Accounting Fees Explained – Financial Statements and Tax Returns

If you were going by the amount of information available online, you would assume the cost of Accounting Services is confidential and a closely guarded secret.

The price seems to only become available once you’ve sat down with an Accountant and they’ve had a chance to provide you with their sales pitch and attempt to communicate just how complex the work is to help them justify their prices.

Below is my attempt to demystify the cost of accounting services and provide rough estimates of how much your accounting fees should cost. I also provide some factors which will impact where on the scale you may fit, as well as some tips for you to negotiate with your accountant to try and lower your fees.

1. End of year financial statements and tax returns

   
   

This is the bread and butter for most accounting firms but before I provide the costs, context is crucial. Up until 10-15 years ago, this was a very manual process which involved posting documents to an Accountant for them to sort through, collate, and then prepare the work. This was time consuming and therefore expensive (accountants have historically charged by the hour).

Technology has improved the ability for Accountants to access their clients data and therefore the sorting and collating has largely been eliminated. This should’ve resulted in a cost reduction of Accounting Fees but it hasn’t, the model and prices have largely stayed the same.

On the flipside, the use of live accounting software (e.g. Xero), has falsely provided business owners with the confidence they can do their own bookkeeping. However, there is a difference between being able to use Xero, and being able to use Xero correctly. I have come across countless examples of clients who thought they were coding and reconciling correctly, but instead encountering a giant mess at the end of financial year end. The cost to fix these problems can be extremely time consuming and therefore has the potential to double your end of year accounting bill from what it should be.

From my own experience, there is nothing more frustrating than trawling through incorrectly coded transactions to understand where the error occurred and then fixing them.

Below is a list of points to help you achieve the lowest end of year accounting bill possible. This list is not extensive, but should give you a good guide:

• Bank accounts match the bank statements

• Balance Sheet accounts have been checked and reconciled. Note: if you don’t know what the Balance Sheet is, or haven’t checked it all year, your Accountant likely has a lot of work to do.

• GST has been treated correctly on both income and expenses

• Personal items have not been included in expense codes

If you can confidently say these 4 items are in order, you are in good shape to get your accountant to get your end of year work underway.

So, without further ado, the GST exclusive costs are (with explanations below):

Structure & Size	Minimum	Maximum
Company - Small	$650	$1,500
Company - Medium	$900	$2,500
Company - Large	$2,500	$5,000
Trust - Little or no activity	$750	$2,000
Trust - Medium or High Activity	$1,500	$4,500
Sole Trader	$550	$1,500
Partnership	$650	$2,500
Individual Tax Return	$350	$650

Q: How much should my Accounting fees be?

Use the table above as a starting point, then factor in the below:

1. Consider the amount of transactions going through your bank account. Also think about the amount of invoices you raise, and bills you pay. Higher activity means more transactions to deal with which likely means higher accounting fees.

2. Do you have any complex items? This might be multiple loans, intercompany/related companies, lots of asset purchases/disposals, several different methods of receiving payments etc

3. Who reconciles your accounts? If you use a quality bookkeeper (note not just anyone who claims to be a bookkeeper), then your accounts should be in good shape. If someone without accounting knowledge reconciles your accounting data, it’s highly likely there will be areas that need adjusting.

Q: What can I do to lower my accounting fees?

1. Hire a bookkeeper. Yes, this will cost money but it will likely save you money at the end of year, as well as giving you reliable data all year round to help you make better decisions. I am bias, but I highly recommend you use a professional for bookkeeping. Often this is left to a business owner who can get much more upside and drive the business forward by spending time on strategy, sales, team etc.

2. Consider looking at your balance sheet at least monthly. Look at the following:

   1. Do your bank accounts match your bank statements?

   2. Are you Aged Receivables current and only contain customers who still owe money?

   3. Have your fixed assets been added to the depreciation schedule?

   4. Do Aged Payables only contain suppliers that you still owe money?

   5. Does your PAYE Payable account reflect precisely how much PAYE you owe the IRD at month end?

   6. If you use Xero payroll, do you have a “Wages Payable – Payroll” balance that is high? If so, it is a clue that your wages might not be displayed correctly.

   7. Are your loan balances looking accurate? Are repayments being coded to the right place?

   8. Are drawings and funds introduced being coded to the Shareholder Current Accounts? Are personal expenses going here too?

3. When you receive your accounts and tax returns, ask your accountant what part of the job was time consuming and whether there is anything you can do to make their job easier.

4. If you don’t already, consider uploading all of your bills/receipts into Xero so your accountant doesn’t need to request any of these. Consider using a tool such as Hubdoc or Expensify.

   
   

Q: Why do different Accounting firms charge different amounts?

Just as different restaurants charge different amounts for the same food, this depends on reputation and perceived value. A firm with a strong brand and tall building may be perceived as better or more professional and they will charge accordingly. A firm with a weak brand may be perceived as less professional and reliable and may need to discount their prices because they cannot do so through the quality of their services. I have seen business owners who choose cheap Accountants often end up in trouble with IRD years down the road because work wasn’t done correctly. This can be an expensive nightmare for the sake of saving a few hundred dollars. You often get what you pay for with Accounting services so be careful you choose someone you can trust to do the right job, while also not overpaying in order to contribute towards the expensive lease on a tall building in the CBD.

Hopefully the above information provides some guidance on what you can do to get the best value for money with your Accounting fees. In summary, my advice when choosing an accountant would be:

• Don’t skimp on price – not all Accounting services are the same or created equal. Use someone who you can trust will do the work and their work won’t come back to haunt you later on.

• Trust your gut - If the Accountant/Firm feels a bit off then keep shopping. Choosing an Accountant is an important decision.

• Reflect on what you can do to tidy up your accounting data so your accountant can reduce their workload. They will likely thank you and your wallet will too.