Accounting Fees Explained
Ever wondered why accounting fees are so ‘high?’
Yeah, I thought so!
Most prospective clients that I meet with are looking for an accountant that they can talk to. That they have rapport with. That understands there business and gets what they’re talking about, quickly.
However, most prospective clients don’t understand the amount of time required to provide that level of service.
That’s what I am going to explain in this article.
A decent Chartered Accountant’s hourly rate is at least $300 per hour
This varies based on firm size, but that’s the rate most smaller CA firms work towards, and it’s the rate that I work on as well.
The larger firms can go a lot higher. They often charge their junior staff out at rates of $450+..
Partners at these firms go for $600 - $1,000+….
The low fes of $1,250 - $2,000 are what you will pay at sausage factory firms that prepare your financials and tax returns on a mass scale and will take no care while doing so.
The value of a good CA is in understanding and caring about the nuance of your business and your wider personal life.
The makeup of your annual accounting fees.
What justifies such rates? Training, experience, and risk…
An accountant undergoes a significant amount of training to get to a level of proficiency whereby they can talk you through complex financial, tax, and legal issues…
It takes about 10 years of training to get to this level:
3/4 years: Bachelors Degree
3 years: Chartered Accounting Qualification (while working)
And then another 3 or so years to get the work experience required to be comfortable with advising
We are advising on serious matters as well. Your taxes and financial position are important. If you get them wrong, it will cost you many thousands of dollars in penalties and or lost business, insolvency, etc…
There are many hours involved in just your annual compliance work..
For a straightforward, one entity set of financial statements and tax returns, this is the process of work and time involved:
1 hour: Prepare annual accounts checklist. Send to client, receive information from client, review information, go back to client with missed information, check again.
4-8 hours: Prepare financial statements. Reconcile the bank balance, reconcile and prepare working papers for all items on the balance sheet: Income tax balance, GST balance, loans and vehicle finance, payroll liabilities, term deposit balances, investments…
2 hours: Discuss accounts queries that have come up during the preparation process with the client.
2 hours: Prepare tax returns, resolutions, and annual letter to client. Package (digitally) and send to client.
2 hours: Meet with client to discuss results and sign off accounts and tax returns.
That all adds up to 10-15 hours of work alone. And remember, this is for a relatively straightforward, one entity job…
10-15 hours at $300/hour is $3,000 - $4,500. Just for the annual compliance work. This does not include general queries, phone calls, emails, communications, and tax planning throughout the year…that’s another hour or two.
GST compliance is 4-6 hours per annum, so expect to pay another $1,000 - $2,000 for this work.
Why do people hire accountants? I reckon I could do this myself…perhaps, but you will do it wrong, and it will take you ages to do it wrong as well…
The time estimates above are for a senior accountant that has at least 10 years of training under their belt….you have…..zero.
You will get things wrong, 100% guaranteed, and it will cost you A LOT to sort out the issues that you’ve created.
For instance, let’s say you got your provisional tax calculations wrong and you’re earning $100k. This simple, 2-minute error, could cost you $1,250 in an initial late payment penalty, and $2,500 in interest Inland Revenue will charge.
How long did it take you to do that work? Probably 10 or so hours, plus a lot of energy consumed with stress and brain power!
This is one example of probably a thousand ways things could go wrong. You’ll also then have to deal with one of Inland Revenue’s trained officers and answer their questions…
If you want an advisory accountant that cares about your business...you’ll need to budget an additional $1,000 - $2,000
This assumes work and meetings through the year totalling 4-5 hours, which equates to two decent catch-up meetings.
In conclusion...you should be expecting to pay anywhere between $3,000 and $7,000 per annum for a decent CA
Objectively, Chartered Accountants may look expensive, however the pain, stress, and direct costs we can save you are far in excess of the cost of our services…
Just in tax deductions you didn’t know you could get, that $3,000 fee would be covered with ease.
What’s the value of your business? $500k?
Did we just help stave off insolvency and the loss of that $500k by implementing a strategic plan, providing projections to your creditors, and helping them understand that you will be good for it in three months’ time?
Did we save that key employee from leaving because we sorted out the payroll issue you were experiencing?
But most of all, we will both enjoy the relationship we build together. Accountants are business nerds, we speak the language of business and when we explain complex financial topics to you and it all makes sense, it just feels good….