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Why Outsource Your Bookkeeping?

Posted on April 26th, 2017

Jack Kern
Owner, President
Outsourced Accounting Department, Inc.

So how many of you small business owners out there had the childhood dream depicted in the above picture?  Based on this January 2015 article from Entrepreneur Magazine: “What’s the One Task Most Small Business Owners Loathe?,” I suspect not very many of you.

Yet, bookkeeping is an essential task, as is the need to do it accurately, as well as using an accounting method that gives you a true picture of your company’s profitability. So what many small businesses do first is to purchase a small business accounting software such as QuickBooks and attempt to do their books themselves. But they quickly learn that QuickBooks is not as “easy to use” as their name and marketing implies. In fact, I often tell people, “QuickBooks has done a great job of marketing its software as being easy to use, but that’s also what makes it easy to abuse”(and most small business owners I’ve worked with do just that – see my previous article, “Winging It In QuickBooks”).

At some point it becomes more advantageous to the small business owner to outsource this function to someone who better understands accounting, or at the very least, have someone oversee and adjust their work.  But it doesn’t take much to completely screw up a set of books, so the sooner you can outsource it completely, the better.  Otherwise, you’ll be constantly paying for someone to clean up your books anyway, which is a waste of money.  Furthermore, many tax preparers only do this in their own tax software at year-end, not in your books, and then charge you for the extra time to prepare your tax return.

In terms of the cost of outsourcing, don’t get hung up on “hourly rates.” That’s comparing apples and oranges. Keep in mind that you are hiring a person or firm that has its own payroll taxes and overhead just like your business, and you cannot sell your product or service at cost and expect to stay in business very long either.  Instead, compare the monthly fee to what it would cost you to hire a full-time bookkeeper on your payroll.  Also, compare it to what you could be doing with your own time, such as increasing sales and producing a larger profit, known in the financial world as “opportunity cost.”  The timing of course, is a matter of affordability.  I’ll have more on this topic in a future article, but in my experience, most small business owners can sense when the time is right to outsource.

Related Articles:

Profit vs. Taxable Income

The Difference Between Your CPA and a Controller: M-1


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