A founder’s expertise is better suited for developing and expanding the business, not bookkeeping. Are you starting to feel strained between bookkeeping and other responsibilities? Then it’s probably time to look into internal and outsourced bookkeeping services.
Accurate day-to-day bookkeeping makes finance monitoring simple and helps you budget correctly. Unfortunately, some bookkeeping services can be costly. Price puts a stop to a lot of small businesses hiring a bookkeeper, but their services are imperative for all businesses.
Below, we’ll discuss the pros and cons of using internal bookkeeping and outsourced bookkeeping. These details should help you decipher which option is best for you.
Bookkeeping Vs. Accounting
Bookkeeping and accounting often get lumped together as a single entity. While they work off each other, their separation of duties is essential in reporting accurate financial information.
The responsibilities of a bookkeeper are to record simple day-to-day financial transactions. For example, accounts payable and accounts receivable fall under the umbrella of daily financial transactions. Bookkeepers can also set up accounting software and connect business accounts and lines of credit.
Accountants, on the other hand, focus on the larger picture of all financial reporting. They rely on a bookkeeper’s numbers to create cash flow projections and other helpful economic models.
CFOS handle all financial actions of the company. An accountant and bookkeeper report to the CFO.
Why Companies Need Bookkeeping Services
Dealing with tax preparation and financial records eats up valuable time. According to PRNewswire, 40% of founders spend over 80 hours on tax preparation. Additionally, 47% of founders claim bookkeeping and tax preparation are the worst part of owning a business.
Hiring a bookkeeper gives you more time to run your business without sacrificing unerring financial data. Keeping track of daily transactions, net income, cash flow, and other documents is crucial. You can’t show investors profitability without income statements, and you can’t prepare for an economic downturn without the numbers to input to create a cash flow forecast.
Internal bookkeepers are employees responsible for maintaining the books for your company. They are part of your team and provide a beneficial financial service.
- Context and a rooted understanding of your business on a personal level. In-house bookkeepers are on the up and up consistently.
- Can wear other hats if needed and able to perform those duties.
- Communication can happen in person as needed.
- Costly. Salaries and benefits can eat up a payroll budget for smaller businesses on a tighter total budget.
- Non-conforming processes. Problems can quickly snowball if the bookkeepers’ techniques and styles don’t align with your company's best practices.
- If they quit or you have to fire them, they leave a space that needs to be filled ASAP.
- Slow results – bookkeeping begins at the month’s end with no real-time insight.
- Different tools used by different finance employees.
Outsourced bookkeeping offers complete accounting teams for small businesses that do not want to hire full-time internally. This could include hiring a freelance bookkeeper whom you’d pay hourly or bringing on a financial consultancy to support your books. Ultimately, outsourced bookkeepers operate in the same function an internal bookkeeper does. Their job is the same, and their responsibilities mirror an internal employee of the same rank.
- Cost-effective for the same services. No salary or benefits need to be paid by the company.
- Expertise focused on all financial reporting and information, including CPA, accounting, and CFO services.
- Consistent access to necessary information when needed.
- Multiple sources of contact. Many outsourcing services have numerous team members dedicated to your books.
- KPI monitoring.
- Possible accounting software integration
- Less background about specifics of your company.
- More scheduling requirements for conferences or one-on-one meetings.
- Possible encryption problems with the company’s software.
Startup budgets vary depending on business structure and niche, but they all have one thing in common: they’re the swinging pendulum that can make or break a business. Internal bookkeeping and outsourced bookkeeping both come with a cost.
The average internal bookkeeper salary is $45,816, with a low of $35k and a high of $56k. That does not include benefits which average around 30% of the employee’s compensation. If you hire a bookkeeper at $46k a year plus benefits, $13,800 at 30%, you’re paying $59,800 per year for a bookkeeper.
Monthly, at $46k a year, your bookkeeper costs your company nearly $4,000 per month. If you want any CPA services included, bookkeepers typically charge their hourly rate, which can cost between $20 - $79 per hour.
As your business grows, a single bookkeeper will not be enough to handle your finances. Day-to-day tasks increase as more vendors or supplies are added, and cash rises. But building an entire finance team averages $500,000+ each year for an internal team.
Outsourced bookkeeping services offer traditional bookkeeping practices that an internal hire would provide at a fraction of the cost. The company does not need to pay any salaries or pay for any benefits when using an outsourced service.
Outsourced bookkeeping services range from $500 - $25,000 per month.
Making The Decision
Bookkeeping isn’t something that can be put on the back burner. The job will always be there whether you’re handling the finances as a founder or have another partner with some financial background working the books. It is a crucial role to fill.
Startups that have a limited budget look to save money where they can. Expansion is a large part of every business owner’s goals, and expansions need to be backed up by cash. Having enough runway is another essential part of keeping a startup from crashing when it leads the nest.
Outsourced bookkeeping is cost-effective to ensure all financial reporting is accurate, timely, and organized. Internal bookkeeping is costly but just as valuable. The decision comes down to your company’s current financial standing and affordability.
Interested In Outsourced Bookkeeping?
Outsourced bookkeeping isn’t an alternative to bookkeeping; it’s a different way to receive those services with some bonuses. We know what it’s like to launch a startup and watch every penny going out and coming in. That’s why we charge our clients based on their monthly expenses with auto downgrades and upgrades based on the amount inputted.
When you work with Zeni, your team is the whole package. We give every client an experienced full finance team at a fraction of the cost of an internal team. We’ve created an AI-powered bookkeeping software that integrates multiple digital accounting tools to help our clients transition smoothly.
Additionally, our daily bookkeeping is ten times faster than traditional bookkeeping. You’ll receive your books within one week of month-end. We operate from a startup-centric position by using modern tools and software that grow with your company.
Use the sliding scale linked below to see how much money you can save with Zeni’s real-time bookkeeping solution.
We change the game of outsourced bookkeeping with our real-time insights. Check out our innovative approach by scheduling a free demo with us!