Small Businesses Expenses in California: Part 1
We researched small business expenses in California concentrating on accounting and payroll administration. We found that expenses vary depending on several factors–the type of industry, the location of business and structure of the business (if the business is structured to outsource these services) and government regulation. The minimum wage in California is $10.50/hour but people who work accounting and payroll management don’t get paid minimum wage. According to Glassdoor, an Accounting Manager can earn between 43k and 88k/year depending on years of experience, industry, and location of the small business. These salaries are significantly higher in San Francisco, San Jose, and Oakland. For this reason, small businesses structure their enterprise to outsource accounting and payroll services for as low as $25 — $350 per month depending on the number of staff.
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The cost of hiring an accounting manager varies depending on several factors. One of the biggest factors is the location of the business. Hires in San Francisco, San Jose and Oakland are significantly higher paid than other areas. For example, an accounting officer in San Diego, California earns $88,871 on the average while someone holding the same position in San Francisco would earn $109,884/year. The average in Riverside is $81,821
This is why small businesses outsource their accounting needs to specialized firms. These firms charge between as low as $250/month to $1,700/ month for rendering accounting services. Statistics show 54% of small businesses in California spend below $5,000 in paying for outsourced accounting services. Compared to how much they would spend on hiring an employee, this is a less expensive route. Even if they could get a $10/hour hire for accounting services, it will still cost the business up to $4,000 in training and recruitment costs.
Small businesses are also choosing to outsource payroll management functions. It costs as low as $31 for some online payroll services. But while payroll services may cost $25 to $200/ month, the cost at the end of the year is higher. It costs as much as $50/employee for year-end reporting. Yet, compared to the cost of hiring a Payroll Administrator, outsourcing makes economic sense. The average pay of a Payroll Specialist in California is $36,412/year. In San Jose, it is $47,433/year.
PREVAILING WAGES ACROSS INDUSTRY SPECTRUMS
The industry in which the small business operates will also play a role in determining the cost of the hire. Low-cost industries include accommodation, waste management, and arts and recreation. Industries that attract higher costs are trade, manufacturing, and publishing. For example, while the average cost of hiring a payroll specialist in California is $36,412/year, hiring one for the automotive industry drops by almost $3,000 to about $33,000/year.
In conclusion, we found that the average cost of hiring an Accounting Manager in California is about $64,000/year while the average cost of hiring a Payroll Specialist is about $36,000/year. The costs are higher in San Jose, San Francisco, and Oakland. Small businesses often opt to outsource these services. They can pay as low as $25-$350/month for accounting and payroll management depending on the number of staff they have. We also learned that business operating in waste management, arts and recreation pay less for these services.