Small Business Advice
The pros and cons of outsourcing your business's accounting
"People wish to be settled. It is only as far as they are unsettled that there is any hope for them."
~ Ralph Waldo Emerson
One of the major problems I run into while helping entrepreneurs is hiring the correct folks to do their accounting. I cannot overstate how important this is for every business.
When talking about accounting help, for most small firms, we mean bookkeepers, and it can be more difficult than people realize to hire good help. When considering an applicant, you must first verify their character – especially as it pertains to honesty – and then their past employment history. This sounds easy, but it is not. For example, I have seen many entrepreneurs hire bookkeepers only to find out later they had been fired from their last job because of theft. In all these cases, the employer did check on the bookkeeper’s job history, but former employers are sometimes fearful about releasing that kind of information. Consequently, they verified the dates of employment and offered no further information.
Other times, applicants did not even list their last employer on their resumes. Then, when asked about it, the applicants lied and said they were unemployed during that time period because they had to take care of their aging parents or some other invented story.
As if those issues are not tough enough, you also must supply a space for your bookkeeper to work as well as provide benefits and so much more. For these reasons, it is prudent to consider outsourcing your accounting function.
Outsourcing is normally less expensive because you only pay for the hours worked, and there is no cost for benefits. Most firms I have seen go this route saved an average of 30%.
Then, there is the question of quality. The quality of help you can receive from a company that provides this service full time is usually much higher than you can afford to bring onto your staff. Akin to quality is knowledge and training, and these firms are constantly training their workers on the latest technology so they can compete in the market place. This is another benefit of outsourcing. Most small businesses typically cannot afford to send their accounting staff to school to upgrade their knowledge base. Nor can they afford the latest technology.
While these are all very compelling reasons to outsource, it can also be troubling not having accounting staff onsite to deal with any issues that may arise. To address that concern, some businesses have the outsourced help spend certain hours in the office so they can handle any unexpected situations.
Every entrepreneur must determine whether outsourcing is the best option for their business by looking at the costs versus the benefits. Many firms I have seen switch to outsourcing have done so in response to theft. In these cases, they stayed outsourced until the number of transactions became too large or the accounting function became too complicated, at which point they hired their own staff.
Now go out and investigate whether outsourcing your accounting function makes sense for your firm. I think the more you consider it, the more sense it will make.
You can do this!
Dr. Osteryoung has directly has assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is a bestseller on Amazon.com. He can be reached by e-mail at firstname.lastname@example.org.