How to weigh up whether your small business needs an accountant — and how much it will cost


Like many small business owners who are looking to save money, you may think you can’t afford an accountant.

But consider how long it would take you to do certain tasks, such as taxes, and ask yourself, is that a good use of your time?

For example, let’s say it takes you 10 hours to do your taxes, and your time is worth $150 an hour.

That’s a cost of $1,500 to do your taxes yourself.

And there’s always the risk you’ll make errors or miss deduction opportunities – especially if you’re multitasking like many business owners.

Working with an accountant could cost a bit more than $1,500 in this scenario, but the service comes with the benefits of less personal stress, more accuracy – and importantly, the opportunity for a smaller tax bill.

Once you share your books with an accountant, unexpected benefits can come to light.

A skilled accountant can spot inefficiencies in existing operations and missteps in your business planning before you make them.

James Solomons, a chartered accountant and director of Aptus Accounting & Advisory in Baulkham Hills outside Sydney, says a small business usually first reaches out to an accountant when the business gets too big to manage easily.

Many owners are good at running operations but too busy to keep track of tax laws.

“If taxes are taking time away from running your business, and you’re spending hours doing a monthly or quarterly business activity statement (BAS) that an accountant can do it in an hour or two, it’s a question of where’s your time better spent?” Solomons asks.

Here’s a quick rundown on the costs you might expect in suburban Sydney in mid-2018, according to Solomons:

  • Accountants’ hourly rates are typically $200 to $300 an hour.
  • Tasks such as BAS statements might cost $220 monthly or $330 quarterly.
  • A straightforward yearly business tax return might cost $2,200 to $3,300. If you’re getting your accountant to also do your BAS, the end of year process can be more efficient.
  • Tax planning in March or April would cost around $1,000.

If you engage a firm based in the Sydney city centre, you’re likely to find prices are at least 30-50% higher due to the greater overhead costs, says Solomons.

In Melbourne, the cost of living is about 15% lower than in Sydney, according to Numbeo.

That differential is reflected in accounting fees.

Here are some typical costs in the Melbourne area for accountants, according to Suntax, an accounting and business advisory firm based in the western suburb of Sunbury:

  • Accountants’ rates are typically $165 to $330 an hour (including GST).
  • Tasks such as BAS statements might cost $198 to $220 quarterly.
  • A yearly tax return might cost $1,800 to $2,500, assuming the bookkeeping is well prepared and reconciled.
  • Tax planning in April or May would cost around $800.

If you’ve engaged an accountant just to do your taxes, that could be the end of the discussion until next year.

Or it could be the beginning of a valuable relationship. If you use a cloud-based accounting platform such as Xero, your accountant can see the same figures as you, in real-time.

This allows your accountant to help keep an eye on how your business is tracking at any moment and provide advice and strategies tailored to your long-term plan.

He or she can offer suggestions, and you can go off and implement them.Then you can reconnect in a month to see how you’re doing.

Many accountants will agree to bill by the hour for such advice, but a retainer is often better value.

A retainer might be $500 a month and include unlimited advice.

This means you can call or email to ask any time for advice on decisions such as whether to buy or lease a business vehicle or the regulatory implications of hiring more staff.

You can also ask your accountant to give you a phone call once a month.

With their help, you’ll learn to understand what a good balance sheet looks like.

The relationship between a small business and accountant often begins as a one-off engagement for a tax return, but grows into something much more enduring.

Accountants can use online tools to provide even further services such as business advisory, which might include:

  • Sharing graphs of a business’s cash-flow situation and explaining what it means for their operations and how to improve the picture.
  • Highlighting revenue trends or patterns of spending
  • Suggesting ways to deploy resources more efficiently
  • Measuring the business’s progress against agreed key performance indicators.

You may also want to measure key business metrics, such as the ratio of salaries and other employee payments to total revenue.

An accountant can help here by managing your payroll and producing graphs so you can see how the ratio changes over time.

One last point to consider: You’re likely to need an accountant when you apply for a business loan or overdraft.

Lending to small businesses has dropped in Australia in recent years, to the point where it has attracted the attention of a parliamentary inquiry in early 2018.

Banks like to know they’ll get back the money they lend out. An accountant can help improve your chances of a lender saying yes.

Even the fact that you have an accountant might sway a bank in your favour, as it implies you’re serious about your business.

With good accounting software, an accountant can present facts and figures that back up your application for funding.

They’ll be able to answer any questions your bank asks about revenue projections and expenses.

Your accountant can also help you choose the right type of loan, and tell you whether your bank’s terms and conditions and interest rate are favourable.

In short, engaging an accountant may be one of the savviest decisions you can make.

A May 2018 survey of 500 small business owners, conducted by CoreData, found least 95 percent of businesses that used an accountant considered that person a trusted adviser who made tax time much less stressful and provided invaluable tax advice.

If you’re unsure where to start, you can begin with ASIC’s MoneySmart guide which offers some resources. Xero also offers the Xero advisor directory.

It can locate accountants and bookkeepers near you who specialise in your industry.

Happy hunting!

Matt Prouse is the Head of Industry at Xero.