Written by Allie Delos Santos
Are your business’ accounting issues keeping you up at night? Do you worry about accurate entries and tax law compliance? Are your accounts payable and receivable records just not clear? Many organizations, with either simple or complex bookkeeping needs, are increasingly outsourcing their bookkeeping–and they’re enjoying the advantages outsourcing confers.
But why outsource bookkeeping when seemingly easy-to-use software is available? What’s the benefit of doing it? Is it really worth your money?
To help shed some light on your questions, this article discusses why businesses should consider outsourcing bookkeeping and notes several indicators that it may be time to hire a professional. We’ll also cover situations where outsourced bookkeeping isn’t appropriate.
When Should You Hire an Outsourced Bookkeeper?
When the workload in the finance and accounting department becomes overwhelming, it’s time to consider outsourcing your bookkeeping. The following situations may require you to hire experts to oversee your bookkeeping needs so you can focus on other business processes.
- It takes a long time to do your payroll taxes because your records are outdated.
- Managing and organizing your books consumes the same or more hours as growing your business.
- You struggle to make high-level business decisions because you lack an accurate financial overview of your company.
- Your cash flow, profit margins, and expenses are not clear because your books have fallen behind.
If any of these challenges look familiar to you and your business is losing valuable resources and time each month, consider looking for a bookkeeping service provider.
When Should You Not Hire an Outsourced Bookkeeper?
As your company grows, you may see yourself wearing more hats. At this point, it may seem like hiring an external service provider would seem reasonable. However, some important factors point to the advantages of maintaining bookkeeping in your own house.
Outsourcing can pose some legal risks. If your service provider commits errors and delivers outputs that could potentially harm your clients financially, then you might be held legally liable. Additionally, if you outsource data entry services and bookkeeping functions, the IRS may impose interests and penalties in conjunction with any other taxes you owe as a result of errors. Keeping bookkeeping in-house might give you the ability to watch over the function more attentively.
While outsourcing has many advantages, especially financial ones, it’s important to consider how it may affect your company’s growth. Before making a commitment, weigh the benefits and disadvantages of employing an outside service. Finally, look for an outsourcing company with a proven track record and glowing references.
Outsourcing May Diminish Company Loyalty
If an employee realizes that their job could be replaced by cheaper foreign labor at any time, they may lose faith in you as an employer. Since outsourcing has expanded from largely un- or low-skilled work to administrative occupations, even managerial workers cannot guarantee job security. Thus, employee productivity and satisfaction may suffer.
Is Outsourcing Bookkeeping Right for Your Company?
Outsourcing bookkeeping may be right for your company depending on the amount of workload and budget you currently have and anticipate having in the future. Here are some questions to ask yourself to determine whether outsourcing bookkeeping makes sense for your business.
- Do you have enough work to hire a full-time bookkeeper? For several companies, a 40-hour-a-week bookkeeper is excessive when performing simple financial functions.
- Is there too much work for your internal resources? You may be asking your bookkeeper to do tasks beyond their skill level. This often happens in new and growing companies. Putting too much work on your employees is a lose-lose situation for all parties involved and may lead to high turnover.
- Are you in a position to support more than one bookkeeping resource? If your answer is no but you need staff with higher levels of experience, then insourcing may not be a good idea.
If your business needs resources to fulfill bookkeeping services but can’t afford to do so, then outsourcing makes the most sense.
Why Outsource Bookkeeping?
Outsourcing bookkeeping has many advantages, the most essential of which is efficiency. Outsourcing bookkeeping helps you to focus on other important aspects of your business without worrying about your books. Below are more reasons to outsource bookkeeping.
Save on Payroll Costs
Including a bookkeeper for your in-house employees and payroll will cost you more in training expenses, insurance, and other benefits. Even if the internal bookkeepers only work part-time, the payroll costs–and the associated paperwork–will be high.
The 2021 median pay of bookkeeping, accounting, and auditing clerks is $45,560 per year, according to the US Bureau of Labor Statistics. That’s excluding benefits, raises, and insurance. This number also doesn’t include the cost of maintaining bookkeeping infrastructures.
Conversely, the cost of outsourced bookkeeping ranges only from $12 to $25 per hour, which is significantly cheaper than insourcing.
When you offload your bookkeeping to a back-office outsourcing company, you only need to pay for the work they complete. That could either be on a monthly or weekly basis. With this, you can avoid paying a staff bookkeeper who might have downtime in between peak seasons.
Take Advantage of Provider’s Expertise
An internal bookkeeper often works alone and could encounter unexpected problems and delays without adequate resources to turn to for help. They may also have insufficient knowledge and experience to accommodate bookkeeping systems that allow for the expansions and changes you make in your company.
A good reason to outsource bookkeeping lies in its ability to give you access to a broader talent pool of seasoned bookkeeping experts. An outsourced bookkeeping staff often handles the books of several clients at a time, making them more skilled in every aspect of finance.
Many bookkeeping and back-office outsourcing services are also responsible for keeping up with industry regulations. That way they can offer you advice in terms of federal and state regulatory protocols that might affect your company now or in the near future. You can tap into their knowledge to ensure your company remains compliant
More Time to Focus on Your Business
Many business owners find out the hard way that bookkeeping and finance are cumbersome and tedious tasks. About 40% of businesses spend roughly 80 hours per year to complete their books—that’s time you could have spent elsewhere.
By outsourcing bookkeeping to a Business Process Outsourcing (BPO) company, you can allocate your attention, energy, and resources to expanding your business.
Scale Your Bookkeeping with Your Business
As your business expands, so does your need for added bookkeeping support. But what if your internal bookkeeper can’t keep pace with your growing needs and increasing workloads? You might experience backlogs in your operation.
You might be able to prevent backlogs by hiring an additional bookkeeper, but that means extra payroll costs and less revenue.
On the other hand, what would happen if your business experienced slow periods? Your internal bookkeeper will stay on the payroll, getting the same benefits and salary for less work. On top of that, your obligation for employee tax is still the same, despite less revenue being generated.
Outsourcing bookkeeping services is a flexible solution that allows you to easily scale to accommodate the fluctuations in your business. This is especially useful if your company has off seasons because the service can quickly change to fit your business’s needs.
Have a Stress-free Tax Season
Outsourced bookkeeping is invaluable, especially when tax season rolls in. The majority of businesses say taxes and bookkeeping are two of the worst parts of managing a business. Updated financial statements are crucial to filing your taxes. Your outsourced bookkeeper can give you the necessary information to quickly and accurately prepare your taxes.
On top of that, tax regulations, whether at the state or federal level, change frequently. The consequences of falling out of compliance with the IRS or your state taxing bodies become tangible all too quickly the instant interests and penalties are incurred. That’s why you need to outsource bookkeeping so you can guarantee that someone is keeping track of the tax landscape all the time.
When you work with an internal bookkeeper, you will need to assess their expertise and experience carefully. Once hired, they require training and time to learn your company’s requirements. Hence, they may be prone to committing mistakes and errors during this period of transition.
With outsourced back-office services, bookkeepers go through rigorous training before working with a client. In addition, multiple bookkeepers will review your books before your monthly financials are sent to you, meaning mistakes are less likely to happen.
Leverage the Latest Technology
An external bookkeeping service’s livelihood relies on its ability to maintain efficient processes. This means that BPO providers are more likely to put money into technology to streamline their operations and keep their clients’ data accurate.
You can outsource data entry services and bookkeeping functions so you can do less input. Plenty of third-party bookkeeping providers use systems that can automate processes like importing transactions and inputting data. Your outsourced bookkeeper can then reconcile and categorize your books without you needing to supply receipts or statements.
Other providers also use cloud-based systems, keeping your data secure and accessible using your preferred device, anytime, anywhere.
Get an Advisor, Not Just a Bookkeeper
Accounting is more than just debits and credits. Finding bookkeeping employees who can provide financial data to help you make informed decisions might be difficult. Service providers who go beyond data entry and provide direction and advice can turn this low-hanging fruit into a key aspect of business operations.
Ensure Confidentiality and Privacy
Companies’ financial information is vulnerable to attacks and breaches. Given the financial impact of breaches on businesses reaching $3.62 million, companies must add a layer of protection to their operations to keep their data secure. That’s one of the primary reasons why businesses outsource bookkeeping to third-party providers.
Outsourced bookkeeping providers take compliance and security very seriously. They are legally obligated to keep your sensitive financial data private. BPO employees are also subject to written confidentiality agreements that prohibit them from accessing client data unless necessary.
It’s not only the quality that bookkeeping providers offer that matters but also the quantity. A lot of business leaders fear not having access to a reliable bookkeeper when their company needs assistance.
Among the specific challenges that businesses face are staff turnover, illnesses, seasonal peaks, and vacations. Having an outsourced bookkeeping solution provides you with a team of dedicated bookkeepers as well as the staffing coverage you need without the hassle or costly overhead expense.
The Bottom Line
Updated and accurate financial information is critical in ensuring the success of your business. Outsourced bookkeeping remains the most cost-effective solution for keeping your books up-to-date, ensuring maximum compliance, and guaranteeing privacy.
To get the most out of outsourced bookkeeping, you must assess your goals for outsourcing, look for a reliable service provider, and keep communication lines open.
At Unity Communications, outsourced bookkeeping is one of the things we do best! We take bookkeeping from your plate so you can focus on running your company.
Your Unity Communications bookkeepers review, import, and categorize financial transactions every month, giving you updated reports so you can make data-driven decisions. Take your bookkeeping to the next level with our excellent filing, preparation, and strategy planning.
Contact us to find out more.