Is it more cost effective to hire an in-house accountant or outsource a professional bookkeeping service?
Once your business has flourished and grown to a certain size, you may realize that you don’t have the time or expertise to handle the accounting yourself and run your business, or at least not run it well. Keeping well organized and figure-correct books is one of the most vital parts of a successful business, but it is also extremely time consuming. At this point, you can either choose to hire an in-house accountant or outsource your books. Let’s look at what hiring in-house will really cost you and your business.
Cost #1: More Money
Salary plus benefits for an in-house bookkeeper will cost you more than outsourcing your accounting needs.
In addition to paying salary, hiring an in-house bookkeeper also comes with the cost of providing benefits such as paid leave, health insurance, retirement, and workers’ compensation. When you outsource, you cut these costs out completely and only pay for what you really need, superb bookkeeping and financial analysis to keep your business running smoothly. An in-house accountant’s salary typically starts off at approximately $72,000 per year or higher (not including insurance, raises, or any additional benefits). In contrast, the cost of outsourced accounting is usually anywhere from $3,600 to $14,000 per year. Outsourcing accounting to an efficient and well run firm makes more financial sense for many successful small businesses.
Cost #2: Training and Retraining
Calculate the time and effort you will spend training in-house bookkeepers.
When you choose to go with in-house help, the burden of making sure your new accountant or bookkeeper is trained falls on you, as does providing office space, a computer, and other equipment. If the new hire doesn’t stay long, then you have to repeat the whole training process again with someone new. When you outsource, you have an entire firm of skilled CPAs at your disposal. Accounting firms employ experienced accountants and bookkeepers who are already highly trained, so a short, streamlined onboarding process is all the firm will require from you. Once the books are handed over, you can relax and let the experts handle it from there.
Cost #3: More Work For You
Once a new hire is trained, you still have to supervise and monitor their performance.
When you have an in-house accountant, you will need to oversee their work and double check the books. You hired them to help, but you still have to keep an eye on things. When you outsource, you have more time to focus on actually running the business. When you do need reports, you have access to on-demand reporting and many firms have even incorporated cloud accounting software that you can access from any device.
Cost #4: Greater Risk of Mistakes (and Fraud)
In-house accounting increases the likelihood you will be a victim of embezzlement.
Creating fake expenses and pocketing the money is just simply too easy when you are the only one or one of the few people with access to the books. Even if entirely innocent, mistakes can easily be made when only one or two people handle the books. Hiring a professional firm to handle these matters greatly reduces the risk of fraud and careless errors as there are many eyes auditing the numbers and an entire team at your disposal. At a professional firm, multiple accounting professionals work on your account, so that any inconsistency or oversight is easily spotted. Professional accounting firms have everything riding on being honest, transparent, and thorough. Before any work is finalized, it will be double or triple checked by multiple people to ensure accuracy.
Cost #5: Spottier Coverage
You still have to cover the books when the in-house accountant is sick or on leave.
When you hire an in-house bookkeeper or accountant, it can be hard to know the type of qualifications to look for when interviewing. If you do not specialize in accounting yourself, you may not be asking all the right questions. Furthermore, bookkeepers in small businesses often handle other duties besides accounting tasks. When a in-house bookkeeper has to manage new hires or deal with other human resource matters, it pulls them and their focus away from the books. If the person responsible for the books is out on extended leave or sick when payroll needs to be done, this can be quite a conundrum for the business owner. At a multi-employee accounting firm, their whole reason for existing is to serve their accounting clients. The numbers are their only job, so they can dedicate their whole focus to their clients’ needs.
Cost #6: Less Knowledgeable
Bookkeepers keep books. They may not know when policies governing business operations change.
Most in-house bookkeepers do not keep up to date on governmental changes to small business operation and tax requirements. These requirements can change incrementally from year to year, but even small changes can mean big things for small businesses. A professional accounting firm makes it their job to know about these changes and help you implement them at your company as it is a cornerstone of their business to be up to date on tax law and modern accounting practices at all times.
Cost #7: Basic Service Only
In-house bookkeepers don’t offer in depth analyses to help you maximize profit and meet your long term goals.
An in-house bookkeeper will typically process payroll, pay bills, and invoice clients. With this basic service, you get the minimum you need to keep your business going; but when you outsource, you get the collective knowledge of a whole team of certified accountants who strive to help your company excel in their field and to keep your business. Professional accounting firms don’t just simply maintain the books, they provide you with reports which help you analyze your business’ finances and make informed decisions about your company’s future, as well as make client service a priority to ensure they retain their clientele.
Common Concerns with Outsourcing Accounting
Nothing is stopping you from keeping your own books, but there is a reason why accounting and bookkeeping are so sought after as a professional service. There are many aspects of the process that take years to master. Opting to outsource your bookkeeping will help you keep track of your business’ finances in an efficient and stress-free manner without having to make it your full-time job. Outsourcing your bookkeeping services can help you save time and allow you and your staff to focus on what you do best.
Leave the bookkeeping to the professionals. At Lloyd & Hodge, we specialize in CPA services and stay ahead of the changes that affect your business when it comes to bookkeeping, tax management, payroll and budgeting.
Contact us today and learn how we can help save you time and money, and get back to doing what you do best – running your business.