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What Should I Spend on Bookkeeping?

Posted In Business - By Techtiplib on Sunday, February 4th, 2018 With No Comments »

Every business needs to do bookkeeping. For most small businesses, bookkeeping can become a drag on sales if the business owner is doing everything. But these days, there are many different bookkeeping options that don’t involve the business owner doing it all, including outsourcing everything to a bookkeeping service. If you are making the leap to hiring a bookkeeping firm, we’ve compiled an easy list of things to consider when making this big decision.

Bookkeeping

What level of bookkeeping service does my company need?

This is something that differs with every company, and even differs as often as month to month depending on your growth. If you have a small ten person startup office, a part-time bookkeeper will probably suffice.

If you have a company that explodes overnight, you likely need more than a part-time bookkeeper to handle your finances. This can vary wildly, and knowing not only what is available, but also what can help you grow is of the utmost importance.

A bookkeeping service can do many simple things for you such as invoicing and payroll, while more extensive accounting services can help with a wider range of tasks such as audits and compiling reports.

If you are in need of financial and strategic guidance, perhaps a more comprehensive service package is something you should look into, perhaps even hiring a controller or CFO– these expansions can obviously cost your business more than a bookkeeper, but the guidance they give your company as you grow can be priceless

The point is: make sure you go into the search for an accounting service knowing what level of service you want, or you may end up paying for a level of expertise that you don’t need.

How much is each level of bookkeeping service going to cost?

There are different ways you can get your bookkeeping and accounting taken care of, and knowing what you need is a big decision. The four main ways people get their accounting done are self-managed accounts, part-time employees, full-time employees, and outsourced services. Each have their own costs, and pros and cons, so consider each and decide which you should invest your time and money on.

DIY Accounting                                      

Cost: Sanity, time, and organization

Many small business owners decide to go this route; why should I spend on accounting, they think, when I could just figure out what I’m spending in Excel by myself?

While this seems like a smart and frugal decision, it can be very costly in other ways. Bookkeeping can take up a lot of time, especially if you don’t know what you’re doing. Figuring it out as you go can be time consuming itself, not to mention all the manual data entry.

Additionally, once tax season comes around, many find themselves lost and disorganized, having to spend hours and days compiling everything needed for audits.

This is all time and energy that the CEO of a budding company should be channeling on management, improvement, and growth; delegating these tasks to someone else can free up massive amounts of time for an owner, relieving stress and making things more organized.

Part-Time, In-House Bookkeeper                    

Cost: $400-$800 /month

This is the next step that most small business owners find obvious–we only need basic help, they think, so a part-time employee should be plenty adequate. This is indeed the case for some businesses, who want somebody in the office with them to handle basic tasks.

The thing to consider, however, is that with an in-house employee comes a whole mess of management and expense: a part-time employee like this will require supervision and management, may not be as experienced in the field, and comes with their own costs in the way of benefits and retirement even after payroll and training.

While this may be the best operational option for your business, be prepared to handle all of the HR responsibilities that come along with hiring a new employee for a position that didn’t previously exist.

Full-Time, In-House Bookkeeper

Cost: $3,000-$4,500 /month + benefits

If you have a large and/or booming business, this seems to be an obvious choice. One or more full-time bookkeepers would be able to help with a larger scope of business, dealing with more information and more services. While full-time bookkeeping and accounting employees would likely have more expertise in the area, they do also require supervision and management, just like any other type of employee.

Having similar costs to part-time workers with regards to salary, benefits, and training, full-time employees bring the benefit of more options in services; you can likely get more things such as financial reports, rather than simple invoicing and payroll tasks. This is likely the most expensive option, but can give you the benefit of having someone on the inside with expertise and insight to your fiscal options– just realize that in some locations, a full-time accountant can cost you up to $70K a year, plus an extra 20% or so in FICA, unemployment premiums, and other benefits.

Outsourced Accounting Services                             

Cost: $125-$2,500 /month

Outsourced accounting services is an option that most had considered reserved entirely for larger businesses until recently, but is now available to anyone with the internet and a profitable business. The great thing about outsourcing your services is that it eliminates the need for any of the hassle that comes with hiring employees such as salary and benefits, training, management, and office space.

One of the greatest parts of outsourcing is flexibility; the best options for outsourcing will have different packages with varying accounting services available, meaning you can choose what you do and do not need, and only pay for what you want.

This also means that your bookkeeping services can grow along with your business, as you can add more services onto your package as your needs grow. Another plus of this method is that you don’t have to worry about employees getting sick or walking out. You can pay one monthly bill and know that, no matter what, someone is taking care of your accounts. You have an entire team taking care of your finances for you, and it’s off your shoulders.

The cost of outsourcing these tasks can vary quite a bit due to the flexibility of the services offered; most places offer everything from simple bookkeeping all the way up to full-service accountants that offer monthly fiscal reports with intelligent strategic advice.

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