The small business mentoring organization SCORE has compiled some new statistics demonstrating how much time and money small businesses spend each year on accounting, taxes and payroll administration.
The results may be dismaying to many accountants and tax professionals.
According to the small business owners polled by SCORE, 40 percent said bookkeeping and taxes are the worst part of owning a business.
Specifically, 47 percent indicated they dislike the financial cost, 13 percent said they dislike administrative headaches and time, 13 percent dislike the complexity of compliance, 10 percent dislike the changing regulations and confusion, 8 percent dislike all the paperwork, and 8 percent dislike the inequity of the tax code.
(It’s a little hard to understand how 92 percent might like all the paperwork and the inequity of the tax code, but there’s no accounting for taste.)
The majority of small business owners said they spend more than 41 hours on tax preparation each year. That breaks down to 40 percent of small business owners who said they spend over 80 hours a year, 18 percent spend 41 to 80 hours per year, 15 percent spend 21 to 40 hours a year, and 28 percent spend less than 21 hours per year.
The annual costs of the administration of taxes, internal costs, legal fees, etc. can be substantial as well, with the majority spending at least $1,000. Of the small business owners surveyed, 23 percent said they spend $1,000 or less, while 31 percent spend $1,000 to $5,000, 18 percent spend $5,000 to $10,000, 12 percent spend $10,000 to $20,000, and 16 percent spend $20,000 or more.
Many small businesses process their payroll in-house to keep costs down. Of those small business owners that do their own payroll, 21 percent said they spend no time at all (perhaps because none of their employees get paid?), 26 percent spend 1 to 2 hours a month, 26 percent spend 3 to 5 hours a month, 17 percent spend 6 to 10 hours per month, and 11 percent spend 10+ hours/month.
Payroll costs vary widely, ranging from 8 percent of small businesses that pay less than $50 per month for payroll services to 5 percent that pay over $5,000 a month.
For more information, you can download SCORE’s infographic here or view it below.