What are the Advantages and Disadvantages of Outsourcing the Bookkeeping Functions of the Business?
Keeping records and managing your financial data is a core function of your business—one many business owners have done themselves at some point, so they understand the importance of betting it right.
But bookkeeping can also be a function that’s tedious, something you should consider outsourcing. Bookkeeping requires methodical and consistent tracking of the transactions of a business. So the nature of bookkeeping is two-fold: yes, it involves a close relationship with the business’ most intimate financial data, but it’s also a high-level form of data entry—an entry-level position with your business’ top-level information.
So should you consider outsourced bookkeeping services to fulfill this role? As more companies try to become hyper-focused on their core business and most profitable roles, they turn to outsourcing as a way to stay lean and yet still get the expertise they need. Bookkeeping is often a function that makes sense to outsource.
Should I outsource bookkeeping?
More and more businesses are seeing the benefit of outsourcing accounting services and certain other departmental functions to focused service providers, bookkeeping being one of them. And it makes sense; why hire employees for certain functions like bookkeeping that aren’t a part of your business model of creating, distributing, and selling a product or service? As businesses look at what functions to outsource, they have to weigh the advantages and disadvantages.
What are some of the things to consider in making the decision to outsource your bookkeeping?
Need for accuracy
When an error occurs in your bookkeeping, the consequences can impact your business. Whether you’re recording transactions that impact your financial statements or you are preparing invoices that go out to your customers, the need for accuracy is critical. Leveraging the expertise of a trained professional can help you avoid costly mistakes and can provide you with better information to make informed business decisions.
What is your time worth?
If you are doing the bookkeeping yourself to save money, you may be looking at it all wrong. There is an opportunity cost associated with everything you do. If you are spending time on bookkeeping, is this really the best use of your time? Could you grow your business faster, or have more time for your family if you weren’t doing the bookkeeping? While the DIY mentality can be a good thing at times, it can often be penny wise and pound foolish.
Do you have time to manage a bookkeeper?
If you have made the decision to delegate the bookkeeping, the next decision you have to make is whether to hire someone or turn it over to an outsourced accounting firm. One important consideration in this decision is whether you have time to supervise an internal bookkeeper. When you hire someone internal, you (or someone else in your organization), will have to assume the responsibility of supervising their work. One of the advantages of using an outsourced accounting firm is that they will assume this responsibility. You can effectively take it off your plate.
What are advantages and disadvantages of outsourcing?
Outsourcing isn’t the right choice for every business. For some, they need to run so lean that they own every part of the business, meaning employees wear a lot of different hats. Or, the business is large enough that they don’t have to worry about outsourcing. Determine where you fall and if this is the right choice by investigating some of the advantages and disadvantages.
Perhaps the biggest argument for outsourcing is that it’s cost-effective to outsource any function of the business that doesn’t require full-time employees. You save on the benefits, salary, paid leave, and the training and onboarding that each new employee costs your business.
When you hire employees for bookkeeping, there’s a certain amount of training required. When you outsource those bookkeeping needs, you get professionals who have the experience and expertise that puts them at the top of their field. Simply put: when you outsource from the right provider, you get the best.
When you sign over bookkeeping responsibilities to an outsourcing provider, you forego the risk of losing your accounting and bookkeeping staff to competitors or to businesses who can pay more. Another one of the benefits of outsourcing bookkeeping services is that you establish continuity with the same provider for years to come.
Anytime you consider outsourcing a business function, you’re giving over some control to an outsider; that’s one of the disadvantages of outsourcing any responsibility. For example, it might require a bit more communication, especially early on, to get to the same level of detail you are used to getting out of the books when you did it yourself. Or you have to specifically request certain financial data that isn’t included on every report.
Risk of the wrong provider
One of the biggest risks of outsourcing any business function is hiring the wrong outsourcing provider. It carries the same weight as hiring the wrong employee, except the repercussions are even bigger: what if you hired the wrong people for an entire department? Hiring the wrong provider means your most critical financial information is in the hands of those you don’t trust, and the repercussions can be detrimental, especially for your peace of mind.
The solution: find the right provider
Finding the right provider can make all the difference in outsourcing your accounting or bookkeeping. Milestone helps you identify the services that would benefit your business and then meets those needs by giving agency to the back of your office. Milestone acts as a partner for HR, accounting, and bookkeeping services your business needs—while ensuring you aren’t paying for services you don’t need. Not only will they alleviate some of those responsibilities from your employees, but they’ll be strategic in improving those aspects of your business.
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