Should You Outsource Your Business Accounting?
One very common question business owners often find themselves wondering is: “Should I outsource my accounting?” The answer depends in large part on the complexity of your accounting, on how much bookkeeping you need and on your office culture.
So how do you decide whether you should outsource or hire an in-house accountant?
==> The Initial Investment
First off, realize that there’s going to be some initial investment if you decide to go in house.
You’re going to need to buy accounting software. You’re going to have to buy a computer and a desk. You’re going to need to spend time and money on finding and hiring an accountant. That includes interview time and costs for posting on sites like Monster.com or CareerBuilder.
==> Calculate the Real Annual Costs of Going In House
Wages for in-house accountants vary widely based on geographic location as well as previous experience. A part-time worker could be paid between $16,000 and $24,000 a year, while a full-time worker could earn $36,000 to $50,000 a year.
But that’s not the full cost.
You also have to factor in taxes, like social security. You have to factor in healthcare costs. You have to factor in any 401K match. You have to factor in vacation time and sick leave.
==> Cost Benefit Analysis
Generally, you can expect to pay about $35 to $60 an hour for outsourced accounting. It’s not uncommon for an outsourcing firm to be able to handle the full workload of a full-time accountant in 40 to 60 billable hours a month.
Remember: with a full-time accountant on staff, you’re paying for down time. If you don’t have accounting work that needs to be done, you’re still paying for their time. With an outsourced firm, you only pay for actual work done.
At $45 an hour, that comes out to $1,800 to $2,700 a month. From purely an economic standpoint, outsourcing makes sense for most small to medium sized businesses.
==> The Benefits of Doing It In House
On the other hand, for many companies going in house could be a lot better than outsourcing.
For one, if you have very complex or very hands-on accounting issues, you should probably have an in-house staff. Likewise, if you have a business that could have accounting emergencies, you should have someone on staff that can respond immediately.
For example, if you manage a sales force with different commission payments and different payment terms, it might make sense to have staff on hand. That’s especially important if someone didn’t get paid properly and needs their paycheck issue handled on the spot.
Fast growth companies should also consider having accounting on hand. Communication issues with an outside firm can slow down growth, as you do have to take time to catch your outsourcing firm up on all your new procedures.
In short, small to medium sized companies with standard accounting needs are usually better off outsourcing. Larger companies, companies with complex accounting needs or fast growth companies are often better off with in-house accounting.