Annual Accounting Services vs. Monthly Accounting Services

When starting a small business, determining how you’ll handle the bookkeeping, accounting, and taxes isn’t exactly the first thing people choose to think about.

This is not a surprise, as it’s not the most exciting part of operating a small business.

Often, it’s not until the end of a small business owner’s first year that bookkeeping, accounting, and taxes start to become a point of concern.

So, you’re either looking back and patting yourself on the back because you kept the books organized throughout the year or scrambling and stressed because other aspects of the business (or life in general) kept taking priority over bookkeeping and taxes.

Whether you’re the owner feeling good, or the one pulling your hair out, some decisions need to be made.

• Should I keep doing the bookkeeping myself?
• Should I hire an accountant to help keep my bookkeeping organized?
• What’s best for me and my business?

Let’s compare two common approaches to handling small business accounting.

Annual Accounting Services - After Year-End

Let’s start with annual accounting services.

This can be a good fit for you if you’re on the smaller end of small businesses. Meaning maybe it’s a small business you started as a side hustle or has very little bookkeeping activity and is not generating a lot of profits.

Implementing a monthly accounting service in this situation can often be more than needed.

Annual services can also be a fit for those small business owners who love doing the bookkeeping themselves and have little complexity in the bookkeeping. This approach could work if you have a year-end accountant proactively planning for tax time.

If you’re a small business owner looking for the cheapest solution, then annual accounting services are typically that solution. If your bookkeeping is clean and organized before your accountant touches it, then an annual approach will likely require a smaller accounting budget.  

However, you must handle any accounting, payroll, and tax requirements during the year – sales tax and payroll tax filings, notices from taxing authorities, daily bookkeeping, etc.

Monthly Accounting Services – Throughout the Year

As for monthly accounting services, they’re essential for small business owners who don’t have time or don’t have reliable internal help to keep up with the bookkeeping.

It can be hard to manage a successful small business well if you don’t know how your business is doing with the help of accurate monthly financial statements.

Small businesses with slightly more volume and complexity in their bookkeeping can also be an excellent fit for monthly accounting services. Even with internal bookkeeping help, many small businesses benefit from monthly accounting services.

Internal bookkeepers are often tasked with accounts payable, accounts receivable, invoicing, customer service, and other administrative responsibilities. A monthly accounting service will ensure everything is categorized, organized appropriately, reconciled, answer questions, and prepare more accurate financial statements monthly.

One of the more critical reasons a small business might be a good fit for monthly accounting services is if that business is profitable.

Any small business that is reasonably profitable can benefit from its accountant keeping an eye on the profitability of the company throughout the year.

Just as important as planning for taxes at the beginning of the year is monitoring that plan throughout the year and making necessary adjustments if you’re more or less profitable than expected. When an accountant is more involved with your business and your books monthly, they can be more proactive to help make sure you’re not going to end up with an unpleasant surprise at tax time.

Every small business is different and requires different levels of service.

However, every small business must file taxes at year-end. So, if you’re a small business owner, take time to think about your accounting needs, where your time is best spent within your business, and what level of accounting services would best suit your business.

If you are curious how the TMA Accounting team can help, check out our accounting services or reach out and let’s talk about what’s suitable for you and your small business accounting needs.