What is the Difference Between Bookkeeping and Accounting Services?
To understand pricing, it's helpful to know the difference between bookkeeping and accounting.
These two terms are often used interchangeably, but there is a significant difference between bookkeeping and accounting services.
Bookkeeping focuses on the daily recording of financial transactions, while accounting involves analyzing and interpreting data to provide financial insights and strategic advice.
Let’s break this down.
P.S. Need Joe to break it down for you on video? Head over to this one 👇
Bookkeeping
We have written in detail about what a bookkeeper does in Canada, but the very basic function of a bookkeeper is to record the transactions of a business in a consistent way. This includes:
- Recording financial transactions and reconciling accounts at the end of each month or week
- Recording and paying bills on their due date
- Creating and issuing invoices
- Processing and recording payroll
- Tracking sales taxes (GST / HST / PST etc.), and filing returns
The bookkeeper is in charge of making sure that all transactions are recorded accurately. The complexity of this job depends on the size of the business, number of transactions to be recorded, and the nature of those transactions.
Accounting
Accounting on the other hand uses the information recorded by bookkeepers to create detailed reports and insights. Examples of these services include:
- Preparing adjusting entries to record information such as inventory adjustments, tax estimates, and other accruals (expenses that have occurred but aren’t yet recorded by the bookkeeper)
- Preparing and analyzing financial statements to help the business owner make decisions
- Completing income tax returns
- Tax planning
- Business advisory
Simply put, accountants help business owners understand their finances, make informed decisions, and plan for the future of their business. They also work to reduce taxes where possible.
At Avalon, we also add empathy and emotional support to the role of an accountant; it can be a lonely road running a business, and we want to help entrepreneurs thrive however we can.
What About Payroll Services?
Now let's look at another type of service that is often overlooked but that can be a gamechanger for small businesses : payroll.
Payroll is a highly specialized service that helps you stay compliant with local employment standards as well as payroll taxes. Payroll may look simple on the surface, but the devil is in the details!
Getting payroll wrong—like not paying your employees on time or the wrong amount—can lead to some serious dissatisfaction among your team. And let’s not forget about the tax penalties that can come from payroll mistakes; those can hit hard, and nobody wants to deal with that stress. That’s why having a solid payroll system in place is absolutely crucial!
So, what exactly do payroll services help you with? Let’s break it down:
- Timely Payments. Payroll services ensure your employees get paid accurately and on time, keeping morale high and your team happy.
- Staying Compliant. Payroll specialists navigate local employment laws and payroll taxes for you, helping you avoid any nasty penalties from mistakes.
- Organized Records. They keep everything in check by tracking employee hours, wages, and deductions, so nothing slips through the cracks.
- Tax Remittance. Payroll services handle all the tax calculations and ensure everything is submitted on time—so you can wave goodbye to those late fees!
- Employee Access. Many payroll services provide online portals for employees, making it easy for them to access their pay stubs and tax documents whenever they need.
By outsourcing your payroll, you can focus on what you love doing—growing your business—while knowing that your team is taken care of.
And if you’d rather handle your own payroll but want some backup, there are support services available. A payroll specialist can guide you and provide the help you need to keep everything running smoothly.
Check out our payroll services page to learn more.
Pricing Models: Hourly Rates vs. Fixed Fees
Bookkeeping and accounting services can be priced in a few different ways. Let's break them down and figure out which pricing method is best suited for your needs.
Hourly Rates
This is a common pricing model where the service provider charges an hourly rate for the time spent working on your business.
The advantage is that you pay only for the time needed.
The downside is you won’t know the amount of your bill until the work is complete and the service provider has added up all of the minutes spent working on your file.
Fixed Fees
With this model, you and the service provider agree on a set price for a defined scope of work.
This can be beneficial for budgeting, as you know upfront what you will be paying each month, but it requires a clear understanding of the services included to avoid scope creep.
Which Pricing Model is Ideal for Your Business?
The ideal pricing model depends on your business’s needs, the complexity of your financial tasks, and your budgeting preferences.
- Hourly Rates might be ideal if you have sporadic or highly variable needs, or if you’re looking for specialized services that don’t require ongoing support. This model offers flexibility but requires careful management to avoid unexpected costs.
- Fixed Fees are often better for businesses that need consistent, ongoing support and want to avoid surprises in their billing. This model is beneficial for predictable and regular services, providing peace of mind with a fixed budget.
To determine which model is best for you, consider discussing your requirements with potential service providers and evaluating their proposed pricing structures. This way, you can choose a model that aligns with your financial goals and operational needs.
How Much Will Bookkeeping and Accounting Cost?
The answer is it depends on a few key factors:
- Business Size and Complexity: Larger businesses with more transactions or complex financial structures may require more time and expertise, increasing costs.
- Number of Transactions: The volume of transactions a business processes each month will affect the workload for both bookkeepers and accountants, impacting the overall cost.
- Industry-Specific Needs: Certain industries may have specific regulatory requirements or need specialized knowledge, which can influence the cost.
- Level of Service: Basic bookkeeping services might cost less than comprehensive accounting services, which include financial analysis, tax planning, and business advisory services.
Cost for StartUp Businesses
Many new businesses need help with compliance but may not have the budget for a full-time bookkeeper or accountant.
However, that shouldn’t stop them from keeping their finances in order.
From our experience, most startups save money by learning to manage their bookkeeping and taxes with some guidance.
It's wise to get help setting things up correctly from the start. A solid foundation will help you avoid mistakes and support your growth as your business expands.
A few options you could look into are:
- Avalon's Bookkeeping Courses : Our bookkeeping courses are made for small business owners who want to simplify their finances. You'll get easy-to-follow guidance and practical tools to help you take control of your bookkeeping and financial planning.
- Bookkeeping & Taxes for Freelancers Course
- Bookkeeping with Xero Course (if you're looking for a scalable solution)
(Pssst! Use the discount code “SAVE35” to get 35% off at checkout.)
- Hourly Support: We offer flexible support on an hourly basis for clients who prefer to handle their bookkeeping themselves but need occasional guidance. This option allows you to get expert advice and support as needed, without committing to a full-time bookkeeping service.
Cost for Small Businesses
We consider small businesses to have an annual revenue between $200k and $350k, that might have 1 or 2 employees and are owner managed.
Because of the high owner involvement, small businesses often need a few more of the financial duties looked after so that they can focus on what they are good at.
A common service level for this type of business includes:
- Hourly Support as Needed: Our team is available to assist and guide you whenever you need it, without tying you to a fixed monthly fee. This flexible approach means you only pay for the support you use every month, and we’re here to help with any questions or issues as they arise.
- Year-end financial statements and corporate tax return - We would prepare your year-end financial statements and tax return.
Expect to pay between $450 and $800 per month for these services. It all comes down to the level of support you need and the complexity of your business.
Cost for Medium Businesses
For the purpose of this article, we’ll consider medium businesses to have an annual revenue in the $350k to $750k range, and often between 3 to 10 employees.
The owners are still involved in the day to day but are focusing on growing the business, perfecting their services or products and training employees.
If this is you, you probably need insight into what is working in your business and what could be improved or changed. Solid monthly reporting that includes insight from an outside advisor is a key success factor here.
A common service level type for this business includes:
- Monthly bookkeeping - Our bookkeepers would record monthly transactions, send out useful financial reports once per month, and be available for questions.
- Sales tax filing - Our team would file your GST and/or PST returns.
- Year-end financial statements and corporate tax return - Your designated accountant would prepare your year-end financial statements and tax return.
- Payroll services - Some businesses like to hand their payroll over to us - We would provide payroll setup, training and support on an hourly basis.
For these services, you can expect to invest between $900 and $2,000 per month, depending on factors such as the complexity of your business, the frequency of services (e.g. monthly vs. weekly bookkeeping), and any additional services you require.
Our most popular package, which includes monthly bookkeeping, sales tax filing, year-end financial work, and tax planning, is worth between $1,200 and $1,500 per month.
Cost for Growing Businesses
As businesses grow, there is often an in-between size where they are not yet large enough to have their own internal finance department but are complicated enough that just hiring a bookkeeper on Craigslist won’t cut it.
We usually see this scenario with organizations that are growing and have revenue between $750k and $2million who employ between 10 and 20 people.
For these growing organizations, you’ll either want to outsource your accounting department indefinitely, or until the business grows large enough to hire an internal accountant.
In cases where the business grows into needing an internal accountant, we would be there to help with training and transition to make sure things go smoothly.
A common service level type for this business includes:
- Monthly bookkeeping - Our bookkeepers would record monthly transactions and send out useful financial reports once per month.
- Monthly management accounts - Each month you would receive a customized reporting package that includes an analysis and commentary on the monthly performance of your business.
- Sales tax filing - Our team would file your GST and/or PST returns.
- Year-end financial statements and corporate tax return - Your designated accountant would prepare your year-end financial statements and tax return.
- Payroll system setup and processing - We set up your payroll system and process your payroll each period, onboard and offboard employees as needed, and prepare employee T4s on an annual basis. We’re also available to answer questions as they come up.
For this level of service you can expect to invest between $1,500 to $3,000 per month. For $1,500, payroll services are typically not included, but we offer additional support for businesses that handle payroll independently.
How to Choose the Right Service for Your Business
Choosing the right level of service can make a significant difference in managing your finances smoothly and effectively.
An all-in-one solution can greatly simplify your financial management by integrating all necessary services into one single, cohesive package.
Outsourced services offer convenience, consistency, and cost savings, while supporting your business as it grows.
When choosing the right service for your business, keep these tips in mind:
- Assess Your Needs: Identify whether you require basic bookkeeping for day-to-day transactions or more comprehensive accounting services that include tax preparation, financial analysis, and strategic planning.
- Evaluate Expertise: Seek providers with specific experience in your industry or with businesses similar to yours. Their specialized knowledge can offer valuable insights and more tailored solutions.
- Understand the Pricing Model: Clarify whether you will be charged hourly or via a fixed fee. Ensure you understand what services are included in the pricing to avoid unexpected costs.
- Check References: Reach out to other small business owners who have worked with the service provider. Their feedback can provide insights into the provider’s reliability and the quality of their services.
Alright, that does it for this one. If you found this article helpful, you might also enjoy our blog post on when to hire an accountant for your business.
Ready to hire help?
If you’re an incorporated business ready to simplify your financial management, reach out to us to see how our all-in-one bookkeeping and accounting services can support your growth and success.
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