You may have heard of the big 4 partners that make millions of dollars a year. Unfortunately, that isn’t the average income for CPAs, let alone accountants.
Accountants make a bit less than CPAs since it is easier to be an accountant but it is more difficult to be a CPA. We’ll look at the average income for accountants and even tell you what average CPAs make.
What is the Average Income for an Accountant?
The average income for accountants depends on a lot of factors but we’ll cover the factors first and then give you some numbers.
Pay depends on:
- The size of the firm
- How many hours are expected
- The seniority of an accountant
- If they are qualified or not
- The location of the firm
We need to cover each one of these to make sense. A large firm will generally pay more than a small firm with few clients. Big 4 accountants will always make more than Local Larry’s Tax shop. Ok, we made up Local Larrys but you get the point. The clients are much larger at the big 4.
That being said, the hours are way worse at the big 4 and that is what you are getting compensated for. At least you think you are. You need to calculate your hourly rate but we will get to that in a minute.
The next factor that the pay of an accountant depends on is their seniority. The more senior they are, the higher their pay will be. Staff out of college might think accounting salaries aren’t great but then they may realize they are making a lot at the manager level after 4-5 years.
One qualification to bump up pay is the CPA exam. There is no doubt that a qualified accountant can command higher pay than an accountant who doesn’t have their qualification. Over the years, this certainly adds up.
Lastly is the location of the firm. A firm in Washington D.C. will pay more than a firm in Idaho, strictly for the cost of living. If you want to make more then the big cities generally pay accountants the most but also cost the most to live in.
The average pay of an accountant is right around $75,486. It’s not a bad salary but it isn’t as much as a CPA. You have to remember that this figure is skewed by many locations and levels of staff.
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What Does a CPA Make? (It’s Not as High as People Think)
A CPA makes considerably more than an accountant. While a CPA is an accountant, a CPA has demonstrated they can pass the professional exams in the field. While an accountant, even at the highest level is most likely making under 100k, the average income of a CPA is over $100,000.
We estimate from our professional contacts that the income of a CPA is around $120,000. At this level, the pay generally falls into a manager level but swings up for partners and down for staff.
If someone climbs the big 4 ladder, puts up with the stress, politics and makes it to the top then it isn’t uncommon to make very high 6 figures a year.
Does Location Matter for Accountants?
We touched on it briefly but location plays a huge role in how much accountants make. You just can’t make the same amount at a small firm, in a rural town as an accountant in a big city.
Sure, the cost of living will be much higher but if you are diligent with your budget then saving shouldn’t be an issue. Especially as you climb the ranks in accounting.
The real benefit is at the higher paying levels but if you want to do the larger firm grind then be ready to work in the city.
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How the Size of the Firm Effects Salaries
Speaking to the size of the firm is so similar to the location but it needs to be said when talking about the average income for an accountant. Smaller firms just can’t pay as much as larger firms.
The clients are smaller at regional firms and therefore the fees are less. Head to a national firm and you can be working on clients that are based on the other side of the U.S. for another firm office.
Work Hours and Salaries (Calculating Your Hourly Rate)
The big salaries in accounting can be enticing but many accountants don’t calculate their hourly wage and they should. You’ll hear many big 4 staff say they can make more as a waiter. Is it true? Probably.
The higher you climb up though, the higher your pay goes. Even staff at small firms expected to bill 2,100 hours a year can expect an hourly wage close to $23 an hour.
We can see how frustrating this is after 4 years of school and all the stress but remember that you’ll have a long career in accounting ahead and this is just the start.
Recapping Average Income For Accountants
The average income for accountants can be all over the place but remember these things and you’ll be good.
- Get your qualification, a CPA will improve your earnings.
- Remember you’ll have to work your way up in accounting.
- CPAs average over $100k a year while general accountants do not.
Final Thoughts on the Income of CPAs and Accountants
You can have a great career in accounting and earn a good salary as an accountant or a CPA.
If you really want to earn the most out of your accounting career, get that CPA passed as soon as possible. Don’t be shy, share your level, general city and pay below. Transparency is great for the industry!
