Overseeing daily financial transactions and keeping records accurate are important aspects in the financial management of any business. A bookkeeper is a professional who manages these financial affairs. Medium to large businesses hire full-time bookkeepers to do their monthly financial statements. Microenterprises and small businesses, however, may not find the need for a full-time bookkeeper to manage their books. Some business owners prefer to take care of their accounts themselves; while others assign the task to an all purpose administrative assistant.
However, as the business grows, financial requirements also grow with it. Business owners would need to decide whether they should hire an in-house bookkeeper or outsource from a service provider.
The pros and cons of each option vary. If you are a business owner contemplating which one to choose, read on. We’ve listed some pros and cons of in-house and outsourced bookkeeping, based on various factors, to help you decide which is best for your business.
Cost is a major factor that influences decisions in any business. Hiring a full-time employee is more expensive than outsourcing. Aside from the salary, you’d need to give a full-time employee paid time off, holiday pays, insurance and social security coverage, training, and office space and equipment. The average annual salary of a bookkeeper in Australia is around 62,000 AUD. If you’re going to spend that much, you need to make sure that you are also getting enough in return. For many small and medium businesses, the amount of bookkeeping work doesn’t warrant a full-time role.
Outsourcing a bookkeeper comes at a relatively cheaper cost. If you are a sole trader, you can already get quality bookkeeping services for 120 to 160 AUD per month. Aside from the cheaper cost, outsourcing also allows you to reduce compliance expenses, reduce tax payments, save on employee insurance, eliminate additional expenses on office space and supplies, do away with the need to pay vacation and holiday pay, and reduce the risk of employee related complaints and lawsuits.
Through outsourcing bookkeeping services, small and medium businesses can save thousands of dollars annually.
2. Training and Management
Bookkeeping is not a simple task. It requires several skills, a keen eye for details and experience. Hiring in-house bookkeepers can play to your advantage here, especially if you are running a large business with several branches. You can train employees to do specific kinds of bookkeeping work or hire experienced ones. With this, you can assure that you have people who are passionate about what they do.
However, if you don’t have an accounting department and aren’t planning on building a team of experts, hiring in-house bookkeepers can be very costly and time-consuming. For small businesses, training the hired bookkeeper becomes the business owner’s responsibility, even if it isn’t their field of expertise. Hiring experts to train a few bookkeepers can be very expensive.
In outsourcing, you get access to expert bookkeepers who already have the skills and oversight to get the work you need done. Bookkeeping companies like the ACT Bookkeeping Group keep their bookkeepers up to date with the latest regulations and accounting software and periodically train their consultants to ensure that clients receive quality services.
3. Quality Assurance and Work Efficiency
The biggest advantage of having in-house bookkeepers is being able to meet your team in person anytime you want, and you can check what they are working on whenever you want. There are entrepreneurs who want to have someone on site all the time. If you have a team of experienced bookkeepers, you can assign a couple of senior staff to ensure the quality of work being done. This is efficient if you need a high volume of financial work that needs to be done continuously. If the workload isn’t there, outsourcing is a cost-effected and more efficient option.
Assigning all the bookkeeping tasks to one employee may leave you in a vulnerable position. With no one to double check on the work quality (unless you’d want to go through the hassle of double checking it yourself), the risk for mistakes is always there. It can also be very stressful on your part should your bookkeeper suddenly resign.
You don’t have to worry about these issues in outsourcing. Aside from having a team of experts do bookkeeping for you, your outsourcing partner assures operational consistency. If your assigned bookkeeper leaves your outsourcing partner, they can quickly assign another expert to work with you.
4. Fraud Risk Reduction and Neutrality
In large companies, a team of trusted and experienced in-house bookkeepers conduct periodic checking and balancing to ensure the accuracy and timeliness of information in the books among the departments. Despite this, the risk of fraud within the business prevails. If you only have one or two bookkeepers handling your ledgers, your business is even at a higher risk. An in-house bookkeeper may also be tempted to manipulate the data in the books to show you what you want or to keep you in the blind. The ACFE 2018 Report to the Nations Global Study on Fraud and Abuse, private companies and small businesses are 42% more at risk of occupational fraud compared to large companies.
Outsourcing helps reduce this risk. Your bookkeeper has little to no access to your funds. Aside from keeping track of all your financial transactions, an outsourced bookkeeper has no personal interest in your money. Most outsourcing companies also have different sets of staff working in one account. This allows each staff to review the work of the others, ensuring that there are no discrepancies in the data.
5. Data Security and Privacy
If you have an in-house bookkeeper who has a high integrity and good work ethics, you are one of the few lucky business owners to hire such an employee. Unfortunately, some bookkeepers may “intentionally” or “unintentionally” leak sensitive financial information. Most outsourced bookkeepers are bound to a confidentiality agreement so they are less likely to reveal confidential information.
Another advantage of outsourcing, especially to a virtual accounting firm, is the Cloud data storage that you get with their services. Not only is your data protected in case of natural disasters, you can also access it via any web enabled device.
When Does Outsourcing Become the Best Option?
In-house bookkeeping and outsourced bookkeeping provide different benefits. To know which option is best, you must assess your needs as a business owner. If you run a small to medium-sized business and you don’t have loads of bookkeeping tasks to do on a day-to-day basis, outsourcing is the best option. You’ll save on cost while getting quality services from experts.
ACT Bookkeeping Group provides excellent and affordable bookkeeping services. Book a free consultation today.