In the balance of life, accounting is the equilibrium that keeps everything in check” Olivia Martinez
Bookkeeping is the most basic and fundamental step towards a better & stable business. It assists you create a future budget plan and monitors the financial activity of your company. The two most common methods for obtaining bookkeeping services are either outsourcing or in-house bookkeeping. Both options offer similar services with their specific pros and cons. The right choice depends on your budget, business requirements, and long-term goals.
In this blog, you’ll learn whether to outsource bookkeeping for small businesses or stick with an In-house bookkeeper(s). Each with its pros and cons explained.
What Does In-House Bookkeeping Mean?
In-house bookkeeping generally refers to an employee-agency/corporation scenario. It means hiring a dedicated employee with related experience, certifications, and the ability to deal with your business finances. This approach provides direct oversight and control over your financial processes, which can be a significant advantage for some businesses.
Pros of In-house bookkeeping:
- Direct supervision:
If you have an in-house team for your bookkeeping tasks, you can thoroughly monitor their progress throughout the process. It is one of the main advantages of using an in-house bookkeeping service. In fact, you can check the bookkeeping procedure to verify correctness and compliance in real time.
- Personalized systems:
If you have an in-house professional team of bookkeepers, you can implement custom workflows and systems that align with your business requirements. It means that you personalize the whole approach towards a certain business depending on their workflow, average daily transactions, and complexity.
- Immediate access:
An In-house bookkeeping employee/team helps you access all the financial data and reports readily available at your fingertips. It also enables faster decision-making and strategic planning for your business activity and a long-term business plan.
Cons of in-house bookkeeping:
- Higher costs:
Hiring full-time employees can be expensive due to salaries, benefits, and training costs. The cost of bookkeeping services for small businesses can often be lower with outsourcing.
- Limited experience:
A single/individual bookkeeper may lack diverse experience, especially with industry-specific requirements like tax compliance or software expertise. So it eventually becomes a barrier to a smooth process.
- Risk of turnover:
One of the major risk factors regarding In-house bookkeeping is employee turnover. It can potentially affect your financial processes that causes delays and inefficiencies.It also leads to additional recruitment and training costs to fill the vacant position. This is where outsource bookkeeping for small businesses proves to be a stable option.
What Does Outsource Bookkeeping Mean?
Outsourced bookkeeping means that you access bookkeeping services via third-party professionals. It includes hiring a third-party provider to manage your financial records. This approach allows businesses to assign their bookkeeping tasks to professionals at a comparatively reduced cost than an in-house team.
Benefits of outsourcing bookkeeping:
- Cost savings:
One of the biggest reasons why outsourcing bookkeeping services is the preferred choice of most small business owners is because it’s cost-effective. It reduces the requirement of full-time management of bookkeepers and a monthly salary, shifting it to project-based or hourly rates.
Bookkeepers in Canada commonly charge based on hourly rates or specified project rates depending on their complexity.
- Expertise and technology:
Another reason to outsource bookkeeping for your small business is the added benefit of access to modern and updated bookkeeping tools. Professional bookkeeping firms bring specialized knowledge and advanced tools, such as outsource QuickBooks bookkeeping services.
The applicants of outsourced bookkeepers have certified expertise in the subject matter and can deal with the ongoing business complexities effectively.
- Reduced workload:
As a busy small business owner in Canada, if you choose to outsource your bookkeeping service, it saves you a lot of time to focus on things that matter the most. Moreover, it helps you stay informed about your business’s financial activity, payables, dues, etc.
Cons of choosing to outsource bookkeeping for small businesses:
- Less control:
If you choose to outsource bookkeeping, it may eliminate the requirement of full-time employee management. But it can give rise to a sense of loss of control over your financial books. Sometimes it might feel like you’ve handed over your business finances into totally strange hands, however, trust builds up over time with a satisfactory experience.
- Communication barriers:
With the global digitalization of service-based businesses, freelancers/professional service providers usually belong to different countries and time zones. If you outsource your bookkeeping, time zone differences or a lack of immediate access to the outsourced team can slow down decision-making.
- Data security concerns:
If you share your sensitive financial data with an external provider, it requires trust and proper confidentiality agreements. If you don’t have any proper confidentiality or an onboarding agreement, it’s not appropriate to start a project with an agency, outsourcing firm, or individual service provider (freelancers). Therefore, it is always recommended to negotiate your rules and requirements beforehand.
Cost Of Outsource Bookkeeping
Are you concerned about how much does outsource bookkeeping costs?
If you outsource bookkeeping for small businesses, it generally starts from $500 a month. They are much more cost-effective as compared to in-house bookkeeping. It does not include any type of additional benefits, salaries, bonuses, etc.
Cost Of In-house Bookkeeping
On the split side, in-house bookkeeping includes fixed costs such as salaries, benefits, and office space. If you outsource your bookkeeping requirements, you can achieve flexibility and expertise without the long-term financial commitment.
| Feature | Outsourced Bookkeeping | In-House Bookkeeping |
| Cost | Typically more affordable, as you pay only for services needed. Avoids costs like salaries, benefits, and office space. | Reduces administrative burden, allowing you to focus on business growth. |
| Expertise | Access to a team of specialists with diverse industry experience and advanced tools. | Limited to the knowledge and skills of the hired individual or small team. |
| Scalability | Easily scalable; services can be adjusted based on your business’s changing needs. | Limited scalability; adding staff requires more time and resources. |
| Control | Less direct control over day-to-day bookkeeping tasks. Processes are managed externally. | Full control over processes, with immediate access to financial data and reports. |
| Technology | Often integrates advanced software (e.g., QuickBooks) as part of the service package. | Requires additional investment in software, setup, and updates. |
| Data & security | Requires trust in the provider’s security measures for sensitive data | Greater control over data storage and security within the organization. |
| Time & workload | Reduces administrative burden, allowing you to focus on business growth. | Management and oversight of bookkeeping take up significant time and effort. |
Key Takeaways:
There are 2 most common ways to access bookkeeping services in Canada/globally. Either outsourcing or keeping an in-house team of bookkeepers. If you are a small business owner confused between the two options, take time to thoroughly review each option with its detailed pros and cons. Also, understand what your business requirements are at the moment and your long-term business plan.
If you are considering outsourced bookkeeping, it is effective if you have variable business finances each month and do not require a dedicated team to supervise your finances every day.
On the split side, in-house bookkeeping is effective if you have to deal with complex business finances that require special attention and expertise.
In the end, whichever option you choose, it must align with your business strategy to ensure long-term success.