Clients often express concerns about outsourcing bookkeeping, but there are numerous reasons why outsourcing bookkeeping will increase efficiency and effectiveness.  This note presents some issues to consider when determining whether to outsource bookkeeping functions. 

Two on-line articles are available to help business owners understand when and why to outsource bookkeeping. 

• Insero, Kasperski, Ciaccia & Co., P.C. (http://www.ikccpa.com/pdfs/OUTSOURCEBROCHURE.PDF) provides a list of questions that can help you determine when you should consider outsourcing bookkeeping.   Thomas M. Begley’s article, “Outsourcing Your Bookkeeping
• How to Move a Non Revenue Task to your Accountant and Save Money” (http://www.accounting-and-bookkeeping-tips.com/selling-accounting-services/outsourcing-your-bookkeeping.htm) talks about why outsourcing is more effective.

There are also financial reasons to outsource bookkeeping.  Business owners commonly underestimate the cost of using an in-house bookkeeper.  The cost of a bookkeeper is more than the hourly salary.  It includes overhead, supervision, (dealing with personal problems or sick time), taxes & benefits (e.g., vacation), turnover (hiring, training, or transitioning the books), equipment and office space, software, etc.  Poor books and bookkeeping can also create a hidden cost as banks will increase your loan rates to cover the cost of converting your books into a format they can use and to offset the risk of not have good financial information. Innocent bookkeeping mistakes can cost the firm money and time such as: missed payment deadlines, overlooked receivables, penalties and late fees, lost records, lax security, and lack of credibility with lenders.  Because bookkeeping work is difficult to monitor, errors can easily slip by.

Hiring a full-time bookkeeper can be especially inefficient since they are “on the clock” 8 hours per day, 5 days per week, ad infinitum. You are forced to purchase bookkeeping in bulk, by the month, no matter how much you use.  And don’t forget delays and costs associated with vacation time, sick time and other periodic issues.  Locally, bookkeepers are commonly paid from $20,000/yr for part time, no benefits to $40,000/yr full time with benefits.  A specialized bookkeeping firm can commonly complete the work of a full-time, in-house bookkeeper in 25 billable hours.  This means you are really paying $66.00 to $133.00 per hour to get bookkeeping done.  Outsource bookkeeping firms charge much less.

Some firms know they don’t need a full time bookkeeper, so they hire a “utility player” to keep the books, act as a receptionist, etc.  This strategy can be even more inefficient and ineffective.  The cost of a bookkeeper is greater than the cost of a receptionist.  If you pay bookkeeping rates, you are overpaying for the receptionist time.  If you pay receptionist rates, the quality of your bookkeeping will be suspect.  In addition, the speed and accuracy of a part-time bookkeeper will not be a great as a certified professional.

To evaluate the effectiveness of your bookkeeper, take this simple test created by Insero, Kasperski, Ciaccia & Co.  If you answer yes to any of these questions, consider outsourcing bookkeeping.

• You don’t feel you can rely on your current financial reports to help you run your business.
• It takes longer than ten days to close and report on the prior month’s financial activity.
• You have no one to fill in for your financial person if that person were unable to come to work tomorrow.
• You don’t feel that you communicate effectively with your banker, CPA or others requesting accounting information.
• You only have the funds for a part-time or one full-time person but need multiple levels of accounting abilities.
• You find that your vendors call you instead of your staff to inquire about payment status.
• You are experiencing short-term cash flow challenges.
• You are spending your day fighting financial fires.