Business Accounting & Payroll

Bookkeeping and Taxes: When Is It Time to Try Outsourced Accounting?

Hood & Associates CPAs, PC


February 8, 2024

For most small business owners, wearing multiple hats isn’t a choice; it’s a necessity. Handling your own bookkeeping and taxes might initially make sense. After all, with a manageable number of transactions, straightforward tax returns, and tight budgets, the do-it-yourself (DIY) route is both practical and economical.

However, as your business grows and flourishes, the complexity of managing your accounting processes inevitably increases. Most successful small business owners eventually reach a pivotal moment when the DIY method no longer serves its purpose, transforming from a cost-saving tactic to a potential liability. So, how do you know when you’ve reached the point where the cost of outsourced accounting services outweighs the cost?

The Turning Point: Recognizing When to Seek Outsourced Accounting Help

As with any outsourcing decision, the right time to start delegating your small business accounting tasks to a professional depends on your circumstances, experience managing accounting operations, and budget. Here are some clear signs that you’ve grown beyond handling daily accounting tasks and tax filing in-house.

Sign #1. Time Constraints

As your business expands, so do your responsibilities. The hours spent on bookkeeping and taxes begin to encroach upon time that could be better invested in strategic planning, marketing, business development, and other core business activities.

If you find yourself buried under receipts, accounts receivable aging reports, and tax forms instead of focusing on growth, it’s a clear sign that it’s time to delegate these tasks.

Sign #2. Increasing Complexity

Success comes with complexity. More transactions, diverse revenue streams, and new tax regulations can turn what was once straightforward into a labyrinth of financial intricacies.

If you’re spending excessive time trying to navigate these complexities, or worse, avoiding them altogether, it’s time to consider professional help.

Sign #3. Costly Mistakes

The true cost of a mistake in bookkeeping or taxes can be staggering. From missed deductions to penalties for late or inaccurate filings, the financial repercussions can significantly outweigh the cost of hiring a professional. If you’re unsure about your tax obligations or the accuracy of your financial records, it’s a strong indication that your accounting system could benefit from some professional oversight.

Sign #4. Growth and Scalability

Planning for the future is essential for any thriving business. A professional accountant can provide bookkeeping services, advisory services, cash flow management, key performance indicators, accounts payable support, and other services to support your business’s growth and scalability.

These services can give you better insight into your numbers and help you make more informed business decisions.

If your business vision extends beyond what you can manage alone, it’s time to build a team that includes financial experts.

The Benefits of Outsourced Accounting Services

Outsourced accounting and tax services offer numerous advantages beyond saving you time and headaches. Let’s look at some of those benefits.

Cost savings

According to Indeed, the average base salary for a Controller in the United States is $110,330.

Outsourced accounting services help you avoid the expense of hiring and training an internal accounting department and paying for employee benefits.

Outsourcing also allows you to pay only for the services you need when you need them. If you just need some help with your monthly bookkeeping, outsourced accounting solutions can be an extremely affordable way to meet your business needs. Likewise, if you need controller services or CFO services, fractional accounting professionals can provide the industry expertise you need without hiring a full-time, dedicated team.

Decreased fraud risk

One of the foundational internal controls—the mechanisms, rules, and processes implemented to prevent fraud and ensure the integrity of financial reporting—is the segregation of duties. Segregation of duties means no one person has sole control over an entire transaction.

For example, one employee makes vendor payments, but another reconciles the bank statements. This segregation of duties helps ensure the person in charge of vendor payments doesn’t have an opportunity to commit fraud without being detected.

In small businesses, segregating roles in the accounting function is challenging—there simply aren’t enough employees to have multiple levels of checks and balances.

Outsourced accounting services can help alleviate this concern by providing another layer to your business accounting functions.

Access to the latest technology solutions

Are you managing your bookkeeping on desktop accounting software or, worse yet, a spreadsheet? If so, your financial reporting could benefit from modern technology.

The modern accounting firm uses a cloud-based accounting system for their clients’ bookkeeping and accounting needs. This allows the business owner and the outsourced accounting team to collaborate in real-time.

If you want to upgrade your accounting systems, your outsourced accounting team can also help with accounting software selection. They likely have industry specialization and experience with several different accounting solutions, such as QuickBooks Online, Xero, FreshBooks, and other tools and applications. They can recommend solutions for your budget, current needs, and business goals.

Avoid turnover and time-off issues

With an in-house accounting team, people take vacations and sick days. Plus, there’s always the risk that they will retire or accept another job, and you’ll be left scrambling to backfill their position.

With outsourced accounting, turnover and time off aren’t a problem. If the person assigned to handle your accounting is out, another team member can step in to handle your accounting or prepare your tax return.

Business intelligence

You may not realize it, but your company’s finance and accounting records are a treasure trove of data.

Some questions you may be able to dig out of your data include:

  • Which product generates the highest margins?
  • Which clients cost you more in terms of customer service than they spend with your company?
  • Are you turning over your accounts receivable as fast as your competitors?
  • How many days of cash flow do you have on hand on any given day?
  • How would extending your accounts payable turnover from 30 to 45 days impact cash flow and vendor relationships?
  • Which team members are essential, and which are a drain on resources?
  • How effective is your budgeting process?

This is where business intelligence comes in handy. Having professional support to make data-driven decisions can make a big difference in running your business efficiently and reaching your goals.

More reliable financial reporting

DIY accounting might work well for a small business that doesn’t need financial statements or business loans. However, once you have additional capital requirements, you may need to provide financial statements and tax returns to potential investors, lenders, or small business grant providers. If your financial statements are outdated or inaccurate, trying to DIY your accounting processes may literally cost you money.

Outsourced accounting and tax services enhance your company’s credibility. When you can present an accurate and up-to-date balance sheet, profit and loss statement, and cash flow statement when needed, this can be a competitive advantage that sets your company apart.

Moreover, with a trusted advisor handling your finances, you can approach investors and stakeholders with confidence, backed by accurate and professionally managed financial records.

What to Look for in an Outsourced Accounting Firm

Let’s be honest; there are thousands of bookkeepers, accountants, and tax advisors out there. So how do you know which is right for your business?

Consider the following factors:

  • They’re qualified and have the right certifications. It’s hard to believe, but just about anyone can start a bookkeeping and tax preparation business—no specialized education or experience is required. However, accounting and tax are complex, so it’s smart to work with a Certified Public Accountant (CPA). CPAs have to meet rigorous education, experience, exam requirements, and continuing education requirements every year. You can have confidence that you’re working with a top-notch professional.
  • They have expertise in your industry. No matter what kind of business you’re in, special regulatory requirements, tax rules, market pressures and opportunities impact your company. Working with outsourced accountants who understand your industry can make all the difference in the quality of services and customized management reporting you receive.
  • They’re proactive about communication. Some accountants only talk to their clients at tax time, which can be a problem because the decisions you make throughout the year can greatly impact your taxes. Look for an accountant available year-round to answer questions, inform you about new rules or regulations that impact your business, and help with tax planning.
Elevate Your Business with Outsourced Accounting

Recognizing when to transition from DIY bookkeeping and taxes to outsourced accounting is a critical step in your business’s evolution. If you’re experiencing any of the signs mentioned above or want to experience any of the benefits, it’s time to consider how a professional accountant can add value to your business.

Schedule a free consultation today to explore how working with a proactive accountant can alleviate the burden of financial management and unlock new opportunities for growth and efficiency. Don’t let the complexities of bookkeeping, accounting processes, and taxes hold your business back. Embrace the expertise that can propel your business forward.

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