I wish I could say there’s a magical formula or a line to draw in the sand to determine whether the books should be done in-house or whether it’s better to outsource. First of all, the answer is a solid “depends.” You also aren’t dealing with a binary choice; there is a spectrum of options in between. For instance, you might have an in-house office assistant handle the daily data entry while paying an accounting firm to review behind your employee at month end. In many cases, an “outsourced” bookkeeper functions mostly like an in-house bookkeeper (e.g. an employee at an accounting firm who personally handles the books for a company exclusively).
Here are the elements to consider when deciding whether hiring an outside firm or delegating to a full-time employee is the right solution for your company.
Required Speed Of Response
Outsourced bookkeepers aren’t working for you exclusively; they are likely responsible for the books of 20 to 30 other clients. If you have a legitimate need for a bookkeeper who can respond and take action immediately every time you send them an email, that expectation needs to be set clearly up front. With an in-house employee who works only for your company, you reserve the right to shift their priorities at any time of your choosing during work hours. Not so with an outsourced firm. The issue pops up more frequently with bookkeepers who handle payables and/or receivables.
Need For Customer Interfacing
Whoever does your invoicing is the face of your business to your customers. That person has a heavy amount of influence over the way customers see you. I’ve seen business relationships end solely because of how communication was handled around invoicing. Bedside manner is more critical here than other areas, especially in delicate situations. For instance, if you have a big account that provides 30% of your revenue and the customer is legitimately unhappy with your company over a service issue, and they have a large past due invoice from six months ago, some finesse and self-awareness are required on the bookkeeper’s part. If invoicing is complex, requires the ability to frequently answer detailed questions about service, and/or has a lot of moving pieces, you should strongly consider having an in-house employee serve as the point of contact. If, on the other hand, you have 20 clients who each get one invoice per month in the same amount, your customer won’t likely notice or care who sends the invoice.
Need For Involvement In Other Business Areas
The flexibility is inherently greater with an inside staff member if you want them to handle other tasks outside of bookkeeping. You might have an office manager who handles the books in addition to writing the email newsletter, following up with sales leads, and training new employees. Some accounting firms are more accommodating than others when asked to handle extra items. Usually most will be accommodating to the greatest extent they can, but you may pay heavier fees compared to the cost of handling the extra tasks in-house. The fees charged for out-of-scope requests can stack up, especially if a fast turnaround time is required.
Role Turnover
Turnover is an issue regardless of whether you hire in-house or outsource, but there are some differences in the way things play out. If an in-house staff member quits, the burden of finding and training a replacement falls onto you. If you hire a firm and their bookkeeper quits, you won’t bear as much of the burden as a firm can reassign your account to a different member of your staff. On the other hand, an accounting firm reserves the right to assign you to a different bookkeeper, and you might not like the new one. The key question: how badly do you need to keep the same person in the bookkeeping role? The more complex and nonstandard your books are, the harder it will be to transition bookkeepers.
Complexity
The biggest factor in the mix: how complicated are your financials? If you are a super-small business and you’re doing all of the work yourself, I believe you should do your own books in the beginning. As your business grows, new issues will pop up, new customer scenarios will emerge, and the way you do your accounting will need to keep pace with you. The complexity will really depend on how big you plan to grow your business. If you are a one-person show and that’s all you ever want to be, you may find that a solo freelance bookkeeper provides everything you need, without having too much trouble if you switch bookkeepers. But if you want to go big, your accounting will need a higher level of sophistication.
The Key: Two Sets of Eyes
I believe that not everyone needs an outsourced bookkeeper, but everyone needs outside perspective. You should have your books independently reviewed at least once a year and possibly more often (again, depending on your volume and the complexity of your accounting). The main question you need to be asking as a business owner: “How do I know my books are being done correctly?” Your books should be reviewed by someone other than your bookkeeper. Some CPAs offer the service of a quarterly or annual review. With some accounting firms, you get two sets of eyes on your books if the firm has a two-person QC process in place and a controller reviews behind the bookkeeper in detail each month (which is unfortunately not always the case).
I often help clients figure out what makes sense in terms of roles and responsibilities for their routine accounting tasks. If you’d like another set of eyes on your books and your accounting workflows, let’s talk soon. Book a call with me today.
