Why you should outsource your bookkeeping
Sooner or later, you’re going to need professional bookkeeping.
Perhaps you’re tired of scribbling out totals on the back of an envelope. Maybe your business is growing and you no longer have time to do your own books as your needs become more complex. Perhaps you’ve realized that you need a clearer, timelier understanding of your cash flow.
When that moment comes, you’ll face a choice: should you hire a bookkeeper or outsource to an accounting firm? While each option has its pros, here are several good reasons for outsourcing.
Practicality and cost savings go hand in hand
“Outsourcing represents practicality,” says Amit Khanna, the National Marketplace Lead, Deloitte Private. “If you’re a small operation and your bookkeeper goes on holiday for three or four weeks, it will be difficult for you to get the information you need to run your business.” By outsourcing, you’ll never have to worry about losing access to your data due to turnover, sick days or holidays.
Outsourcing also relieves you of the burden of hiring for a position with which you likely aren’t fully familiar. After all, candidates aim to present themselves positively during interviews. But unless you’re well versed in accounting practices, you’ll find it difficult to thoroughly assess qualifications and make the right decision for your company. An accounting firm, on the other hand, will know exactly what to look for when hiring. As a result, you can be confident when you outsource to one that you’re getting qualified bookkeeping talent.
There are also costs to hiring and retaining an in-house bookkeeper as you’ll need to pay CPP and EI contributions as well as cover vacation time for your employee. When you outsource, you won’t have to worry about these.
One related issue that many business owners might not consider is how often they might have to hire for the position. Few people want to remain a bookkeeper forever; it’s often merely one step on a long career path. This means you’re likely to have turnover every few years. While outsourced accounting firms have to deal with turnover as well, they’re able to offer the sort of training and career advancement that attracts the more capable bookkeepers and makes them stick around longer. That translates to more bookkeeping experience that can be applied to your business.
Finally, for many businesses, bookkeeping may not be a full-time job – although you might think it is and hire accordingly. This means you could end up paying too much for your bookkeeping. By outsourcing the work instead, you’ll only pay for the hours required.
Competency and insight make a powerful combination
Many business owners might question the need to hire or outsource their bookkeeping at all, when there’s accounting software out there that bills itself as an all-in-one solution. This claim, however, can be misleading.
“You still need someone who knows how to actually use the software properly,” says Khanna. “Plus, do you really want to be spending time doing data entry just so you can access your books?”
Software also has to be updated and managed, which is yet another activity that can distract you from running your business. “By outsourcing your bookkeeping, you’re always getting the latest, newest technology and the best processes. Outsourced bookkeepers are incentivized, and required, to stay up to date,” Khanna notes.
Outsourcing provides business owners with the most appropriate software as well as the people who can take maximum advantage of it.
Simplicity and flexibility make great partners
Even better, outsourcing ensures you get the most up-to-date technology without a big upfront investment. And by eliminating the burden of maintaining a legacy technology, you’re free to concentrate on actually running your business.
Similarly, outsourcing means you’re not stuck with technology that your business outgrows. It means you have the flexibility to bring in services as you need them, and dispense with those you don’t. And if you need more advanced capability – an advisor, for instance – then the right outsourced solution will have you covered.
There’s more to outsourced bookkeeping than bookkeeping
“If you pick someone who is highly skilled in cloud bookkeeping, you’re actually getting a lot of high-value technological consulting at the same time,” says Khanna. “Such an organization can bring your bookkeeping process to the 21st century by digitizing your work flow and inserting automation into the process.”
For many businesses, this advisory component represents an added value that in-house bookkeepers can’t match. A capable accounting firm can show you how to work more efficiently, and offer insights that you can use to analyze your spending and gain a clearer understanding of your business performance.
The only security is maximum security
It may seem surprising, but having your bookkeeping done off-site is typically the most secure option for your business.
“People think that having their files on an office computer is secure,” says Khanna. “In fact, it’s not, because you typically don’t have the latest firewall technology. You probably are not encrypted to the level that is absolutely necessary. After all, security is expensive. To really protect your data, keeping it on your computer is a bad idea.”
An outsourced firm, meanwhile, will make extensive use of cloud technologies, which are far more secure. Consider, for example, QuickBooks, which uses Amazon Web Services (AWS). AWS invests a great deal in secure technology, including a secure server farm and the latest encryption software. So your financial information is just as secure, for example, as someone’s medical records. It’s much less likely for organizations like AWS to be compromised than it would be if a hacker targeted your business.
The right questions lead to the best choice
Outsourcing clearly has its advantages. So how do you choose the right accounting firm for your needs?
First, assess the size of its team. A small, three-person operation can represent a risk, for if one person leaves or takes a vacation, their capacity is reduced by a third. A 50-person organization, on the other hand, can afford to have staff leave without significantly reducing its ability to serve your business.
You’ll also want an organization with the ability to scale as your business grows. A mid-sized accounting firm, for example, will be able to add resources and adapt to changes fairly quickly.
The next fundamental question is what technology does the firm use? Ideally, it will use a cloud-based software such as Xero or QuickBooks as a foundational accounting platform, and specialized software to solve specific challenges. For instance, the firm might recommend WayPay as a means to get away from manual cheque-writing, or ReceiptBank to capture receipts.
Ultimately, the right outsourced accounting firm will do more than just handle your books. It will help your business become more efficient.