documents. Label things clearly!  
• Regular Processing: Don’t let piles of paperwork accumulate. Deal with invoices and receipts at least bi-weekly, but better weekly.
• Use Accounting Software: Xero, QuickBooks, Free Agent, or SAGE will all connect with your bank feed, reducing the risk of errors and the time it takes to enter data manually.
• Integrate Systems: Connect your accounting software with other business tools e.g., payment processors, e-commerce platforms to automatically pull in transaction data. 
• Go Digital: Scan receipts and invoices instead of providing paper copies. Use the scanning apps that many accounting software packages have built in.  
• Provide Prompt Information: Chasing missing information takes time and ultimately your money. When your bookkeeper asks for something, provide it quickly and make sure it’s all there.
• Understand The Basics: Have a basic understanding of bookkeeping principles. Knowing how income, expenses should be categorised can help you provide clearer information.
• Communicate Clearly: Discuss your business and any changes that might affect your bookkeeping. The more your bookkeeper understands, the more efficient they can be.
• Ask Questions: Don’t be afraid to ask for clarification but try to bundle your questions rather than sending them one at a time.
• Review Regularly: Take time to look at your reports. This helps you understand your financial position and identify any discrepancies early on.
• Consider the Scope: If you can handle some basic tasks yourself (like sending invoices), this will reduce the workload.
• Be Realistic About Fees: Understand that quality bookkeeping costs money. While you want to keep costs down, choosing the cheapest option might lead to errors and more expensive fixes down the line. Focus on value.

In short, being organised, embracing technology, communicating well, and understanding the basics will ensure you work more effectively with your bookkeeper and ultimately keep those costs as low as possible.

So, what are your options for bookkeeping?

Doing bookkeeping yourself

Pros:

• Lowest Direct Cost: You’re not paying anyone else for their time.
• Maximum Control: You have complete oversight and understanding of your finances.
• Flexibility: You can do it at your own pace and schedule.
• Intimate Knowledge: You’ll gain a deep understanding of your business’s financial ins and outs.

Cons:

• Significant Time Investment: Bookkeeping can be time-consuming, taking you away from core business activities.
• Risk of Errors: Without proper training, you’re more likely to make mistakes, which can have serious consequences (e.g., incorrect VAT returns, tax issues).
• Lack of Expertise: You might miss opportunities for tax efficiency or not be aware of all relevant regulations (like Making Tax Digital).
• Software Costs: Even DIY often involves accounting software, which has its own subscription fees and learning curve.
• Stress and Frustration: Dealing with numbers and regulations can be stressful, especially if it’s not your forte.
• Potential for Delays: Bookkeeping might get pushed to the bottom of your priority list when other business demands arise.
• Limited Scalability: As your business grows, DIY bookkeeping can become overwhelming.

This might appear to be the most budget-friendly option, as it only demands your time. However, you might want to consider the true value of your time and the cost to the business of losing it. Maybe your energy is better spent on higher-priority tasks, like sales or customer retention.

Read our post: What is your time worth as a business owner?

Use an existing staff or family member for bookkeeping

Pros:

• Potentially Lower Cost Than Hiring Externally: You’re likely already paying their salary.
• Familiarity with the Business: They already understand your operations.
• Convenience: They’re readily available.
• Trust (with family): You might have a higher level of trust with a family member.

Cons:

• Lack of Expertise: They may not have the necessary bookkeeping knowledge or qualifications, leading to errors and compliance issues.
• Time Constraints: Their primary role might suffer if bookkeeping takes up a significant portion of their time.
• Potential for Conflicts: Mixing roles (especially with family) can lead to interpersonal conflicts.
• Limited Scalability: As your bookkeeping needs grow, their capacity might be limited.
• Risk of Errors (Again): Similar to DIY, lack of training increases the likelihood of mistakes.
• Opportunity Cost: Their time might be better spent on tasks more aligned with their primary skills and driving revenue.
• Tax Implications (for staff): Ensuring proper tax treatment of their bookkeeping duties within their employment.
• Professional Development Costs: You might need to invest in training them.

Using existing staff or family for bookkeeping seems like a cheap option, but risks errors, missed deadlines, and penalties due to lack of expertise. Fixing mistakes and compliance issues can be costly and far outweigh initial savings.

Hire in-house bookkeeper

Pros:

• Dedicated Resource: You have someone solely focused on your bookkeeping needs.
• Integration with Your Business: They become part of your team and can gain a deep understanding of your specific requirements.
• Control and Oversight: You have direct management and can easily communicate with them.
• Potential for Proactive Support: A good in-house bookkeeper can identify financial trends and offer insights.
• Scalability (to a point): Can handle increasing bookkeeping demands as your business grows (until their capacity is reached).

Cons:

• Higher Cost: Salary, benefits (pension contributions, holiday pay, etc. – important considerations), National Insurance contributions, and potential training costs can be significant.
• Recruitment and Retention: Finding and keeping a skilled bookkeeper can be challenging, time-consuming and costly.
• Software and Equipment Costs: You’ll need to provide them with the necessary software, hardware, and office space.
• Risk of Single Point of Failure: If they leave or are unavailable, your bookkeeping can be disrupted.
• Ongoing Management: You’ll need to manage their workload and performance.
• Limited Scope of Expertise (potentially): One person might not have expertise in all areas (e.g., complex VAT issues, payroll rules).

Employing someone directly for bookkeeping can be a costly option when factoring in salary, benefits, and management time. Additionally, you’ll need to plan for covering absences such as holidays, sickness, and parental leave.

In-house bookkeeping cost including benefits – £38,524.40 to £61,308.72+

Hire a sole bookkeeper cost

Pros:

• Familiarity: You likely know them, or have been recommended to them by a friend, so feel there is a trust there.
• Easier Document Exchange: Dropping off or picking up physical documents can be more straightforward.
• Flexibility in Communication Style: Being local can sometimes lead to a more relaxed and informal communication style.
• Community Connection: Supporting a local bookkeeper can strengthen your ties within the local business community.
• Local Knowledge: They might have a better grasp of local economic factors and other local businesses.
• Potential for Networking: Your local bookkeeper might be well-connected in the area and could introduce you to other business owners.

Cons:

• Bottlenecks & Delays: Sickness, holidays, heavy workload, or other clients, may create delays in getting financial tasks completed.
• Single Point of Failure: All knowledge could be lost if your bookkeeper suddenly decides to quit.
• Limited Expertise: Keeping updated with all the new HMRC regulations can be challenging for sole bookkeepers.
• Efficiency: Researching industry specific nuances and regulations, can be inefficient and costly.
• Capacity Constraints: As business grows, increasing volume and complexity of bookkeeping may be a challenge.
• Availability & Support: Support and availability to answer questions may be limited to certain days and times.
• Latest Technology: Sole bookkeepers may lack the time or awareness to trial and implement the latest, most efficient technologies.

Choosing a sole bookkeeper can offer a personal touch and simplify local interactions. However, it’s crucial to weigh these benefits against potential drawbacks like delays, limited expertise, inability to scale, and the risk of them not being available when you need them.   

Use your accountant for bookkeeping services

Pros:

• Established Relationship: You may have an existing relationship or been recommended to your accountant.
• Interpreting Financial Data: An accountant would be experienced in high-level complex reporting of financial data, if this is required.
• Integrated service: All your accounting needs under one roof, reducing the risk of miscommunication.
• Streamlined: Year-end reporting and tax preparation may be more streamlined.
• Cost Savings: Potential cost savings for businesses just starting out with very few simple transactions.

Cons:

• Cost: You are likely to pay much higher hourly rates for routine tasks.
• Bookkeeping: Accountants don’t always have their own in-house bookkeeping team, so outsource to other providers.
• Bookkeeping Detail: Data analysis and strategy are the primary strengths of an accountant so they may be less focused on the day-to-day bookkeeping.
• Overkill: An accountant might potentially be overkill for a business with relatively simple financial transactions, VAT returns, payroll etc
• Availability: Accountants have a diverse client base and may not always be available to address bookkeeping queries promptly.
• Scalability: With larger transaction volumes your accountant may become inefficient, potentially leading to overwhelm and delays.
• Technology Adoption: They might not have in depth knowledge of bookkeeping software, as accounting software is where their skills lie.

Essentially, while there can be advantages in certain situations, using an accountant as your bookkeeper can sometimes be like using a highly skilled surgeon for basic first aid – effective, but potentially more expensive and not always the most efficient use of their specialised skills.

Accounting Bookkeeping Cost – Typically £35 to £45 plus

Outsource your bookkeeping

Pros:

• Expertise and Experience: You gain access to a team of professionals with up-to-date knowledge of regulations (like MTD) and best practices.
• Efficiency: Bookkeeping services often know the most efficient processes and use technology to streamline tasks.
• Scalability: Increasing or decreasing bookkeeping demands as your business needs change is where outsourcing can offer a significant advantage over fixed in-house staffing.
• Reduced Overhead: No salary, benefits, office space, equipment, or management time to pay for.
• Continuity of Service If a team handles your bookkeeping, you benefit from uninterrupted service even if an individual is unavailable.
• Access to a Wider Range of Skills: Different team members may have expertise in specific areas (e.g., VAT, payroll, CIS).
• Focus on Core Business: Frees up your time and your staff’s time to concentrate on revenue-generating activities.
• Predictable Costs (often): Many offer fixed monthly fees based on your needs.

Cons:

• Potentially Higher Direct Cost Than DIY or Using Existing Staff: You’re paying for their expertise and services.
• Less Direct Control: You’re entrusting your finances to an external party.
• Communication Can Be Key: Clear and consistent communication is crucial for a successful outsourcing relationship.
• Familiarity with Your Business: Even with industry awareness, it takes time to grasp specific business nuances, processes, and history.
• Data Security Concerns: You need to ensure that there are robust data security measures in place, confidentiality and GDPR.
• Finding the Right Fit: It’s important to choose a reputable and reliable bookkeeping business that understands your specific industry and needs.

If you are looking for flexibility, reliability, and a dedicated point of contact that feels like an extension of your team, the right outsourced partner offers precisely that. You’ll benefit from the collective knowledge of a skilled bookkeeping team, coupled with the reliable accuracy expected of an accountant, ensuring you possess the complete skillset required for effective business management.

Ultimately, the best option for your business will depend on your budget, the complexity of your finances, the time you have available, your level of accounting knowledge, and your growth plans.