Business owners face a difficult decision regarding who should handle their business numbers.
Different businesses have different bookkeeping needs, and these needs change as businesses grow and adapt to industry changes.
In recent years the advancements of cloud technology have made the process of outsourcing your businesses accounts much more achievable and economical for many business owners. It’s now very possible to outsource the entire financial function of your business using cloud software.
However, many business owners are reluctant to embrace this technology and prefer the comfort of an in-house employee.
There’s Pros & Cons to both approaches, so let’s take a look at them.
In-House Employee
Employing an in-house “bookkeeper” or “accounts manager” is a very common approach taken by many business owners. They feel comfortable knowing that they have someone internal to their business that is in control of their numbers.
Skill Set
Unfortunately, a lot of these employees lack the appropriate skills and qualifications required to undertake this work accurately. There’s some that do and if you can find them they can be a great asset to your business. But there’s also a lot that don’t and that can have serious ramifications for your business.
If your numbers aren’t accurate then it makes it very difficult to make timely, informed decisions in relation to your business. It also makes it very difficult for your other advisors (accountants, CFO’s, business coach, etc) to provide you with the advice you need.
We come across a lot of business who will combine the bookkeeping function of their business into a general administration role, or perhaps a practice manager or even a receptionist. There’s positives and negatives to this approach. If they have the ability, then this is a great way to get your books done whilst also utilising that resource by having them undertake other functions within the business.
If they don’t have the skills to complete this function then not only are you likely to find the quality of your financial information deteriorates rapidly, it’s also going to detract them from their core role or function within the business.
Availability, Responsiveness & Continuity
Often these roles are offered on a part-time basis e.g. 2-3 days per weeks. That’s a great way to get the job done without incurring the cost of a full-time employee’s wage. The downside of this arrangement is if you need something done on the 2-3 days per week that employee isn’t working.
Employees don’t typically stay in the one business forever. The average employee tenure period is now just over three (3) years. That means every three years you need to find a new employee & train them to provide you businesses with these essential services.
What About Cost?
Whilst the cost per hour of employing someone is likely to be cheaper than outsourcing, it’s important to remember that employees cost you a lot more than just their dollar per hour rate – superannuation, work cover, payroll tax, sick leave, annual leave, long service leave, staff amenities and the facility you need to maintain to have them – just to name a few!
Outsourcing
Outsourcing the financial functions of your business can be a daunting prospect for many business owners, especially if they’ve employed in the past and they’re used to and comfortable with the face-to- face, human interaction.
Skill Set
Thanks to technology and modern cloud software it’s now more efficient and economical to outsource these functions than ever before.
When it comes to getting your books done efficiently and accurately there’s now a host of different technology available to both bookkeepers and employees. Accounting systems like Xero and document reading tools like Receipt Bank are able to take out a lot of the manual processing. A good outsourced bookkeeper should be fully aware of all the technology available to them and the best ways to utilise them for their clients.
Someone who specialises in this field will not only be able to make sure your essential business tasks are managed correctly but they should also be able to help your business improve by providing additional services such as management reporting or cashflow forecasts.
If you are outsourcing your bookkeeping function you should make sure they are a registered BAS agent. This is the minimum requirement put in place by the ATO for individuals to provide BAS services; something an employee is unlikely to have. A registered BAS agent will have the skills required to ensure your monthly/quarter BAS & IAS statements are lodged on time & accurately with the ATO. You’ll also get a 4 week extension on lodgement & payment of your quarterly BAS when you lodge electronically with a registered BAS agent.
Availability, Responsiveness & Continuity
Typically, an outsourced resource will be available to your business 5 days a week which means you can obtain the information you need when you need it. If they’re not then you should consider looking elsewhere.
Whilst the person you’re dealing with may decide to leave the bookkeeping firm, it will always be the responsibility of that bookkeeping firm to ensure that your business continues to receive an uninterrupted service.
What About Cost?
When it comes to costs an outsourced provider is more than likely going to cost more in terms of cost per hour. Like any business they have overheads that need to be met and these will factored into your fee. We highly recommend asking your bookkeeper to provide you with a fixed monthly fee – this is quickly becoming the industry norm.