When Is the Right Time to Switch to Outsourced Bookkeeping?

Bookkeeping work is likely not your most important service. Even if it is, you’ll need more hands to handle the workload as your firm grows, compliance requirements evolve, and operational costs increase.

In this article, we examine the key signals that indicate your need to switch to an outsourced bookkeeping service to build the firm (and business) you’ll be proud of.

Understanding Outsourced Bookkeeping

• What is outsourced bookkeeping?

Outsourced bookkeeping is when you hire an external bookkeeper to complete your client’s bookkeeping tasks (such as recording transactions, reconciling accounts, and preparing financial statements.

• How does it differ from in-house bookkeeping?

With In-house Bookkeeping, your bookkeeping projects are managed by internal staff over whom you have total control. This takes the traditional route of hiring and onboarding bookkeeping professionals to who you owe a monthly salary and employee benefits.

In Outsourced Bookkeeping, you delegate your bookkeeping projects to external bookkeeping experts who understand your industry’s financial reporting requirements as much as your in-house team, if not better. The cost is subscription-based, so you won’t have to bother with the lengthy hiring process, which reduces costs and allows your full-time team to focus on the work that matters most.

• Online Bookkeeping Service vs Traditional Methods

Online Bookkeeping Services: This uses cloud-based platforms (like QuickBooks and Xero) to document financial transactions and ensure accurate reporting. This system centralizes data (for easy, remote access and collaboration), automates manual tasks, and enables integration with other business-critical tools.

Traditional Methods: This uses manual processes (like desktop software) to manage the bookkeeping process. It deals more with physical documents, onsite work, and in-person collaboration. As you can imagine, this is labor-intensive and prone to error.

Common Signs It’s Time to Switch to Outsourced Bookkeeping

Once you notice any of these signs, know that handling your bookkeeping projects in-house might become a bottleneck soon if it isn’t already.

• Your firm is growing, and bookkeeping projects are falling behind

Your client’s bookkeeping needs increase when their transaction volume grows. Unless you’re hiring full-time employees frequently enough, your in-house team will struggle to keep up with deadlines and deliverables, which results in delays in reconciling your clients’ accounts and delivering their financial statements.

At this point, you need external bookkeeping talents to take some workload off your internal team.

• High employee turnover in your firm

Losing your bookkeeper so frequently can get your bookkeeping projects stuck, keeping your clients from accessing the insights they need to grow their businesses. Again, the traditional recruitment cycle can be long and time-consuming.

Outsourced bookkeeping is a quick way to bring in expert bookkeeping professionals, and because you wouldn’t need to train them on how to perform bookkeeping tasks, they will be ready to start completing their assigned tasks immediately.

“When we’ve had to bring on additional projects, Finsmart assigned additional staff to help us during that process.”

Elizabeth Bergen, Owner of Foray Business Group

• Struggling to meet compliance and deadlines

If your team is spending too much time on bookkeeping tasks for any reason (overcapacity, unresponsive clients, workflow bottlenecks, etc.), bringing in third-party bookkeepers can help free up time, provide valuable insights, and reduce mental load.

This will enable everyone to focus on the most efficient ways to move their projects forward and complete their tasks in time for regulatory deadlines.

• Limited in-house expertise or bandwidth

Your in-house team’s bookkeeping expertise is limited to the certifications and experience your employees have in serving businesses in your industry.

Since bookkeeping might be only one of the accounting services your firm provides, you may not have enough qualified staff to deliver services that are up-to-date with evolving financial reporting standards.

Whatever the case, if your in-house bookkeepers fall short of the expertise required to manage complex bookkeeping projects, it just makes sense to outsource this part of your client’s work. It enables your in-house staff to focus on areas where they make their highest contribution.

• Spending too much time on non-core tasks

Another sign that you need to outsource your bookkeeping is when it is your firm’s main service offering. If, and especially when, you are offering bookkeeping as a complementary service, you definitely should outsource it.

It allows your internal team to focus on the tasks that bring you the most profits or a better sense of meaning.

In that way, you get people who are skilled and passionate about bookkeeping to complete your client work, giving your clients accurate data to run their businesses.

• Difficulty scaling operations during peak seasons

If a surge in workload gets your in-house team disorganized, tense, and burnt out, you need an outsourced team to augment and enable you to serve your existing clients confidently.

Outsourced bookkeeping gives you a steady stream of qualified and available bookkeeping professionals for hire.

• Concerns over accuracy and reporting

If you can’t trust your in-house team to give your clients financial reports that will hold up under scrutiny (especially when there’s a pattern of inaccurate work and reworks), you should follow the data.

Use qualified external bookkeepers to ensure accurate transaction categorization and financial records that enhance decision-making.

In-House vs Outsourced Bookkeeping: A Quick Comparison

• Cost breakdown

In-House Bookkeeping

Salary: Full-time bookkeeper salary in the US is between $40,000–$70,000 a year.

That is besides employee benefits like healthcare and retirement, which are between $8,000–$21,000.

Software: GL software (QuickBooks or Xero, etc.) costs $200–$1,200 a year.

Training: Ongoing software and compliance training costs $500–$2,000 a year per employee.

That is why this system is much more expensive to maintain.

Outsourced Bookkeeping:

Pricing: Flat fee typically costs $2600 a month. Hourly rates are around $20 a month.

Software: Software costs are usually included in the subscription fee, where necessary.

Training: Outsourced professionals are knowledgeable in relevant bookkeeping requirements. Only training on internal workflows and operating procedures is needed.

• Scalability and flexibility

In-House Bookkeeping:

Scalability: In-house bookkeeping teams are limited by the workload capacity of their internal bookkeepers. Adding more hands to handle the increased workload requires spending your time and money to hire more staff.

Flexibility: It is difficult to increase your team’s workload once everyone is at capacity, making it hard to adjust to fluctuating workloads.

Outsourced Bookkeeping

Scalability: Adding more professionals to manage seasonal workloads is as simple as asking your outsourcing partner for it. They can easily assign more talent will be assigned to relieve your internal team at a monthly subscription fee.

Flexibility: No long-term contract is required, so you can start and end outsourcing partnerships on demand.

• Expertise and access to technology

In-House Bookkeeping

Expertise: Your firm’s expertise is restricted to the bookkeeping professionals you can afford. Depending on your operational budget, that may be more of an entry-level role. In that case, it reduces the expertise available to your clients.

There is also the technology issue. If your in-house bookkeeping team is not up-to-date with the latest tech solutions, they will not be able to implement a suitable tool to improve your workflows.

Outsourced Bookkeeping

Expertise: You have access to certified professionals who are proficient in relevant financial reporting standards, and you can easily switch between providers if one is not meeting your expectations.

Outsourcing professionals are trained in the latest bookkeeping technology, which enables them to deliver quality bookkeeping services.

• Risk management and security

In-House Bookkeeping

Direct control over your workflows should mean fewer chances of having your data intercepted by unauthorized persons, but that is not always the case.

Without the right data security measures, your client’s information will be vulnerable to all security risks.

Outsourced Bookkeeping:

Even though outsourcing allows authorized third parties access to your client’s data, you can prevent all security threats by using data encryption and other security measures.

Moreover, outsourcing companies combine the latest technology with specialized offshoring centers to ensure the security of your client’s information and the handling of your client’s data according to relevant regulatory frameworks.

Benefits of Switching to Outsourced Bookkeeping

• Access to professional, experienced bookkeepers

The average outsourced bookkeeping professional has gained a wealth of experience from serving various businesses similar to yours.

This gives them the capacity to serve your clients in ways your in-house team may not be able to.

If you’re outsourcing to countries like India, you can be sure of getting bookkeeping talent that has been pre-vetted for expertise in industry-specific bookkeeping standards and professionalism.

• Improved accuracy and compliance

Outsourced bookkeepers know the right frameworks to apply and tools to use to automate tasks and maintain the integrity of financial records and statements.

Thanks to automation, they can complete tasks more quickly, increasing their ability to be thorough with quality control.

Besides, reputable outsourcing firms have a standard system of oversight that keeps their results more accurate and compliant with applicable regulations.

• Reduced operational overhead

Outsourcing saves you the cost of hiring, training, and paying in-house bookkeepers. Instead, you get to pay an hourly or monthly subscription fee for just the services you need.

You wouldn’t have to worry about employee benefits and local labor laws (especially if you’re using an outsourcing firm).

• Better focus on business growth

Outsourcing your bookkeeping work also frees up your time to focus on tasks (such as client relationships and marketing) that grow your firm.

Your outsourcing partner becomes a branch of your firm, to which you can always delegate your bookkeeping projects.

This gives you the confidence to add new clients, knowing you have enough capacity to meet their needs.

• Seamless reporting and month-end closures

Outsourced bookkeeping makes it easier to close your clients’ books confidently to help your clients make sound decisions. They do this by ensuring your books are properly kept throughout the month.

Since they are fluent in relevant bookkeeping standards and do not require training in financial reporting, they can hit the ground running immediately, increasing your chances of meeting your month-end targets.

When Exactly Should You Make the Switch?

• Before Tax Season or a Major Audit

Your clients not only need accurate financial records, but also need them done (and relevant statements generated on time for tax and audit compliance.

So, if your in-house bookkeepers do not have what it takes to guarantee these, partner with an outsourced bookkeeping firm to organize and make your client’s financial information tax and audit-ready.

Outsourced bookkeepers rely on their CPA-level training and access to the latest technology to record and categorize transactions and prepare financial statements in line with federal and state tax regulations and auditing standards like the GAAP and IFRS.

• After experiencing consistent bookkeeping errors

Errors, especially when consistently committed, can be a sign that your in-house team does not have the expertise to deliver accurate bookkeeping services consistently.

Outsourcing will make your bookkeeping projects more accurate by using AI and robotic process automation (RPA) to streamline the process, automate manual tasks, and minimize errors.

Their wealth of experience enables them to provide effective quality control.

• When expanding to new markets or regions

Entering into new industries or regions introduces new layers of complexities (that your in-house team may not understand) to your bookkeeping processes.

Industries like hospitality also rely on accrual accounting in addition to higher transaction volumes, making bookkeeping even more mentally demanding.

Outsourced bookkeeping provides you with bookkeeping experts who can use their expertise in global financial standards, multi-currency transactions, or multi-industry bookkeeping to keep your clients compliant.

Whatever the industry or region you or your client is expanding to, there are qualified outsourced bookkeepers who can help your firm navigate the complexity of financial reporting.

• When preparing for funding or mergers

Accurate financial records are crucial when discussing a merger or seeking funding. If your in-house team can’t deliver data, you may sell the business short or exaggerate its financial value, leading to accounting fraud and regulatory penalties.

Outsourced bookkeepers are trained to deliver unbiased and compliant financial analysis that supports business evaluation, funding, and mergers.

• Post rapid revenue growth or organizational change

When businesses grow, the volume of bookkeeping tasks increases, as does the frequency of financial reporting and the chances of errors.

Similarly, organizational change can necessitate changes in bookkeeping workflows, procedures, and software.

In any case, experienced outsourced bookkeepers can bring their industry experience to bear to help you maintain accurate records and figure things out more quickly and efficiently.

Final Thoughts: Evaluate Your Bookkeeping Resources Regularly to Make the Switch Before Things Go Wrong

Here’s how you know it’s time to outsource your bookkeeping:

• Your bookkeeping work exceeds the available capacity.
• You’re failing to meet tax, audit, and other compliance deadlines.
• Your in-house expertise seems deficient (either because of workflow bottlenecks or too many errors).

Forward-thinking firms do not wait for these signs before they take action by examining their workforce and bookkeeping processes to make decisions ahead of time.

If you do this regularly, you’ll spot the problem sooner, and hire and onboard outsourced bookkeeping experts before your clients feel the impact of the strain on your in-house resources.

We encourage you to do the same today, and if you need help understanding your outsourcing opportunities, our outsourced bookkeeping expert is available to speak with you for free.

Click here to Get a Free Consultation Now.