4 Reasons Why You Should Consider Outsourcing Your BookkeepingPosted on February 26th, 2019
Outsourced Accounting Department, Inc.
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 here are a few things to consider:
- Accounting Accuracy: 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).
- Accounting Consistency: Many CPAs and tax preparers will simply take your QuickBooks file at the end of the year and transfer the data into their own tax software, then make their adjustments there, not in your books, and charge you for the extra time to prepare your tax return. However, your books are then not consistent with your tax return (book basis), so your internal financial statements are meaningless for monitoring the financial health of your business on a monthly basis. And even then, your tax return may not be completely accurate either if your books were in that bad of shape to begin with, which is ultimately your responsibility, not that of your CPA or tax preparer.
- Time Management: As a small business owner, what is the best use of your time, learning to do bookkeeping, or focusing on managing your own business?
- Foregone Profitability: Compare the cost of outsourcing your bookkeeping, to the dollar value of increasing sales and bottom-line profit (known in the financial world as your “opportunity cost”).
The timing of course, is a matter of profit and cash flow. But in my experience, most small business owners can sense when the time is right to outsource. 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 even then, as stated above, 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. Rather, as sated above, compare the cost of outsourcing your bookkeeping function on a part-time basis, to the value of your time, and to the cost of hiring a full-time bookkeeper at $25,000 to $35,000 a year.
For more information on our services and/or a fee quote, give us a call, or fill out the form on our contact page.