The outsourcing industry has grown by leaps and bounds as the internet has connected people globally. Outsourcing gives access to a larger pool of talent and low-cost labor. It helps you delegate lower-level responsibilities and focus on more key, higher-level tasks.
Bookkeeping is a role encompassing the preparation of financial statements, managing bank account operations, analyzing financial data, and preparing outgoing invoices. It is an essential part of any enterprise and requires expertise.
Although hiring an accountant is the best way to ensure your business’s books are balanced, outsourcing bookkeeping services allows you to finish the job more qualitatively and cost-effectively.
Outsourced bookkeeping services are particularly helpful for small businesses and start-ups that may find it challenging to hire an in-house bookkeeper. It is an excellent way of getting important work done without recruiting and onboarding a new team member.
Are you wondering whether outsourcing accounting services are a better choice for you than in-house bookkeeping? Continue reading for a detailed comparison of each one’s pros and cons.
Advantages of outsourcing bookkeeping services
- Outsourced bookkeeping services are the most cost-friendly solution if your bookkeeping is specialized and complicated. When you hire an outsourced bookkeeper, you will always enjoy reduced costs without compromising the quality of work.
- Instead of outsourcing all parts of the job, you can even choose to outsource the job in parts. Typically, a flat fee is paid to an outsourced employee.
- Time wasted in hiring activities also has an added cost element. So, outsourcing bookkeeping frees up the time of key executives who can focus on creating better business strategies.
- By segregating and outsourcing various bookkeeping operations to different people, you ensure control is diffused. Payments can be outsourced to a separate individual, whereas bank reconciliations to another. In this way, you reduce the chances of embezzlement or fraud.
- The availability of talent across the world enables you to take advantage of dollar arbitrage to find different prices across markets. Thus, you can hire people with qualifications and expertise at a reasonable cost.
- Outsourced accounting and bookkeeping is a scalable model. As bookkeeping rates are applied on an hourly basis, the hours allocated can be increased or decreased as per the need.
- Outsourcing accounting and bookkeeping services facilitate automation accounting, eliminating human errors. Many outsourced accountants are experts in Visma, Xero, Quickbooks, Sage, Microsoft Dynamics, SAP, and more.
- The benefits of outsourcing bookkeeping services depend on the reliability of the service provider in providing a good and accurate set of books. Having different groups of people check the same financial records and books ensure fewer chances of errors.
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Disadvantages of using outsourcing bookkeeping services
- One major disadvantage of outsourcing bookkeeping is the different time zones, which sometimes results in not getting your output at the correct times. So, although you have a wide pool of experts worldwide to handle your books, there may be some time delays or communication gaps.
- Handing over sensitive financial information to a freelance accountant may lead to concerns about the privacy of data and protection of Intellectual Property.
- You may not be sure of the loyalty of the employee to whom the work is outsourced.
- You must ensure that you outsource to an agency or person with validated credentials. Otherwise, people are prone to exaggerate their talent.
- For the role of a bookkeeper, you may need someone who has qualifications given by your country and is familiar with the accounting rules there. For example, in the US, you may want to hire a CPA who knows the Generally Accepted Accounting Principles (GAAP).
Advantages of in-house bookkeeping
- When you retain the bookkeeping function in-house, you can always make small adjustments and changes to the process.
- In-house bookkeeping allows for quick and easy resolution of queries.
- An in-house bookkeeper will follow your company culture. They are likely to be loyal to your company and keep its best interests foremost.
- Keeping your bookkeeping work in-house means you can safeguard your sensitive information.
- With an in-house bookkeeper or accountant, you keep better control over the quality of work.
Disadvantages of in-house bookkeeping
- The most important disadvantage is the prohibitive cost of hiring a bookkeeper. You must provide a complete pay package with health and travel benefits and any other perquisites.
- Another drawback of in-house bookkeeping is that the talent pool is limited. It may be difficult finding people with the right qualifications and experience in smaller cities and towns.
- Employee turnover may be costly in terms of time and effort expended. Onboarding new employees and training them may be expensive, especially for small businesses.
Key Takeaways
Not every role can be outsourced but keeping accounting experts around all the time and paying them a huge salary is not warranted by the few times you may require their expertise. This is a costly and unnecessary exercise.
Made up your mind to outsource accounting services? Using a third-party service provider is especially warranted when the size of the business is big. It leads to flexibility in contracts, cost savings, and scaling up. As accountants get instant reports, they can catch errors and minimize the possibilities of fraud.
