When you started your business, building it from the ground up, knocking on doors, burning both ends of the candle, and being the first one in the office and the last one to leave—finance & HR tasks probably weren’t your first love. They probably aren’t, even now. So when it is time to outsource your bookkeeping and hand it off to a professional team? This is a question many entrepreneurs and business owners ask themselves after they’ve been in business awhile.
How to Know When to Outsource Your Bookkeeping
Many entrepreneurs and business owners start out doing their books out of necessity and all-in desperation. How do you know when it’s time to outsource to professional bookkeepers?
There’s actually a fairly simple, two question, litmus test.
1. The first question we all ask is, “Will you make more money (or have more time for your other priorities) by handing your bookkeeping off to a professional team?”
Pretty straightforward right? You’re wondering if you should finally give up tearing your hair out over invoices, quarterly reporting, estimated taxes, payroll and data security. Well, the first question that comes to mind is probably, “Will it help you increase your profit (or time) margin?” More likely than not, the answer is yes, yes it will. This is thanks to the law of specialization, meaning if an entity focuses on the production of a limited scope of goods they will gain a greater degree of efficiency.
In other words, if you focus on what you’re good at, you’re more likely to smash it. Thanks for that, Adam Smith.
2. The second litmus test is easy: “Will you be happier to punch in every morning?”
As it turns out, the second litmus test actually relates to the first one–if you’re happier at work, you’ll likely be able to increase your profit margin.
Topping the list of the Entrepreneurial Operating System’s signs of business owner burnout is dreading the workday. This creates an uncomfortable cycle of lacking energy, decreasing overall performance, longer hours, more fatigue, and more dread.
If you are managing bookkeeping on your own, it’s possible that your business would be more profitable and you would experience more joy in life if you delegated finance tasks to a professional firm.
In-house Bookkeeping Limitations
When you were optimizing systems and processes for efficiency at the beginning, the workload and responsibility probably fell on one person, such as yourself, an admin or assistant, your spouse or partner, or another “voluntold” employee. And this person typically had no formal accounting training or career experience.
The “Miscellaneous” Bookkeeping Category
As a result, way too much money is flowing through “Miscellaneous Expense”-type categories, your chart of accounts is disorganized, and it’s hard to glean valuable information from your financial reports (or you rarely bother to look at them because they are always out of date).
Now you’re dealing with delays in payroll and invoicing, which aren’t just a headache, but they also directly contribute to expenses getting out of hand, poor cash flow, and disgruntled employees. Let’s face it – no one likes late or incorrect paychecks and expense reimbursements, or having to settle for subpar work equipment, or dealing with vendor account holds on their projects.
The Central Issues
Between the day-to-day financial stresses and pressures and the annual tax anxiety, many business owners are really suffering from anxiety, lack of sleep, strained professional and personal relationships, and more. A poorly-functioning accounting department is like the unhealthy heart of a business, and an unhealthy heart in your business can give you real-life personal health issues.
But when your accounting is managed excellently by trustworthy professionals, you’ll get increased peace of mind, reduce your stress, and probably sleep better at night (we’ve seen it happen!)
Advantages of Outsourcing Bookkeeping
Outsourcing to Ingenium BCS provides our clients with controlled, well-defined, predictable costs, and we take nearly all of the hidden or subtle costs out of the equation, so you just pay for the results you need and you stop paying for:
- A set schedule of in-office time blocks that may or may not fit the actual workload, determined by supervisors who have never held the particular job themselves
- Payroll taxes
- Employee benefits
- Worker’s Comp insurance premiums
- Office space for this role
- Office equipment/computers/furniture
- Office supplies, snacks, and utilities
- Paid breaks
- Paid holidays
- Vacation or sick leave
- In-office downtime
- Employee turnover, which carries a huge but largely hidden cost
All of the above become our problem, not your problem! And because we deliver these services all the time to numerous other organizations, we have the data and experience to define clear scopes and costs.
Insurance for Employee Fraud
Unfortunately, employee fraud can also become a problem when one person completes all of the accounting tasks with minimal oversight. But employees don’t come with insurance to cover your losses for their mistakes or malfeasance, so that’s a big risk you’re taking if they are largely unsupervised, or if you lack tight controls on outgoing payments.
Professional firms like ours carry Errors & Omissions Insurance (also known as Professional Liability) to ensure you can obtain compensation if your business is harmed by them. If you have already outsourced your bookkeeping, request a Certificate of Insurance from your bookkeeping provider to verify that they are insured.
Record Retention & Data Security
Record retention, retrieval, and data security is crucial. If you’re still pawing through a filing cabinet in the cleaning closet for auditor requested receipts, chances are you’re spending too much time on record retention and retrieval.
Too often record retention is also directly related to employee turnover– and it’s not just a loss in time and training to take on a new employee–it’s a loss of continuity. A loss of institutional knowledge. Our relationships with our clients usually outlast their typical administrative employee’s tenure, and for all of our clients we provide critical continuity to their business administration and bookkeeping needs.
Is It Time To Outsource Your Bookkeeping?
Do you want to increase that time and profit margin? Be happier at work?
How about both?
Talk with a business strategist at Ingenium to find out if it makes sense to outsource your bookkeeping and how your business can benefit.