As a small business owner, managing sales tax can be a complex and time-consuming task. However, with the updated integration between Xero and...
Are you a small business owner considering hiring an accountant to help manage your finances? Choosing the right accounting solution for your small business can be tricky with so many options available. Hiring an accountant comes with its own set of advantages and disadvantages that must be weighed carefully against the needs of your company. Comparing the pros and cons of hiring an accountant, taking on in-house staff or handling it yourself, this post examines what is best for your business. We'll also discuss important considerations when making this decision, such as cost effectiveness and time management.
Why should you outsource your accounting?
Outsourcing allows small business owners to delegate certain tasks to outside experts, who can provide high-quality services at competitive prices. While this statement has been repeated since the beginning of time, it still rings true. Most business owners didn't start their business because they were excited about reconciling their accounts and paying bills. They may not even have the experience to make sense of what is in their financials– and that is ok! Focus on what you are great at, hone your craft, do what you love and you are less likely to burn out , which means you are more likely to be in business for years to come. Finding the right outsourced accounting partner means that you will be able to streamline processes, free up resources, and focus on your core competencies, leading to increased productivity and efficiency.
Time is finite and a valuable resource, therefore it's important to make the most of it. Hiring an accountant can be one of the best investment decisions you make to improve the accuracy and efficiency of your financials while also receiving cost savings over hiring an in-house accountant or doing the work yourself. An accurate set of accounts is fundamental for any business; experienced accounting professionals can provide advice on financial strategies to help a business reach its goals, as well as provide higher levels of accuracy in bookkeeping processes that may be too complex for individuals. Furthermore, an accountant can create savings by leveraging their knowledge in tax laws to minimize tax liabilities and identify potential claims or refunds that could benefit the company. All-in-all, hiring an accounting professional is a great way for businesses to focus on core operations without having to worry about their finances.
Outsourcing vs Hiring an In-House Accountant
Outsourcing your accounting to an accounting firm can be more cost-effective than hiring an in-house bookkeeper or accountant in several ways.
Reduced Overhead: No need to pay for things like payroll taxes, health insurance, retirement programs, additional office space, furniture, computers, software licenses, vacations, and everything else that comes with hiring an in-house accountant or bookkeeper.
However, when you are choosing an outsourced accounting provider it is important to understand how they price their services. Some will charge by the hour and some charge a flat fee, but unless this is clear, it is impossible to make an apples-to-apples comparison to determine what service is right for you.
Part of our process is to fully understand what the scope of work is, document that scope in a written proposal, and provide flat rate pricing, which we stick to. No one likes hidden fees, including us, we are careful to detail what the plan of action is before engaging with a new client, so there are no surprise costs later.
Wider Breadth of Knowledge: When you outsource to an accounting firm, you will get a team of experts with a range of skills, meaning that the business has access to a broader range of expertise and services than they would with a single in-house bookkeeper or accountant.
No Training Needed: Not only do you not have to train our team, we document and improve upon your processes using the knowledge and insights we have gained working in your industry. The knowledge is documented in Process Playbooks, which we readily share and constantly update. This means that our documented knowledge grows the longer we work together, and if your dedicated accountant is on vacation, the changing of the guards is imperceptible and flawless.
Overall, outsourcing accounting to an accounting firm can help small businesses save on overhead costs, gain access to specialized expertise, and streamline financial operations, making it a cost-effective solution for small businesses looking to grow.
Outsourcing vs DIY Accounting
Outsourcing your accounting to an accounting firm can be more cost-effective than managing the bookkeeping yourself in several ways.
Win Back Time: Outsourcing frees up valuable time for small business owners, allowing them to focus on core business activities and revenue-generating tasks, instead of spending time on bookkeeping. This time can be used to pursue growth opportunities, increase sales, and improve customer service.
Increased Efficiency: Accounting firms have specialized software and systems that allow them to complete tasks more efficiently and accurately, reducing the risk of costly errors. This can save businesses time and money by minimizing the need for costly rework and corrections.
Expert Guidance: Accounting firms can provide businesses with valuable insights into financial performance and industry benchmarks, enabling them to make better-informed decisions about their finances.
Overall, outsourcing accounting to an accounting firm can help small businesses save money, increase efficiency, and make better use of their time and resources.
Evaluating Your Business Needs for an Accountant
When evaluating your business needs for an accountant, it is important to consider what services you need and which type of accountant firm can provide them. You may be looking for someone who can do your bookkeeping, prepare payroll, manage sales tax compliance, or prepare income tax returns. Depending on the size of your business, you may need a Certified PublicAccountant (CPA) with a specific tax specialization in order to ensure your work is done in compliance with your industry. However, there are also more cost-effective options such as hiring a part-time bookkeeper or an accounting firm to manage less complex tasks. It's important to explore all available pathways so that you can make sure you get an accountant who meets both your financial capability and operational requirements.
What to consider when outsourcing your accounting
1. Determine Your Needs
Before searching for an outsourced accounting firm, you need to determine your specific accounting needs. Identify the tasks you want to outsource, such as bookkeeping, payroll, tax filing, or financial reporting.
2. Do Your Research
Research potential accounting firms that provide the services you require. Look for firms that have experience working with businesses similar to yours and have a track record of delivering quality services.
3. Evaluate Tech
Evaluate the technology and software used by the accounting firm. Check if they have the latest accounting software, which can improve efficiency and accuracy in your accounting processes.
4. Review Pricing
Consider the pricing structure of the accounting firm. Some firms charge hourly rates, while others charge a flat fee. Make sure you understand the pricing structure and that it fits within your budget.
5. Check Communication
Ensure that they have a system in place for clear communication, regular updates, and timely responses to your queries and concerns.
6. Read Reviews
Read reviews and references from previous clients to get an idea of their experience with the accounting firm. Ask for references from the firm and contact them to get a better understanding of their services and how they have helped other businesses.
Common mistakes to avoid when outsourcing accounting services
Outsourcing accounting services can be a great way to help streamline processes and improve business performance. However, it is important to be aware of any common pitfalls that could have an adverse effect on your finances. One mistake to avoid is minimizing the amount of communication between you and the provider. This can lead to misunderstandings and inaccurate reporting. It is also important to carefully review contracts to ensure there are no hidden fees or other terms that could add extra costs for your business. Lastly, trust your gut; if something seems misaligned with what was discussed prior to contracting a service then take the necessary steps to address it in order for everything to run state smoothly.
1. Not Defining Your Needs
Clearly identify the tasks that you want to outsource to avoid misunderstandings and ensure that you get the services and outcomes you need. Better yet, having your needs outlined in a written proposal is the best way to get everyone on the same page.
2. Wrong Fit
There are a lot of accounting firms out there, but it's important to find the right one for you. Research and evaluate potential firms to ensure that they have the necessary expertise, technology, and resources to handle you accounting needs.
3. Poor CommunicatioN
Communication is a two way street, so be sure that you find a team that places a lot of value is great communication and be a part of the communication process. Be sure to establish communication channels and ensure that you receive regular updates and reports from your new accounting team.
4. Focusing Only On Cost
While cost is an important factor, focusing solely on cost can lead to choosing an accounting firm that does not provide the necessary services or does not meet the quality standards required.
5. Not Focusing on Metrics
Business owners need to monitor the performance of the accounting firm and review the reports and statements provided. This helps to detect errors, inaccuracies, or any potential fraud.
6. Siloed Team
Outsourced accounting needs to be integrated with the rest of the business operations to ensure a seamless flow of information and avoid errors or discrepancies.
Strategies for finding an accountant that is the right fit for your business
Finding an accountant that is the right fit for your business can be challenging, but taking the proper steps can simplify the process. It's important to do research and make sure you are aware of all available options. You might even consider setting up a consultation to ask them questions and gain insight into their qualifications. From there, narrow down to the few that make sense for your company, review their credentials and current client list to get an idea of their experience level. Ultimately, choosing an accountant should be based on trust and support needed for your specific company goals. Taking the time to find someone who goes beyond basic financial statements is ultimately worth the effort in the long run.
Ask the Right Questions
Feeling stuck and not sure what to ask when interviewing an accountant for your small business? Here are few ideas to get the conversation started.
- What services do you offer?
- What experience do you have working with businesses like mine?
- How do you ensure accuracy and compliance with accounting regulations?
- Can you provide references from other clients you have worked with?
- What is your fee structure?
- How do you communicate with clients and keep them informed about their financial status?
- What accounting software do you use?
- How do you ensure the security and confidentiality of client information?
- How do you handle tax planning and preparation?
- What is your process for resolving accounting errors or discrepancies?
- How do you stay up-to-date on changes in accounting regulations and tax laws?
- Can you provide financial analysis and advice to help improve my business?
- How do you handle financial reporting and preparing financial statements?
- What is your availability for meetings and consultations?
- How do you work with other professionals, such as lawyers or financial advisors, to support my business needs?
Listen carefully and ask follow up questions in order to get the full picture when speaking with an accountant. It may also be wise to ask the opposite of these questions as well, to uncover more detail you may have not considered.
For example, you may want to ask:
- What services do you not offer? For example, do they not provide sales tax or income tax services?
- How do you handle inaccuracies and non-compliance with accounting regulations? Do they have errors and omissions insurance? Will they comp time spent on correcting errors, if one occurs? How do they handle legal disputes?
- Are there any additional fees we haven't talked about?
- What accounting software do you not use? We will only work with clients who use Xero accounting software. Our migration process is simple and painless, but if you can only use Quickbooks and cannot move away from it, we aren't the right fit.
- When are you not available? For example, we give our team off the last week of each year no matter what. If this is your busiest week of the year, and you absolutely need us to be on call, we are likely not the best fit.
The importance of systems and process
Outsourced accountants are a critical piece in any business's financial health. The benefits of utilizing their expertise and technologies to save time and resources can be great, however without proper communication processes or systems in place it will be difficult to maximize the results from outsourcing these services. Setting up simple yet systematic methods for communication with an outsourced accountant is essential for successful collaboration and preventative measures. This can involve anything from consistent scheduling of phone conferences and email contact, to creating a shared storage platform or data tracking system that allows both parties to access information as needed. Establishing clear pathways of communication with outsourced accounting services will provide assurance that workflows are not interrupted and nothing falls through the cracks during each business cycle.
How We Create Documented Systems and Processes
If you can't tell, we are super nerds when it comes to developing efficient systems and processes for our clients. Please steal our ideas, make them your own, and share how you've improved upon them so we can learn from you.
Get a Lay of the Land: We begin by first understanding what systems and processes are currently in place, and who or what is responsible for each step.
Identify Opportunities: Next we evaluate what steps can be merged, eliminated, or automated with technology. We take the business owner out of each process, as best as we can, so they can focus on what makes their heart smile and improve their bottom line.
Document the Improvements: After that we make sure that each step, including who or what is involved in step, is documented in a clear, easy-to-read Miro board. We make sure to color code and link the heck out of it, so that it's easy to make adjustments to automations or see who we need to bug if a step is missed.
Don't believe us?
Here is an example of a simple bill pay process we follow.
Record the Nuances: Once we know each step that needs to be followed, we use Loom to record ourselves talking through the process, Scribe to take screenshots for each step, and Notion to store the processes in our custom Process Playbooks. We makes sure to include one-off, atypical scenarios in order to fully document edge cases.
Rinse and Repeat: Documentation is like a garden. You must tend it and consistently perform upkeep, in order to reap the rewards. We make sure to not only constantly add more detail, but look for ways to continuously improve each process especially since technology is constantly improving.
How to get the most out of outsourced accounting services
Outsourcing accounting services can be an effective way to save time and resources for small businesses, but it's important to know how to get the most out of these services. One of the keys to success is effective communication. Clear and consistent communication with your outsourced accounting team is critical for ensuring that they have all the information they need to provide accurate and timely financial reports. This includes providing regular updates on business activities, changes in expenses, and other important financial information.
Another way to get the most out of outsourced accounting services is to ensure that your team is using the latest technology and software. This can help streamline the accounting process, increase accuracy, and provide better insights into your financial performance.
Finally, it's important to set clear goals and expectations for your outsourced accounting team. This includes setting deadlines for financial reports, defining the scope of their services, and providing feedback on their performance. By following these steps, small businesses can maximize the benefits of outsourcing accounting services and achieve their financial goals.
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