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Outsourced Bookkeeping Demystified
All companies of any size need timely, accurate, bookkeeping, but bookkeeping is a 100% overhead expense.
The simple fact is that hiring an in-house bookkeeper for your business is an expensive proposition. According to salary.com, the annual salary of full-time bookkeepers ranges from approximately $35,000 to $45,000 per year. For most companies in the early stages of growth this amount of pure overhead is unsustainable. In addition, finding a well qualified bookkeeper who is willing to work for part-time income can be quite challenging. Ultimately, many business owners resolve to work their business during regular business hours and then carry-out their company’s bookkeeping needs in the evenings or on the weekends. This certainly saves money, but there are two major drawbacks.
First, the owner of a business usually started the business because he or she has a particular area of expertise and a track record of success in that area. Unless the business happens to be a bookkeeping or accounting company, that area of expertise and success is unlikely to include bookkeeping. This can significantly impact accuracy and timeliness. A second challenge to the DIY approach is that every second spent on bookkeeping is either time that takes away from core business activities, planning, development or, much needed down time of the business owner.
The Outsourced Bookkeeping.
Control ~ There is sometimes a concern that when we outsource a service, some measure of control is lost. This is seldom true with outsourcing, and even less likely in outsourced bookkeeping as the contracts signed usually create a fiduciary, client relationship between the company and service provider.
Cost ~ Some business owners are concerned that there is little financial advantage in engaging an outsourced bookkeeping firm verses hiring an in-house bookkeeper. This is, in fact, completely untrue. Even setting aside the obvious overhead of employee carrying costs when hiring in-house, outsourced bookkeeping services with caps on hours per month or year, or with fixed monthly service billing agreements. In many cases, a firm that might have hired a bookkeeper for the median salary of around $40,000 dollars per year, can get all the bookkeeping services they need for between $500 to $2000 per month. Most local businesses find themselves in the lower end of that range, and often realize additional savings on software and hosting by simply signing a term agreement with an outsourced bookkeeping provider.
Cyclical and Growth Driven Scaling ~ Some business owners are concerned that an outsourced bookkeeping firm which offers service to smaller companies for a few hundred dollars a month, would be unable to grow with them. Others have a concern that outsourced bookkeeping may not be able to contract to meet lower cost requirements due to cyclical or other revenue reduction factors. Neither of these concerns is valid. Actually, outsourced bookkeeping firms provide some of the most easily scaled services available. Flexibility is a requirement for such firms as their own services are cyclical in nature requiring significantly more work during year-end and tax package preparation periods.
This leads us to the solution, rapidly being adopted by focused, savvy, business owners and operators. Like their predecessors in adoption; technology integration, network development and maintenance, cloud management, and others services, business bookkeeping and accounting has become widely accepted as a service best out-sourced by most companies.
In addition to the obvious advantages of freeing the business owners time and ensuring that books are kept accurate and timely, there are several other benefits to the decision to outsource business bookkeeping. Other than company specific knowledge, for instance the specific items in your business chart of accounts, there is little to no cost or time required to train or ramp the bookkeeper up to speed when using a professionally staffed outsourced bookkeeping firm. Expense of bookkeeping can be fixed, set on payment plans, and is easily scaled to the meet growth or cyclical needs of your company. Most professional outsourced bookkeeping firms offer cloud hosted, desktop versions of popular business accounting and bookkeeping software like QuickBooks, giving the business owner and bookkeeping firm instant, simultaneous, access to real time financial data from anywhere with internet access. Often outsourced bookkeeping firms have multiple bookkeepers available so, if the bookkeeper for a particular company is out of the office, away on vacation, or sick, there is no interruption to the businesses bookkeeping, and no scrambling to find coverage while the that bookkeeper is away. If the firm used does offer cloud hosted, desktop versions of the bookkeeping software used for the books, all hosting, as well as software issues and up-grades, will be handled seamlessly behind the scenes and never impact the business or business owner.
So, why doesn’t everyone in business just immediately switch to outsourced bookkeeping today?
Well, actually, many businesses that can afford to make the move and have seriously analyzed the cost of opportunity lost are moving to outsourced bookkeeping. But there are a few questions that need to be answered to make a sound business decision concerning the decision to outsource bookkeeping services for a company.
Questions to ask yourself before deciding if outsourced bookkeeping is right for you:
Not every business has developed to the point where engaging an outsourced bookkeeping firm makes sense. Below are some questions to help determine if a firm is ready to transition to this type of support.
- Are you already considering hiring, and know you can afford the salary of a bookkeeper? (If this answer is yes, you can probably skip the other questions.)
- Do you already have a bookkeeping staff, but are looking for ways to reduce overhead at your company?
- Are you unsure that your books would stand-up under professional review?
- Are you struggling to get your books done in a timely fashion?
- Does it cost you extra money to have your tax accountant “prepare” or “fix” your books before you can file taxes each year?
- Are you loosing business opportunities because you are too busy doing non-income producing activities?
- Is your schedule so full that you are failing to work “on your business”, as well as “in your business”?
- Has it been too long since you could break away from your business and enjoy a little of the success it is providing?
You may have other driving factors in addition to these questions, but these are a very good starting place.
Your Next Steps:
When you ask these and any other questions that would help you determine the right choice for your own business, you will likely find yourself in one of three places. We would like to offer you a next step regardless of where you determine the business you are evaluating is:
I’m not ready to outsource, but need help doing my own books more time effectively:
Sign-up For The Free Webinar Series
You think you might be ready for an outsourced bookkeeping solution:
Find-out More About Outsourced Business Bookkeeping
You are still going to do your own books but need to be ready to transition to outsourced bookkeeping as you grow:
Find-out about cloud based hosting of your books.