Stressed business executive and piles of paperwork

10 signs that your business is ready to outsource its bookkeeping

1. Bookkeeping is taking time away from income generating activity or time away from your personal life

Are you doing the bookkeeping yourself?  Does it feel like you could be spending your time on getting new clients or getting your name out there more, but you’re stuck looking at numbers on a screen?  On average, studies show that a business owner spends up to 120 hours a year on bookkeeping.  That’s 120 hours working on something that isn’t generating your income or if you are like a lot of small business owners, doing it after the day has finished or on weekends which takes time away from your family.

2. You have realized the time and money it takes to hire and train an in-house bookkeeper

There are a lot of different costs (both with time and money) to consider when hiring an in-house bookkeeper. The questions that should be asked are:

  • Do you know enough about bookkeeping and accounting to know when a candidate is a good fit or not?
  • Can you can oversee the work to ensure that what they are doing is accurate?
  • Can you adequately define their role and develop the necessary business processes for them?
  • Will your needs evolve over time? How will they evolve?
  • Does a bookkeeper have all the qualifications necessary for that evolution?

Then the consideration becomes the time and money costs involved when hiring a new employee. Placing classifieds or employment listings on job websites, screening interviews, testing and training the new employees as well as acclimating them with your company culture are all parts of obtaining and hiring a new employee.  The monetary costs could include paying payroll taxes, workers compensations, medical insurance, vacation and sick days, and retirement plans.  The costs all start to add up as you hire a new employee to fill this role. 

3. Your bookkeeping is so far behind you are making decisions about growing your business without up to date or accurate financials

Making decisions without all the correct data can lead to a world of pain in a business.  If the business owner is not keeping up with their reconciliations or the data is not correct, then the chances of a costly decision occurring is high.  If the bookkeeping was correct a few months ago and hasn’t been reconciled since then, the data was useful at that moment in time but everything after that could have mistakes and be incorrect.  If you aren’t keeping up with the bookkeeping or the person who is designated to do it isn’t keeping up with it monthly, outsource the bookkeeping to catch any mistakes which allows you to make decisions based on data that isn’t months old.

4. You’re losing out on tax saving opportunities

Do you wait until the end of the year to have all your bookkeeping done by your tax accountant?  Don’t be that guy!  The end of the year is one of the busiest times for accountants.  They have hundreds of clients sending information their way trying to get everything filed by the March and April deadlines.  This also repeats itself again in September and October.  When the accountants are under a lot of pressure to get the taxes filed and have 12 months of bookkeeping to go through, do you think that mistakes could be made?  Do you think that the bookkeeping being 100% correct and accurate is on their mind or do you think that the 100 other tax filings they need to do are?

The point is, if you wait until the end of the year, you are likely missing out on tax opportunities because the tax accountant isn’t likely to go look for everything that could have been there or you are going to be charged extra because the tax accountant is supposed to be focusing on bookkeeping and now has to do the books for you.  I like to call it an inconvenience fee.  You have inconvenienced the accountant so now you get charged more and you can take it or leave it, and they’re happy either way.

Both ways get you charged extra for things that could be fully avoidable if the bookkeeping had been done throughout the year, and it would save you a lot of stress to be able to simply hand over financial data to the tax professional in the first week of January and know that it isn’t being rushed or potentially missing that first deadline.

Coin stacker, businessman with stacked money

5. You need protection against fraud or company theft

According to a Hissox study “employee theft on average costs us businesses 50 billion per year”.  In 28.7% of cases, the theft took place over a 5-year period, and 70% of all cases occurred at companies with fewer than 100 employees.  Putting internal controls in place is essential to ensure that cash flow isn’t affected by theft. The person creating the bills should not also be the person to pay them.  Additionally, the person reconciling the accounts should not have access to be able to pay and create bills.  After all, there is a chance that small sums of money will end up heading into someone’s back pocket.

6. You are worried about an IRS audit

Every business owner gets busy, and it does happen from time to time that a business owner doesn’t do his books correctly or isn’t 100% confident in their current in house bookkeeper.  Not all bookkeepers are people who have been to college and received a bachelor’s degree in accounting.  The concern does come up from time to time as to what would happen if there was an IRS audit of the company.  Do you feel that you would be covered if that happened?  Does the person who is performing this task focus on bookkeeping 100% of the time or do they have multiple different aspects of the business that they work in that all are a priority?  If you are concerned about what would happen in an IRS audit it might be time to look for someone who just does accounting work.

7. You are concerned about when and if your current in house bookkeeper takes time off or leaves

Most businesses are cyclical.  They scale up in some seasons and down in others.  A good example of that is an ecommerce store.  Around Black Friday, Cyber Monday, or Christmas there will be an upward surge of people buying products, and on the other side of Christmas, there will be a downward trend of less people buying.  Many employees love to take time off in summer to go to the beach or simply get away from the office.  What happens if summer is your busiest time of your year and the person who does your in-house bookkeeping goes away on holidays?  Even the number nerds of the world need some sunlight on occasion, but where does that put you?  You don’t have correct information at your fingertips during those times, and if you just ignore it but try to make important decisions about your business, this can become stressful and filled with unknowns. 

And what about if your designated employee quits, God forbid? This can cause all sorts of chaos.  Looking for a new employee and training them in the intricacies of your business is a headache for sure.  And what if you don’t find the right person the first time you interview?  You don’t want to scramble and hire just to hire because you don’t know how to manage the accounting side of the business.  All of this costs money.  It also costs valuable time for you to do the bookkeeping in the interim and find the perfect person to fill the vacancy. 

Accountancy and bookkeeping office supplies

8. You are in a growth period and you need scalability from your bookkeeper

Watching your company grow rapidly is exciting! Well…it’s exciting right up until your business’s growth is outpacing your ability to keep up with it all.  One of the best ways to ensure that you stay on top of it all is by leveraging the scalability of an online service.  It is cost effective and allows you to focus more on the business then the books. 

The added benefit when looking for these types of companies is finding one that can grow with your business.  The ideal company would offer not only bookkeeping but accounting services, tax planning and innovation as well to improve your decision-making abilities.  An outsourced bookkeeping solution is great; however, once you have built the relationship and they understand your business, having that next step you can take is always a great option to have.

9. Sales have increased but profits haven’t

Maybe you need a second set of eyes.  Your bookkeeper gets used to the transactions that are coming in every month and puts them into their correct buckets.  They see the same transactions every month and don’t question them at this point.  Getting a second set of eyes on something is always a good idea.  It helps to have an accountant that knows what to look for when it comes to wastage every month.  Innovative strategies assist in increasing cash flow so ultimately your bottom line increases rather than remains the same or goes down as more expenses pile on top of you.

10. You believe you are prepared for an offsite arrangement

Ultimately, this is the leading factor in whether you are ready to outsource your bookkeeping. If you don’t believe that outsourcing can work for you then it won’t.  If you have this mindset, everything that could go wrong will, and only the negatives will shine through.  If you’re ready, come in with an open mind.  Companies like Bennett Financials (www.bennettfinancials.com) and many others can help you save money, grow with your business, make you audit ready, protect against fraud, and eventually help you understand your cash flow.  But bottom line—you have to be ready to take the plunge.  It won’t work if you don’t want it to, but if you go into it with the mindset of this can be beneficial then you are ready.

Leave a Comment

Your email address will not be published. Required fields are marked *