How to Avoid Overpaying for Bookkeeping Services: A Freelancer’s Guide

Yeon J.

Nov 24, 2023 — 6 min read

As a freelancer, managing your finances is as crucial as the services you provide. However, bookkeeping can be complex and time-consuming, and hiring professional help often seems like the best solution. Yet, it's easy to find yourself overspending on these services.

This blog is designed to help you navigate the world of bookkeeping services efficiently, ensuring you get the best value without compromising on quality.

According to a 2022 survey from Upwork, a popular marketplace for freelancers, there are about 60 million freelancers in just the US alone.

1. Understanding the Basics of Bookkeeping

Bookkeeping is the process of recording your professional financial transactions and the techniques you use to record these business transactions.

The purpose of bookkeeping is to keep your financial records up-to-date. When your transactions are up-to-date, you’re able to create accurate financial reports that measure your performance and help you make adjustments when necessary.

Common bookkeeping tasks and requirements

The key components of bookkeeping, whether you’re a freelancer or a multinational corporation, are always the same:

Recording of transactions: For freelancers, income and expenses are their most relevant recorded transactions.
Categorization: Categorization in bookkeeping means sorting your transactions into different 'sections' based on nature of transactions.

These categories help keep your finances organized and make it easier to understand how your business is doing.

Reconciliation: Reconciliation is the process of matching transactions entered into your records with the corresponding bank or credit card statements. This process ensures that you captured all cash / credit card transactions. Reconciliation is typically done at the end of every month.

Importance of Bookkeeping for Freelancers:

Financial Clarity: Bookkeeping provides a clear picture of your financial status, crucial for effective decision-making and planning.
Tax Preparation: Accurate records simplify tax filing and can help maximize deductions.
Cash Flow Management: Regular bookkeeping helps track and manage cash flow, ensuring you have funds when needed.
Client Trust and Professionalism: Well-maintained books reflect professionalism, building trust with clients and stakeholders.
Future Growth: Understanding your financial past and present sets a foundation for strategic planning and growth.

2. The True Cost of Bookkeeping Services

How bookkeeping services charge (hourly rates, fixed fees)
The average market rates for bookkeeping services

Once you’ve decided that a bookkeeper is what you need to move your business forward and free up some of your valuable time, the next thing you want to do is make sure you aren’t overpaying for the service.

Keep in mind that the basic tasks a bookkeeper is typically responsible for include:

Entering transactions into your accounting software
Reconciling bank accounts
Paying bills
Creating invoices
Collecting Accounts Receivable
Maintaining vendor and client information

Your options for hiring a bookkeeper fall into one of 3 categories, So let’s look at the typical cost of bookkeeping services for each of these categories.

A Part-time In-House Bookkeeper

According to ZipRecruiter, The average part-time pay for a bookkeeper is around $20/hour. However, that can vary widely based on what part of the country you are in and factors like workload expectations (number of transactions, accounts, invoices, etc.) and experience level.

A Full-time In-House Bookkeeper

According to Salary.com, the annual salary for a bookkeeper is roughly between $38,000 and $47,000, with the average being around $42,000. This does not include the additional cost of possible benefits you provide such as insurance, paid time off, retirement savings, etc.

Cost of an Outsourced Bookkeeper

According to Basic365.com, the average fees for an outsourced bookkeeper run from $500 to $5000 per month for small businesses. An outsourced bookkeeper is an independent contractor that you hire according to terms that meet your needs. They might work hourly on a regular schedule, monthly, quarterly, or as needed.

3. Factors That Affect Bookkeeping Rates

Different factors can affect the cost of bookkeeping services. Here’s an overview of the most important considerations.

Level of Expertise: For instance, a certified bookkeeper with 10 years of experience specializing in E-Commerce businesses might charge $75/hour, while a less experienced bookkeeper just starting out may charge around $30/hour.
The complexity of the Work: A freelance writer with straightforward transactions might be charged $35/hour, but a small online store dealing with inventory, international sales, and returns might be charged $60/hour due to the increased complexity.
Industry-Specific Needs: A bookkeeper specializing in restaurant businesses, familiar with food inventory and state health regulations, might charge more (say, $65/hour) compared to general bookkeeping services.
Geographic Location: Rates in high-cost cities like New York or San Francisco could be around $90/hour, whereas in smaller towns, the rate might be closer to $40/hour.
Software and Tools Used: A bookkeeper using advanced software like QuickBooks Online Advanced for comprehensive financial reporting might charge $70/hour, compared to $45/hour for basic bookkeeping using simpler software.
Frequency of Service: A business requiring weekly bookkeeping might be charged a monthly retainer of $800 (discounted from what would be a $1,000 charge if billed hourly), due to the regular, ongoing work.
Additional Services: If a bookkeeper offers tax filing services in addition to standard bookkeeping, the rate might increase from $50/hour to $80/hour

*Please note that the above-mentioned rates are purely illustrative and serve as placeholders for the purpose of this discussion.

4. How Circler.io Can Help You Save Bookkeeping Costs.

Circler's Bookkeeping AI stands out as a revolutionary tool for small business owners and freelancers looking to optimize their bookkeeping processes while keeping costs in check.

Here's how Circler's generative AI technology and user-prompt responses can transform your financial management:

User-Prompted Transactions: Circler.io responds directly to your prompts, efficiently converting invoices, slips, and receipts into accurate accounting entries and journal records. Simply command, and Circler.io takes action, reducing the need for extensive manual data entry.
Customized Accounting Entries: Tailored to your specific business needs, Circler.io generates customized journal entries based on the documents you upload. This precision ensures your books are always up-to-date and reflective of your actual financial transactions.
Time and Cost Efficiency: By automating the conversion of financial documents into bookkeeping entries, Circler.io significantly reduces the time spent on bookkeeping tasks. This automation translates into direct cost savings, as it minimizes the hours you'd otherwise need to spend on or pay for traditional bookkeeping services.
Accuracy and Compliance: Circler.io's advanced algorithms ensure high accuracy in financial record-keeping. This accuracy is crucial for maintaining compliance and preparing for audits, thereby avoiding costly financial discrepancies.
Accessible Financial Management: Designed for ease of use, Circler.io makes bookkeeping accessible even to those with minimal accounting knowledge. Its user-friendly interface and responsive AI assistant allow you to manage your financials without the steep learning curve.
Informed Business Decisions: Beyond basic bookkeeping, Circler.io can analyze your financial data to provide insightful reports and recommendations. These insights empower you to make informed business decisions and strategize for future growth.

By incorporating Circler's Bookkeeping AI into your business operations, you can enjoy the benefits of streamlined, accurate, and cost-effective bookkeeping, giving you more time to focus on growing your business.
Circler.io is not just a tool; it's a bookkeeping partner that adapts to your unique business needs.

5. Conclusion:

Recap of key strategies to avoid overpaying

To wrap up, let's recap the crucial strategies to avoid overpaying for bookkeeping services and emphasize smart bookkeeping practices that can benefit freelancers.

Understand Your Needs: Assess the complexity of your financial transactions to determine the level of bookkeeping service you require. This ensures you don't pay for more extensive services than necessary.
Explore Options: Compare rates of part-time, full-time, and outsourced bookkeepers. Understand how their charges align with your budget and business size.
Consider DIY Bookkeeping: For simpler finances, consider managing your bookkeeping with user-friendly software. This can significantly reduce costs, especially in the early stages of your business.
Leverage Technology: Tools like Circler's Bookkeeping AI can automate and simplify the bookkeeping process, making it more efficient and cost-effective.
Regularly Review Services: Continuously evaluate the value you’re getting from your bookkeeping services. Adjust or change services as your business grows and your needs evolve.
Stay Informed: Keep up with basic bookkeeping knowledge and financial trends. This empowers you to make informed decisions and negotiate better with service providers.
Utilize Circler.io: As a freelancer, utilizing Circler's Bookkeeping AI can be a game-changer. Its ability to process financial documents and create accurate bookkeeping entries through simple prompts helps in saving time and reduces the need for costly professional bookkeeping services.

By following these strategies and embracing smart bookkeeping practices, freelancers can effectively manage their finances without overstretching their budgets. Remember, the goal is to find a balance that offers financial clarity and supports the growth of your business.