Outsourced Bookkeeping vs. In-House Bookkeeping: Which Is Better for Your Small Business?
Keeping track of your small business's finances can be quite challenging. To stay properly informed, business owners have to maintain reliable accounting records of their revenue, spending, availability of funds, and financial position in general. One major decision that business owners need to make is who will do their bookkeeping.
There are companies that recruit a staff member who takes care of the books inside the organization. On the contrary, there are those who prefer that their bookkeeping is managed on a contract basis by an outside expert accountant or accounting firm.
So, which approach will suit you best? This really depends on the amount of money that you can spare, the type and size of your business, how much your business gets done, and your financial goals.
We suggest you compare the two alternatives before deciding on the right one for your company.
What Is In-House Bookkeeping?
In-house bookkeeping means hiring an employee to handle your business's financial records. This person may work full-time or part-time and become a regular member of your team.
An in-house bookkeeper may handle tasks such as:
Recording income and expenses
Reconciling bank accounts
Managing invoices
Tracking payments
Preparing financial reports
Managing accounts payable and receivable
Organizing financial documents
Having someone inside the company can make it easy to communicate about financial matters. The bookkeeper is familiar with your business and can quickly access the information they need.
However, an in-house employee also comes with additional costs.
What Is Outsourced Bookkeeping?
Outsourced bookkeeping means hiring an external bookkeeper or bookkeeping company to manage your financial records.
Instead of adding another employee to your payroll, you pay an outside professional for the bookkeeping services your business needs.
Depending on the arrangement, an outsourced bookkeeper may handle:
Daily or monthly transaction recording
Bank and credit card reconciliation
Accounts payable and receivable
Financial statements
Payroll-related bookkeeping
Expense tracking
Monthly bookkeeping reports
Cleanup of outdated or inaccurate records
Many outsourced bookkeeping services can work remotely, making them a practical option for small businesses.
Cost: Outsourcing Can Be More Flexible
Cost is something important that small businesses have to consider.
A small business that goes the in-house bookkeeper route will probably be paying much more than the bookkeeper's paycheck. Some expenses will likely include payroll taxes, the bookkeeper's benefits, the cost of the bookkeeper's paid time off, the space where work happens, office equipment, computer software to be used, and training for the bookkeeper, if any.
You pay for only the bookkeeping service you use when you use the outsourcing route. That could be the easiest way to budget your company funds particularly when the amount of work related to bookkeeping goes up or down monthly.
Outsourcing could be a better cost-saving option for a small business with only a few transactions than hiring a person full-time.
Expertise and Experience
Your internal bookkeeper is probably very well acquainted with the day-to-day operations of your business. But their knowledge is limited to the type of business you have.
The benefits of an outsourced bookkeeper extend beyond your business as it may be their way of working with a range of companies. They have the knowledge to advise different business types of the accounting requirements and financial issues in their specific industries.
This kind of assistance might prove to be very useful when your business is expanding or the complexity of your day-to-day bookkeeping needs is increasing.
But keep in mind to hire an experienced specialist who not only knows your business very well but is also skilled and has the capability to keep detailed books for you.
Control and Communication
Detailed knowledge by the bookkeeper and direct access are the two major benefits.
When you question a certain transaction, there's no problem if you directly ask your bookkeeper, mainly when he works full-time with all parts of financial reporting.
The bookkeeper service from third parties can also be arranged to be very communication-oriented by having regular correspondence via e-mails, talking on the phone, meeting via video calls, and accounting programmes that are all available for communication. The extent of the communication will largely rely on the kind of provider you select.
Ask the service provider beforehand for the communication cycle: that is, if the update will come at a fixed interval and who can be contacted in a situation when you have queries.
Scalability for a Growing Business
Your business can undergo quite a few changes, and so might your bookkeeping requirements.
For instance, you may only deal with a handful of customers and a few hundred transactions every month now. You might soon expand to have staff, new branches, higher sales, or partner with more vendors.
By going the outsourced bookkeeping route, you get to keep up with changing needs easily. You will likely be able to either scale up or scale down the services without having to make changes like taking on or laying off an employee.
Getting this level of adaptability right is something many small business owners and entrepreneurs really appreciate.
Data Security Matters
Bookkeeping may be done internally or outsourcing, whatever works best for your business. However, safeguarding financial data is paramount.
Companies often come into contact with highly confidential data on their customers, clients, employees, vendors, bank accounts, and transactions.
If you decide to outsource, inquire about a potential provider's security policies, software access control, backups, and confidentiality agreements.
If, on the contrary, you hire someone internally, you also need to restrict access to secret financial information and make sure you are using secure accounting software.
Which Option Is Better for Your Small Business?
There is no single answer for every business.
In-house bookkeeping may be a good choice if:
You have a large and consistent bookkeeping workload.
You need someone available every day.
Your financial operations are complex.
You want a dedicated employee on your team.
Outsourced bookkeeping may be a better choice if:
You are a small or growing business.
You want to control administrative costs.
You only need bookkeeping support for certain hours or tasks.
You want access to experienced bookkeeping professionals.
You do not want to manage another full-time employee.
Your bookkeeping needs change as your business grows.
For many small businesses, outsourcing can provide professional support without the expense and responsibility of maintaining a full-time bookkeeping department.
Make Bookkeeping One Less Thing to Worry About
Your bookkeeping should help you understand your business, not become a constant source of stress.
Whether you choose an in-house employee or an outsourced professional, the most important thing is keeping your financial records accurate, organized, and up to date.
If you are not sure which option is right for your business, consider your current bookkeeping workload, budget, growth plans, and the level of financial support you need.
The Bookkeeper Marketplace can help small business owners connect with bookkeeping professionals who can provide the support they need. Instead of spending valuable time searching for the right bookkeeping help, you can explore professional options and find a solution that fits your business.
The right bookkeeping support can give you greater financial clarity, save valuable time, and help you focus on what matters most—growing your business.
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