Most small business owners start out doing their own bookkeeping, which makes sense when money is tight and there aren't many transactions. As the business grows, the books take longer and mistakes cost more, and eventually you start wondering whether to hand them off.
For most small businesses, outsourcing is the right call. It isn't right for every business, though, or at every stage.
What outsourced bookkeeping means
Outsourced bookkeeping means an outside professional keeps your books instead of you or an employee. That could be a remote bookkeeper, an accountant or a firm. Today the work is almost always done online. They work in your accounting software (usually QuickBooks Online), connect to your bank feeds and send you financial statements every month.
A typical monthly arrangement includes:
- Recording and categorizing every transaction
- Reconciling every bank and credit card account
- Tracking what customers owe you and what you owe suppliers
- Monthly profit and loss, balance sheet and cash flow statements
- Support for your tax preparer at year-end
The advantages of outsourcing
You get your time back. Owners who keep their own books tend to do it late at night or not at all, and handing it off frees hours every month for the work that grows the business.
You also get experience you probably couldn't afford to hire. An outsourced bookkeeper with years of experience costs a fraction of an experienced employee's salary. See what bookkeeping typically costs for the numbers.
Your books stay current, because a professional closes them every month on a schedule. You always know where you stand.
You'll make fewer costly mistakes. The most common problems in owner-kept books are miscategorized expenses, missed deductions and personal spending mixed in with the business, and each of them can cost you at tax time.
There's no hiring, training or turnover to deal with: no payroll taxes, benefits or sick days, and no starting over when an employee leaves.
And you'll make better decisions. With reliable monthly numbers you can see your margins, cash and trends instead of just a bank balance.
The disadvantages
You give up some control over day-to-day details. Someone outside the business will need answers from you about unclear transactions, though a good bookkeeper saves these up and keeps them short.
It's not instant. An outsourced bookkeeper works on a schedule, usually monthly. If you need someone in person every day, an in-house employee may fit better.
You have to share access to your accounting software and statements. Give your bookkeeper their own login instead of sharing a password, and work with someone you trust.
Quality varies. Low-cost providers sometimes rotate staff and do little review, so ask who will do the work.
Signs it's time to outsource
- You're more than a month behind on your books
- You spend more than a few hours a month on bookkeeping
- You dread tax season because your numbers aren't ready
- You've had a late fee or penalty from sales tax or payroll
- You can't answer "how much profit did we make last month?"
- You're preparing to apply for a loan or talk to investors
- The business has added employees, inventory or sales channels
If several of these sound familiar, outsourcing will likely pay for itself.
When doing it yourself still makes sense
- A brand-new business with very few transactions
- You enjoy it, have the time and keep current every month
- You have accounting training yourself
Even then, many owners pay a professional to set the books up correctly at the start and review them once a year, which avoids the most expensive mistakes.
Outsourced vs in-house bookkeeper
| Outsourced | In-house employee | |
|---|---|---|
| Cost | Monthly fee | Salary plus payroll taxes and benefits |
| Experience level | Often senior, at a part-time cost | Depends on who you can afford to hire |
| Availability | Scheduled, mostly online | On site, during working hours |
| Coverage | Continues during vacations and turnover | Stops when they're away or leave |
| Best for | Most small businesses | Larger businesses with full-time volume |
How to choose an outsourced bookkeeper
Ask these before you sign:
- Who will do the work? One experienced person, or a rotating team?
- What's included in the monthly fee? Reconciliations, statements, sales tax, payroll, year-end support?
- Which software do you use? Make sure they're experienced with yours.
- How do we communicate, and how quickly do you respond?
- When will I receive my monthly reports?
- Can you catch up past months if my books are behind?
- How is my data kept secure?
Thinking about outsourcing?
I'm a remote bookkeeper and accountant with 38 years of experience, based in Weatherford, Texas, working online with small businesses across the US. You work directly with me, not a rotating team.
See what's included in my bookkeeping services, or book a short intro call to talk about your books.