Outsourced bookkeeping: Is it better than doing it yourself?

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You started your small business, rented space, hired a manufacturing or sales staff, stocked your inventory and are ready to open the doors. Aren’t you forgetting something? Who’s going to do the bookkeeping?
As the business owner, you plan on doing the bookkeeping yourself, so you head to the local office supply store and purchase QuickBooks, Microsoft Small Business Accounting or some other accounting package. You’ve heard that these accounting packages are pretty intuitive, but more than likely, the accounting packages aren’t intuitive enough for your business.
If you are like most small business owners, your head is in the day-to-day running of your business. You barely have time to breathe during the day, and now you have to enter accounts payable invoices, prepare customer billings and do payroll. When will you have time to make the payroll deposits and figure out if Cafeteria Plan deferrals are subject to all payroll taxes? Not to mention, process quarterly payroll and sales tax reporting?
Your primary vendor or your bank will want financial statements, but you’re not sure that your financial statements make sense. How can they determine whether to extend credit to your business and at what limit?
If those thoughts sound familiar, don’t panic. You have options: hire an internal bookkeeper or outsource your bookkeeping.
If you choose to hire an internal bookkeeper, your dilemmas can be numerous. First, the internal bookkeeper is on your company’s payroll; therefore, you have to pay payroll taxes and provide benefits for this employee, and this might be more than you’re willing to take on. Second, you might not be able to afford a full-charge bookkeeper, someone to handle the full array of accounting. You might only have enough money to hire someone to handle accounts payable or the receivables which require more of your time because of the approval process. Third, when the bank or a vendor needs financial statements, you and your bookkeeper might have to take your company’s records to your accountant for adjustments before the statement is accurate, adding costs.
The second option is often the simplest and most cost effective: outsourcing your bookkeeping. Hiring a well-equipped bookkeeping service often will save you money, and many accounting firms. By taking this option, your company will save the costs associated with an employee such as benefits, supplies and equipment.
A professional bookkeeper, capable of providing accurate financial records, statements and pertinent analyses, is available to provide answers to your business’ needs. In addition, this bookkeeper will be knowledgeable about all forms of compliance reporting requirements and about proper classification of business transactions.
The end result equates to financial records that you can rely on to produce meaningful financial statements for you or for your lending institution. Another bonus to outsourcing your bookkeeping is that professional bookkeepers understand depreciation and other basic tax rules, ensuring that your financial records provide accurate information for the CPA that will be preparing your business or personal tax return.
Consider this scenario: your company has been in business for about five years and you hired a general office person. He or she has been entering your transactions, but at year-end, your accountant still gives you a myriad of adjusting journal entries necessary to clean up your books before your tax return is even prepared.
This is a perfect time to consider outsourcing your bookkeeping. The outcome will be accurate records to provide your tax accountant, resulting in reduced fees for the preparation of your tax return, as well as meaningful, accurate and timely reporting of your financial transactions.
Or consider this scenario: you’ve been in business for about five years and you have been doing your own customer billing, accounts payable processing and payroll after working 50 to 60 hours running your business, dealing with purchasing issues and handling personnel problems.
Is there a light at the end of the tunnel? Absolutely, there is light with equally successful results.
Outsourcing your bookkeeping is worth investigating. You owe it to yourself and your business’ future to explore it as a viable option. The cost savings might surprise you, and the time savings will allow you to be the business owner and manager that your company needs to grow and thrive.
Karon Cowan CPA is the Private Client Services specialist at BiggsKofford P.C. She can be reached at kcowan@biggskofford.com or 579-9090.