Which Bookkeeping option is best for you?
Bookkeeping is indeed a crucial part of running a business, as it helps you keep track of your finances, ensures
compliance with tax regulations, and can even help you identify areas where you can save money. What is your
best option for getting this critical business item done? Do you hire someone to work for you? Do you outsource
to a bookkeeping service or do you do it yourself (DIY)?
When considering which option is right for you, it's important to weigh the costs against the benefits.
Here are some options you might consider:
1. Hiring a Professional Bookkeeper in House: As mentioned, this can cost anywhere from $500 to $3,520 a month. The cost can vary based on the complexity of
your business, the volume of transactions, and the level of expertise required. A professional bookkeeper can
handle everything from daily transaction recording to preparing financial statements and tax filings.
2. Outsourcing to a Bookkeeping Service (Like Ours!): This can be a more affordable option, with prices typically ranging from $200 to $2,500 per month.
These services often use cloud-based software, which allows you to access your financial information from
anywhere.
3. DIY Bookkeeping: If your business is relatively simple and you have the time to dedicate to it, you might choose to
handle your own bookkeeping. This can save you money, but it requires a good understanding of accounting
principles and a commitment to staying organized and up-to-date with your records. It does take time away from
you building your own business though.
As we explore the costs and options for hiring a bookkeeper, which is a crucial step for managing your business
finances effectively. Let's delve deeper into the different bookkeeping options and their associated costs.
In-House Bookkeepers
Best for:
Large businesses with numerous employees, complex financial systems, or a high volume of daily transactions.
Monthly cost: $3,200 - $3,520 or more
The average base salary for an in-house bookkeeper ranges from $42,000 to $46,000 annually, translating to about
$3,200 to $3,520 per month. This figure is based on data from sources like the Bureau of Labor Statistics,
Salary.com, Payscale, Glassdoor, and Indeed.
However, the salary isn't the only expense. You also need to consider:
Training costs: Initial and ongoing training to keep the bookkeeper updated on the latest financial regulations and
software.
- Employee benefits: Health insurance, retirement plans, paid time off, etc.
- FICA tax: As an employer, you are responsible for paying a portion of Social Security and Medicare taxes.
Outsourced Bookkeepers (LIKE US!)
Best for:Small-to-medium businesses
Monthly cost:$250 - $1,500
Outsourcing bookkeeping can be a more flexible and cost-effective option, especially for smaller businesses. The
cost varies widely depending on the scope of work and the complexity of your financial transactions.
With this choice you avoid training costs, both initial and ongoing to keep your bookkeeper up to date on the latest
financial regulations and software; retirement plans, paid time off, sick time, health insurance, salary, FICA tax.
- Basic bookkeeping: For small businesses requiring minimal bookkeeping (around five hours per month), costs
can be as low as $250 per month.
- Comprehensive services: Larger businesses with more complex needs may spend up to $1,500 per month.
- Outsourcing can be particularly advantageous because you only pay for the services you need, and you don't
have to worry about additional costs like benefits and taxes.
Factors to Consider
When deciding which bookkeeping option is best for you, consider the following:
- Business size and complexity: Larger, more complex businesses may benefit from the oversight and control of
an in-house bookkeeper.
- Budget: Smaller businesses or startups might find online or outsourced bookkeeping services more cost-effective.
- Control and oversight: In-house bookkeepers offer more direct control, while outsourced and online services
provide flexibility and scalability.
Let's break it down the pros and cons of hiring a bookkeeper versus doing it yourself further to help you make an
informed decision.
Financial Considerations
1. Time vs. Money:
- Time Spent: Calculate how many hours you spend on bookkeeping tasks each month. This includes data entry,
managing accounts receivable/payable, and other financial transactions.
- Opportunity Cost: Determine your average hourly rate. Multiply the hours spent on bookkeeping by this rate to find out how much your DIY bookkeeping is costing you in terms of lost revenue.
For example, if you spend 10 hours a month on bookkeeping and your hourly rate is $75, your
DIY bookkeeping costs you $750 a month. If hiring a bookkeeper costs less than this, it might be a financially
sound decision to outsource.
2. Software Costs: If you use tax or bookkeeping software, add this to your DIY costs. Software can range from
$10 to $100+ per month depending on the features and complexity.
Non-Financial Considerations
1. Expertise:
- Accuracy: Professional bookkeepers are trained to handle financial records accurately and efficiently. Mistakes
in bookkeeping can lead to financial discrepancies and potential issues with the IRS.
- Compliance: A professional will ensure that your books are compliant with current laws and regulations,
reducing the risk of penalties.
2. Time Management:
- Focus on Growth: By outsourcing bookkeeping, you can focus on growing your business, developing new
products, or improving customer service.
- Stress Reduction: Handling finances can be stressful, especially if it's not your area of expertise. A bookkeeper
can take this burden off your shoulders.
3. Scalability:
- Business Growth: As your business grows, your financial transactions will become more complex.
A professional bookkeeper can scale their services to meet your growing needs.
- Flexibility: Outsourced bookkeepers often offer flexible plans that can be adjusted as your business needs change.
Additional Considerations
- Training and Benefit: If you hire an in-house bookkeeper, remember to factor in the costs of training, benefits,
and taxes.
- Control and Oversight: An in-house bookkeeper provides more control and oversight, which might be crucial for larger businesses with complex financial systems.
Conclusion
Ultimately, the decision to hire a bookkeeper or do it yourself depends on your specific circumstances
including your financial situation, business size, and personal preferences.
If you find that your time is better spent on activities that directly generate revenue or grow your business, hiring
a bookkeeper could be a wise investment. On the other hand, if your business is still small and you have the time
and skills to manage your books accurately, DIY might be a viable option for now.
If you have any more questions or need further assistance, feel free to call us!
Conclusion
Choosing the right bookkeeping solution depends on your business's specific needs and budget. Whether you opt
for an in-house bookkeeper, an outsourced service, keeping your financial records accurate and up-to-date is
essential for your business's success.
