How Outsourcing Your Accounting Needs Could Benefit Your Business
New businesses often begin with the business owner doing all of the accounting work. While this might work when you’re your only employee and your sales are minimal, as soon as your business begins to grow, it’s time to consider more professional options. But should you outsource your accounting needs or hire an in-house accountant? Keep reading to learn why a third-party accounting firm is better for your business.
Problems with DIY Accounting
First, let’s address why continuing to handle your own accounting isn’t an option for a growing business. You might think that you’re saving money by avoiding hiring someone else at all, but the potential complications of continuing to do your own accounting can actually cost your business a great deal. Here are a few examples of why DIY accounting isn’t a good idea:
- Ineffective use of your time – As a business owner, you have a great deal of responsibilities that demand your time. Is maintaining your books and filing your taxes really what you want to be focusing on? Your time is a valuable resource. It’s important to use it effectively, helping your business grow, rather than simply maintaining financial records.
- Lower level of accuracy – Simply put, most business owners are not professional accountants. No matter how good you are with a spreadsheet or bookkeeping software, you simply don’t have the same level of training as a professional. And, as we already mentioned, you have a lot more demands on your time; a full-time accountant is completely focused on the accuracy and completeness of your financial records.
- Issues with compliance – If your business is beholden to any regulatory bodies, it’s incredibly important that your financial records are consistently in compliance with those organizations. This is much more difficult to do for business owners who don’t have professional training in these compliance issues.
Now that you know why doing your own accounting isn’t the best idea, let’s discuss why outsourcing your accounting needs is better for your business than hiring an in-house accountant.
Eliminating Conflicts of Interest
For a growing business, it’s incredibly important that your books and all handling of your financial records is above bar. If you handle your accounting in-house, it is much easier for their legitimacy to be called into question, because potential conflicts of interest do exist. It is better to have the person maintaining your books be separate from and impartial to the person with easy access to the company’s finances. This is simply not the case when you’re your own accountant, or when your in-house accountant can easily access company funds.
An external accounting service separates your bookkeeping from your funding, eliminating those possible conflicts. If any inaccuracies do arise in your books (which, again, is much less common if using a professional), it’s less likely that you’ll face investigations as a result, simply due to the fact that it would be impossible for you to doctor your own books—because you aren’t handling the books at all.
Saving Your Company Money
Many business owners think that hiring an in-house accountant will be cheaper than hiring third-party accountant. In some cases, a bookkeeper’s salary may actually be lower than the annual fees for an outsourced accounting service. However, that salary only represents a portion of the actual cost of hiring that employee. The hiring process itself comes with expenses, which are constantly adding up during your search for the right accountant. Then, once you find the right employee, you’ll have to buy equipment for them, provide benefits, and take on a number of other expenses simply associated with having another employee in your office.
On top of all this, most full-time accountants aren’t productive 100% of the time they’re in the office. On average, accounting employees have nearly 700 hours of nonproductive work a year—and it could be more, depending on how much work you actually have for your bookkeeper.
Making Tax Filing Easier
Most businesses who have an in-house accountant or bookkeeper still need a CPA when it comes time to file their business tax returns. This is simply because most accounting employees don’t have the knowledge needed to file a business return; they’re significantly more complex than personal returns. However, most third-party accounting services also employ CPAs, which means you can rely on the same company when tax season rolls around. This makes filing your return much simpler, because your CPA will already have all of your business financial records on hand, taking a lot of work out of your hands.
If your business is interested in outsourcing your accounting needs, contact Demian & Company today to learn how we can help.