It's Gotta Get Done
No doubt about it, if you are running a small business, you need to have your books done. There are a few different ways you can go here. Here's a breakdown of the options that a small business owner has, the cost associated with each, the pros and cons and a summary of who might be a fit for each type. Check out this article for what bookkeeping is and the types of things you can expect your bookkeeper to do for you.
Essentially, you have three different options when deciding who will complete your bookkeeping:
- Do it yourself
- Outsource it
- Insource it
Let's take a few minutes to understand the different options in terms of cost, pros, cons and who it might be best for.
1. Do it yourself
Cost
Your time and energy. This can be a good option early in your entrepreneurship journey as you will have some energy to work your weekends and evenings.
Pros:
- Low dollar cost: you can keep your costs low (it will just cost you time and energy)
- Learning: you can learn a new, valuable skill
- Insight: you can see where your money is coming from and going
Cons:
- Focus: Early in the growth sage, you may have a lot of energy, but what could you be doing instead?
- Procrastination: There’s a temptation to put off these types of tasks until they are urgent (or past due) and this can cause a lot of stress (or worse)
- Context Switching: when you move from one type of task to another, it costs a lot of energy and produces a lot of resistance
- Mistakes: when you are doing it yourself, it’s more likely you will make mistakes
- Learning Curve: This may take a lot of time at first (but will get faster as you get better)
Summary
Doing it yourself can be an empowering and cost-saving practice, but it has a shelf life. What impact could you have if you spent that time meeting with prospects, refining your processes, or recharging with your family?
DIY is a good option for businesses that are starting out and have an organized and financially savvy owner. It's a good idea to mitigate any downsides by befriending a professional bookkeeper that you can ask questions to if you get stuck.
2. Outsource it
Cost
Generally between $400-$3000 per month or $30-$60/hour
Pros:
- Continuity: if you decide to go with a company that offers these services, it’s less likely you will have to recruit, retain and manage this role
- Privacy: You won’t have someone on your team that knows the ins and outs of your financial state..
- Focus: By outsourcing this function, you and your employees are free to do what you do best (sell and deliver your product or service).
- Accuracy: A full service bookkeeping company will have reviewers on staff to check for mistakes.
- Back-up: Bookkeeping companies have staff to cover vacations, so filings are not missed and reports are up to date.
Cons:
- Industry Knowledge: in certain industries (like retail or manufacturing), it is helpful to have an “on the ground” person that knows the day-to-day. They can apply this knowledge to the books and prevent costly back-and-forth.
- Cost: the cost can be high with this option. You will be paying for expert service and having all filings completed on time.
- Quality: Unfortunately, there are a lot of poor quality providers out there. When interviewing a bookkeeping company, make sure to ask these questions.
Summary
Outsourcing your bookkeeping is more costly than doing it yourself, but can free you up to focus on what you do best, therefore allowing your business to grow. A good bookkeeper will give you relevant information and peace of mind.
Outsourcing is a good option for businesses that have a solid idea of what they are selling and can make use of the time savings that outsourcing gives them. It can also be a good option for business owners that know they won’t do the bookkeeping themselves.
3. Insource it
Cost
$15-$25/hour, $30K-50K salary full-time + Payroll taxes and benefits (+ about 10%)
Pros:
- Dedicated: You will have someone dedicated on your team that has their feet on the ground of your business so will know the comings and goings. This can reduce back-and-forth communication with you, the business owner.
- Flexibility: You can use any spare time they may have for other projects or administrative work.
- Complexity: A qualified person can handle complexity and project work better than other options because they are working in the business every day.
Cons:
- Capacity: You may not have enough work for a full-time person, leaving them with little to do
- Training: If you are going for a low-cost employee they may need training
- Turnover: If you can not provide full time work or are hiring entry-level workers, you will likely face turnover, which is an administrative burden
- Managing: Employees need management. They need to know what to do and how to do it. They also go on vacation and leaves of absence. They have children, get married and get sick.
- Expertise: there is a tendency for small businesses to use their receptionist to complete the bookkeeping, which can cause stress on that person. They were likely hired for their friendly and outgoing nature, not their bookkeeping skills.
Summary
Insourcing is a good option for companies that have complex operations such as manufacturing, retail and restaurant groups. It can also be a good option if you have administrative staff with some capacity and willingness to learn bookkeeping. Finally, it’s a good option for companies that have reached a size that they can afford a full-time qualified professional to do the work. It is generally not a good option to hire a part-time employee to complete the bookkeeping as this employee will require management and is more likely to turnover. Likewise, handing the bookkeeping tasks to another member of your team can produce some mixed results.
Conclusion
As you can see there is no one-size-fits-all answer to small business bookkeeping. Understanding the pros and cons of each type of bookkeeping should help you decide on which option is for you. We’re always here to answer questions and give you a fair assessment of whether outsourced or another option is best for you. Please reach out!
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If you think that outsourced bookkeeping is a good option for you, please reach out. We will happily chat through any questions that you have to see if վ is a good fit for you.
