Outsourced Bookkeeping Services vs. In-House Staff: What’s Best for Your Growing Business?

For a growing business, the choice between outsourced bookkeeping services vs. in-house is less about feelings and emotions and more about what is scalable, sustainable, and flexible for an unpredictable business environment.

Take AcuTech, for instance. When the internal team began struggling with inefficient Accounts Receivable processes that blocked cash flow and reduced financial visibility, they outsourced their bookkeeping due to its cost-effectiveness.

For Account Ability Consulting, the decision to outsource bookkeeping was based on the lack of in-house capacity to clean up three years of data in QuickBooks Online.

Your reason for outsourcing (or decision to remain in-house, for that matter) might be different, but your decision must be carefully considered, just like these two businesses.

This article will help you weigh both options to make the most suitable decision for your business.

Why Growing Businesses Rethink Bookkeeping Models

Two of the most common reasons to reconsider your system of bookkeeping and financial reporting are:

• When DIY or In-House Starts Falling Short

Most DIY or in-house bookkeeping systems crumble under the weight of high transaction volume and more complex financial reporting requirements.

That’s partly because in-house bookkeepers use spreadsheets and basic bookkeeping software, which require so many manual workarounds as the business grows.

Another reason is the sheer number of available bookkeepers. Most businesses have one or two bookkeepers handling all aspects of financial reporting. As transaction volume increases and the business expands operations, the small bookkeeping team becomes overwhelmed, leading to errors and missed regulatory deadlines.

• Pressure to Scale without Overhiring

Scaling a business requires more hands to manage increased transaction volume and complexity in reporting requirements. But hiring in-house bookkeeping staff is a long-term solution to a problem that might not exist in a few months. Business owners are aware that growth can plateau very quickly, and if it does, in-house hiring makes it hard to downsize the workforce.

Not to mention the increase in operational expenses (such as payroll, overhead, and employee benefits), which can stretch your budget too thin.

What Do Outsourced Bookkeeping Services Include?

Core Responsibilities and Deliverables

Outsourced bookkeeping services cover every financial task that contributes to the completeness and accuracy of financial reporting:

Here are some examples and what they entail:

• Transaction Processing: Recording and categorizing a company’s income and expenses.
• Account Reconciliation: Comparing bank, credit card, and general ledger information to identify and rectify discrepancies.
• Payroll Management: Processes employee salaries and benefits in compliance with relevant employment regulations.
• Accounts Payable/Receivable: Managing vendor payments and payment collection to facilitate timely pay-ins and pay-outs.
• Financial Reporting: Preparing balance sheets, income statements, and other financial reports on a monthly or quarterly basis to enhance decision-making.
• Tax Preparation Support: Compiling financial data and coordinating with tax accountants for accurate and compliant tax returns.

What an Outsourced Bookkeeper Does Not Do

Outsourced bookkeepers do not provide high-level accounting services, like:

• Strategic Financial Planning: Tasks involving financial strategy, investment planning, or long-term forecasting are handled by senior accountants, such as CPAs, Controllers, and CFOs.

• Auditing: The outsourced bookkeeper’s work stops at preparing the financial records needed to perform financial audits, but the main audit tasks are reserved for certified public accountants (CPAs).

• Legal or Tax Advice: Apart from compiling data for tax planning and advisory, outsourced bookkeepers cannot provide any other tax services.

Common Software and Communication Workflows

Outsourced bookkeeping owes its existence to advancements in technology that enable professionals to deliver efficient services from anywhere in the world.

Key software solutions include:

• Accounting Software: Outsourced bookkeeping teams rely on QuickBooks Online, Xero, FreshBooks, and accounting software to organize financial data for accurate reporting.
• Payroll Software: Gusto, ADP, and Paycheck Flex automate employee payments in compliance with relevant financial regulations.
• AP/AR Software: Bill, Invoicera, and Tipalti streamline accounts payable/receivable.
• Document Sharing: Google Drive, Dropbox, or client portals like Liscio, Financial Cents, and Canopy ensure secure document exchange between businesses and their outsourced bookkeepers.

Communication Workflows

Outsourced bookkeepers receive their clients’ transaction data through bank feed integrations and secure document-sharing platforms like SmartVault.

When they are done with the work, they deliver daily reports via email and hold weekly or monthly check-ins via video calls (Zoom, Google Meet, Microsoft Teams, etc.).

In-House Bookkeeping: Pros and Cons

Most businesses prefer in-house bookkeeping because they need to keep their financial data in-house. Apart from the limited expertise, success in in-house bookkeeping depends on the costs and risks they are willing to bear.

PROs:

Role Clarity: Since in-house bookkeepers are your permanent employees, they understand the business, its goals, culture, and their roles in achieving these. It’s easy to assign them specific tasks and resolve financial queries.

Control Over Processes: In-house bookkeeping gives businesses full control of their financial data and procedures. There is greater certainty in data handling processes and compliance with applicable standards.

CONs

Cost of hiring and retaining staff: Maintaining an in-house bookkeeping team is more expensive, which is why most businesses rely on one or two bookkeeping staff.

These costs include:

• Salaries: The average salary for a full-time bookkeeper in the U.S. is around $61,000.
• Benefits and Overhead: You are also responsible for their health insurance, retirement contributions, paid leave, and other employee benefits, which can cost up to 20-30% of their base salary.
• Recruitment Expenses: The shortage of accounting and bookkeeping talent in the U.S. today has made the recruitment cycle slower and more expensive. Job posting, recruiter fees, and employee onboarding can take another $5,000-$9,000 per hire.

Training, Turnover, and Hidden Risks: The way you manage the following in-house bookkeeping challenges can determine the success or failure of your bookkeeping model. Most businesses get them wrong.

• Training: You’ll have to train your team, especially new hires, to follow your unique operating procedures. Your in-house bookkeepers might even need training on financial reporting standards. Depending on the duration of the training, this will divert the time and money that could have been spent on tasks that directly generate revenue.

• Turnover: 25% of bookkeepers resign their roles annually due to burnout, better working conditions, and other reasons. If this happens in your team, team productivity will be negatively affected, and more resources will be spent replacing them.

• Hidden Risks: In-house teams are generally smaller in size and less qualified than outsourced bookkeepers, who are trained to handle complex financial reporting tasks.

This limited expertise could result in errors that will not only affect the company’s quality of financial decisions but also attract regulatory penalties.

Outsourced Bookkeeping: Flexibility and ROI

Most businesses switch to outsourced bookkeeping to enjoy a flexible and agile bookkeeping system that gives more value for less through:

• Cost Efficiency and Scalability

Outsourced bookkeeping costs less than in-house bookkeeping in all ramifications (as we’ll see in the next section). It is also the easiest route to access specialized bookkeeping experts who have served similar businesses for years, accumulating experience that can get your business out of difficult financial reporting situations.

Moreover, there is no fixed cost in outsourced bookkeeping. You only pay for the services you need. This singular advantage saves businesses from unnecessary financial commitment and gives them the confidence to scale their operations, knowing that scaling down (if growth flattens) won’t cost an arm and a leg

• Faster Onboarding and Reduced Overhead

Outsourced bookkeeping teams are already trained, certified, and equipped with the latest bookkeeping tools. Providers, like Finsmart Accounting, have standardized onboarding processes that help their account managers to start meeting your needs in seven days.

Since work is done virtually, outsourced bookkeeping teams thrive in up-to-date knowledge of bookkeeping tools like QuickBooks, Xero, and FreshBooks, which save time and effort.

This makes it easy for them to settle into your financial reporting systems and processes quickly. Providers like Finsmart Accounting can even help to set up your tech stack and workflows to keep your processes modern and efficient.

• Remote Access and Business Continuity

Outsourced bookkeeping relies on cloud technology for access to information, visibility into financial data (and procedures), and centralized collaboration.

This makes your financial data accessible to your outsourced bookkeeping team at any time. Using secure backup systems, outsourced bookkeeping services are more resilient, ensuring continuity in client service even in the face of unforeseen disruptions.

Using secure and intuitive client portals, they make financial data available to accounting leads, CFOs, and business owners who need to monitor financial performance and make timely decisions.

Cost Comparison: In-House vs. Outsourced

• Side-by-side monthly/annual breakdown

Here’s how the cost of using one outsourced bookkeeper compares with having an in-house bookkeeping staff in a growing business:

Cost Category	In-House Bookkeeping	Outsourced Bookkeeping
Monthly Cost	$4,800 a month	$2600 a month
Annual Cost	$68,000 a year	$31,000 a year
Employee Benefits	$10,000-$24,000 a year(for health insurance, retirement, etc.)	None
Software licenses	Around $2000 monthly	Usually comes with the outsourced bookkeeping subscription cost

Value Beyond the Hourly Rate

In-House Bookkeeping:

• Control and Customization: In-house bookkeepers are deeply rooted in your process, work culture, and financial reporting needs.

Plus, they are always there for your long-term and ad hoc needs, so you can use them as often and as sparingly as the volume and urgency of your reporting needs. They are also available for immediate collaboration.

• Long-Term Investment: In-house bookkeeping helps you build a team for the future. This is best when businesses need immediate responses to urgent needs.

• Risks: The bookkeeping talent shortage in the U.S. and the Western Market makes building an in-house team riskier now than ever before.

With exhaustion, competition for bookkeepers, and other similar factors on the increase, 25% of bookkeepers quit their jobs every year.

Outsourced Bookkeeping:

• Expertise and Scalability: Outsourcing provides a wide pool of bookkeeping professionals with the knowledge to meet whatever transaction volume and financial reporting demands you might have.

Their contracts are flexible and scalable, so you wouldn’t have to worry about overhiring or disrupting your budget.

Time Savings: Outsourced bookkeeping frees up internal resources, allowing them to focus on core tasks and strategy that drives growth.

Technology and Continuity: Outsourced bookkeeping providers use advanced accounting technology (such as AI and robotic process automation) to automate manual tasks and coordinate tasks to ensure workflow continuity.

Deciding What’s Right for Your Business

The right fit for your business will depend on your growth stage, long-term goals, and the available internal resources.

When in-house bookkeeping makes sense

In-house bookkeeping is a good fit when:

• You need your bookkeeper to be physically present: An outsourced bookkeeper cannot handle cross-department work, paper-based processes, and cash handling tasks. An in-house, physically present bookkeeper is more fitting.
• Complex Internal Processes: Unique internal financial workflows and proprietary systems that require deep customization and direct oversight are another reason businesses prefer In-house staff.
• High Transaction Volume with Predictable Demand: Consistent transaction volume can justify the high cost of a full-time team. At least, you wouldn’t have to worry about termination and severance fees anytime soon.

When outsourcing creates more value

Outsourcing is more valuable when:

• You are Growing Quickly:  Adding more hands to manage increased transaction volume and save your internal team from being overworked is easier with outsourced bookkeeping vs in-house bookkeeping.

It allows you to add or reduce bookkeeping experts as quickly as your workload changes.

• You want to Cut Costs without Sacrificing Quality and Control: In-house bookkeeping can be twice as expensive as outsourced bookkeeping, and with the right systems, outsourcing guarantees equal, if not more, control and service quality.

• You’re struggling to find or retain qualified in-house talent: The shortage of bookkeeping talent has made hiring bookkeepers more difficult than it used to be. If you’re not finding suitable in-house talent, outsourcing is an excellent alternative.

• You want access to specialized expertise: In-house bookkeeping teams are usually limited in their expertise and exposure to accounting technology. Outsourcing your bookkeeping lets you access bookkeeping teams that have served similar businesses for years and understand the available software solutions.

Signs You’re Ready to Make the Switch

When you start noticing the following signs, know that the business has outgrown in-house or DIY bookkeeping.

• Bookkeeping tasks are falling behind: Your in-house team can no longer balance the pursuit of growth initiatives and up-to-date bookkeeping like they used to. You want to be able to focus more resources on core business goals.

• Your in-house bookkeepers are overwhelmed: Business is growing more rapidly than your small in-house bookkeeping team can handle without sacrificing accuracy and work-life balance.

• You’re experiencing errors, compliance issues, or messy reports: Business growth requires specialized bookkeeping expertise. If this is not available in your in-house team, errors and compliance violations will be common.

• Your Current Team Lacks the Skills to Automate Your Workflows: Most internal bookkeeping teams are not up-to-date with accounting technology, but outsourced bookkeeping relies on technology. Providers are more agile, constantly learning new and emerging technologies to automate manual tasks and enhance collaboration.

How to Evaluate a Bookkeeping Partner

Key Questions to Ask

Asking the right questions is the first step to finding the right outsourced bookkeeping partner for your financial reporting needs.

Here are some questions to improve your chances of success in bookkeeping outsourcing

• What is your experience with businesses in my industry? Every industry has unique compliance requirements. This question will help you get a partner who truly understands you and your specific financial reporting needs.

• How do you ensure data security and compliance? This will give you the confidence you need to share sensitive financial data with your bookkeeper.

For example, Finsmart Accounting uses encryption technology to protect files and communication, has a strict access control system, and complies with global security certifications (such as ISO 27001, SOC 2, GDPR, etc.). This includes a non-disclosure agreement (NDA) that compels the confidentiality of financial information.

• What is your engagement model? This tells you whether you’ll have a dedicated account manager or a rotating team. Finsmart Accounting provides both, but we encourage our clients to use the dedicated account manager model for consistency and maximum availability.
• What services are included in your pricing? This question addresses potential hidden fees and lets you understand the value and attention level to expect at any price level.

• How do you handle errors or disputes? Mistakes or missteps are a natural part of any human-related task. An effective dispute handling system will ensure issues are resolved on time.

Technology and Process Fit

A good technology and process fit ensures your bookkeeping partner’s technology and workflows align with your internal operations:

• Software Compatibility: Confirm that an outsourced bookkeeping service provider’s software solutions are compatible with your existing systems (accounting, AP/AR, payroll, and any other software). This is another place where Finsmart’s proprietary Accounting Seat mode is most helpful.

It gives you a dedicated bookkeeping team that will work in the software, systems, and processes already in place in your firm, minimizing disruptions.

• Reporting Capabilities: What reports does the bookkeeping outsourcing company provide, how often do they deliver them, and how relevant are they to the business? Customized and frequent reporting improves the quality of your decisions.

• Communication Workflows: This is where you establish the suitable communication channels and frequency. It should include a system of regular check-ins and escalation paths for urgent issues.

“We have regular meetings with them, and my internal staff enjoys their efficiency and productivity.”

—Elizabeth Bergen, owner of Foray Business Group

Trial Periods and Onboarding Support

• Trial Periods

Set up a test project for your outsourced bookkeeping team using a fake customer’s financial information.

This project will help you to measure the bookkeeper’s response time, expertise, and the effectiveness of the communication.

Onboarding Support

On average, onboarding in outsourced bookkeeping takes as much as two weeks. With Finsmart Accounting, this takes just seven (7) days.

Using Finsmart’s five-step Onboarding procedure as an example, here’s how onboarding an outsourced bookkeeping team should look:

1. Your Bookkeeping Talent is Assigned: Finsmart assigns you a dedicated bookkeeper.
2. Talent Learns Your SOPs: You train the assigned talent or team on your best practices to familiarize them with your SOPs.
3. Test Their Skills and Expertise: You give your assigned bookkeeper a mock project to measure their skills and efficiency.
4. Test Project Review: Finsmart works with you to review the work. If you’re satisfied, engagement can proceed.
5. Your Dedicated Team Goes LIVE: The assigned team is now yours. Manage them as your in-house team while Finsmart Accounting handles their payroll and other HR responsibilities.

How Rapid Circle Made the Smart Move for Sustainable Growth

Rapid Circle is a provider of Microsoft Cloud Solutions. Their ability to develop custom cloud solutions that fit diverse client needs enabled them to grow quickly.

But this growth also resulted in an inability to keep pace with financial reporting requirements, which threatened the company’s reputation, stability, and regulatory compliance.

Finsmart Accounting turned things around for the firm by:

• Developing a customized financial reporting plan for the company.
• Correcting general ledger errors by adjusting book balances.
• Assembling experts to reconcile Rapid Circle’s balance sheet and verify its assets and liabilities.
• Assessing PNL impact and cleaning up financial statements for accuracy.
• Providing ongoing financial maintenance through regular documentation and reconciliation.

“Initially, we outsourced because we were small, but even as we grew, their services were so reliable that we never felt the need to hire internally. Payroll on time, 100% accuracy, accounting with no faults, never missed a date – it’s always been nice with them. Right from understanding international principles to handling complex structures – it’s always a pleasure working with Finsmart.”

Riya Chandan, Financial Analyst at Rapid Circle

Take the first step toward outsourcing your bookkeeping today. Click here to book a Free Consultation session with our outsourced bookkeeping expert.