Outsourced Bookkeeping Service vs. In-House Employee

Establishing bookkeeping processes should be among the top priorities of any business owner during the early stages of growth. From the very beginning, it’s critical to monitor expenses, income, and other such transactions. Doing so supports everything from business growth to tax compliance. Business owners must decide between an outsourced bookkeeping service vs. an in-house employee.

At first, when a business is still quite small, a business owner may be able to handle their own bookkeeping without needing additional help. However, it won’t be long before they may need to offload this task to another party.

They have two general options to consider when doing so: Hiring an in-house employee, or working with an outsourced bookkeeping service.

Neither option is always the best decision. If you’re a business owner deciding between outsourced bookkeeping and an in-house bookkeeper, this guide will help you make the right choice for your company.

Overview of Outsourced Bookkeeping Services

All businesses require proper bookkeeping. That’s not to say all businesses require in-house bookkeepers.

Outsourced bookkeeping services offer the following potential advantages:

References from past clients to confirm they offer quality service
The option to save money, as you only need to pay them based on your needs
The option to hire professionals who specialize in bookkeeping

That said, there may be some drawbacks to this option, depending on your business’s needs. For example, if you choose an outsourced bookkeeping service, you may be one of many clients. This can limit the degree to which you might access your financial records or directly coordinate with your bookkeeper regularly.

Overview of In-House Employee Bookkeeping

An in-house bookkeeper is a dedicated employee whose job involves tracking financial transactions and maintaining financial records. Pros of in-house employee bookkeeping include:

Having more opportunities to ask your bookkeeper questions, request financial data, etc.
Knowing your bookkeeping is being managed by someone who won’t ever be distracted by other clients
Hiring someone who, as a member of your team, might develop a more thorough understanding of your business and its specific needs

Of course, hiring an in-house bookkeeper isn’t always the right decision a business owner can make. For instance, hiring an employee to manage bookkeeping may be unnecessary if your business’s bookkeeping needs aren’t significant.

Deciding Between Outsourced Bookkeeping Service vs. In-House Employee

Assess Your Business Needs

Of all the tips on this list, this may be the most fundamental. Your goal when choosing whether to hire an in-house bookkeeper or work with a third-party bookkeeping service is to ensure your needs are met in regard to maintaining financial records. Thus, to begin making this decision, you must account for your current needs.

Maybe yours is a small business. Your transactions are simple. If so, an outsourced bookkeeping service may suffice. If your transactions are complex, you might be better off creating an internal bookkeeping department.

Consider Your Budget

You need to account for such practical factors as your budget when making any type of investment in your business. Doing so can also help you choose between outsourced bookkeeping services and an in-house bookkeeper.

For example, perhaps you run a small business that’s currently in the early stages of growth. Your current bookkeeping needs may be relatively minimal if so.

In this scenario, hiring an in-house bookkeeper could be prohibitively expensive. If your bookkeeping needs are not particularly significant yet, you might end up spending too much money paying an employee who doesn’t have much to do. You could instead save money by working with an outside bookkeeper who can serve you on an as-needed basis.

On the other hand, maybe your business has grown, and you conduct many transactions on a consistent basis. You might thus be able to justify hiring an in-house bookkeeper.

Examine Your Control Needs

Evaluate your style of running a business when choosing whether to coordinate with an outsourced bookkeeping service or hire a bookkeeper to work for you full-time. Maybe you’re the type of business owner who appreciates having consistent and easy access to your financial records.

You might lean towards hiring an internal bookkeeper in this case. Doing so allows you greater access to financial data whenever you need it. If this isn’t a concern, you might be comfortable working with an outsourced bookkeeping service.

Evaluate Your Business Growth

Don’t make the mistake of simply hiring a bookkeeper that can serve your needs now. To make the right decision, you must also consider the future.

Perhaps an outside bookkeeper can currently manage your business’s bookkeeping needs. That doesn’t necessarily mean you should hire them if you have reason to believe your business will grow relatively quickly.

Think About Data Security

Accounting for data security is vital whenever you make decisions regarding bookkeeping. A breach involving your financial data could lead to a range of consequences and might even result in your business being the target of legal action.

Guard against this by accounting for your current security capabilities and needs when choosing between an internal bookkeeper and a third party. You might be safe hiring an in-house bookkeeper if you know you have the security protocols in place to avoid breaches. If your approach to security isn’t optimal, you may instead choose an outsourced bookkeeping service that’s already established its own security protocols.

Check the Level of Expertise Needed

A small business might only need the services of a bookkeeper who has the skills and experience necessary to track basic financial transactions. On the other hand, perhaps your business requires a bookkeeper with more specialized training.

As always, you must also remember that your business needs can change and develop as your business grows. While you might not currently need a bookkeeper who offers certain specialized services, you might nevertheless want to hire one who can provide these services should you ever need them in the future.

Reflect on Your Business Culture

If you’ve identified a potential in-house bookkeeper who seems as though they’d be a proper fit for your company not only in terms of experience but also in regard to how successfully they might integrate with your business’s culture, hiring them may be a way to enhance the business culture while also addressing a practical business need.

Or, maybe you’re not sure whether adding a new member right now will disrupt the current culture. If so, you may decide it’s wiser to allow an outsourced team to handle your bookkeeping. They’ll manage a critical task without directly engaging with your other team members on a daily basis, ensuring the status quo of your company culture remains unaffected.