When you run a small business, your main focus is making sure it runs smoothly and is profitable. You’re also in a constant state of awareness for ways to protect your business from harm, whether that comes in the form of increased competition, property loss due to theft, or some other factor. But you may not be aware how a very important and foundational part of your business can potentially have an adverse effect on your company - staffing and managing an in-house bookkeeping and accounting department.
Even though doing your bookkeeping in-house and self-managing your business’s accounting might give you the feeling that you have everything under control, the truth is that it might not be not be the smartest choice.
Here are four reasons why doing your Bookkeeping & Accounting in-house can adversely impact your business...
1. Costly Bookkeeping Mistakes
If you employ a bookkeeper to handle your day-to-day financials, you’re relying on one single person for this critical function. Since human beings are fallible, it’s not unusual for people to make mistakes, especially when they’re inexperienced or tired.
In the best-case scenario, your bookkeeper or accountant will catch any mistakes made themselves and correct them in a timely manner.
In the worst-case scenario, however, a mistake will go unnoticed. That means it could be used to generate reports or even prepare audit and tax readiness inaccurately — and that’s the last place you want errors. In other words, one single mistake can have far-reaching consequences for your company, both financially and fiscally.
On the other hand, if you outsource your accounting to a reputable firm, you’re guaranteed that the expert services you receive are accurate. With an entire team looking at your books and handling your reporting, any errors are more likely to quickly be noticed so they can be addressed immediately.
2. Outdated In-House Financial Training
When you hired your accountant, you probably took great care to verify that his or her certifications were valid and up-to-date. Yet over time, even the best training becomes outdated.
Accounting professionals need to stay current not only about things like new software and integrated apps for greater efficiency, but more importantly about things like amended regulations, changes to tax rules and other important developments that affect their field.
Unfortunately, especially when your bookkeeper or accountant has a heavy workload, it can be challenging for him or her to stay current with these things — let alone complete any professional development courses. That means that before too long, the quality of your in-house bookkeeping and accounting will suffer.
When you outsource your accounting, the right firm will ensure that its people are up-to-date on all of the latest technology, regulations, tax codes and other developments. That means you never have to worry about the quality of your accounting.
3. Potential Internal Fraud
On average, organizations lose five percent of revenue to fraud annually. What’s more: Small businesses are typically more susceptible to fraud. The reason for this is that they don’t have the resources to perform all of the checks and balances needed to detect and combat fraud such as payroll fraud and skimming.
In a larger company, you can set up a system of internal controls to ensure that the various financial responsibilities and authorizations are handled by different people. In a small company, this often comes down to one or two people.
No matter how much you trust your bookkeeper or accountant, he or she can miss all the signs of fraud. Worse: They could even be the person committing fraud. And when you know that the average fraud incident for small businesses amounts to $150,000 median loss, then you have to ask yourself, “Can my company afford this kind of risk?”
An outsourced accounting firm provides protection against fraud by ensuring multiple people review your accounts providing separation of duties and follow up on every potential sign of wrongdoing.
The best firms have procedures in place that virtually eliminate the chances of fraud going undetected. What’s more: If they do detect fraud, they can follow the trail back to determine which of your employees is the fraudster so you can take appropriate action.
Hiring a full-time bookkeeper or accountant involves significant costs. First of all, there’s the time and money that goes into recruiting, screening and onboarding the new employee. If you work with a recruiter in order to do this quickly, you’re looking at a bill of between 20 and 30 percent of the new employee’s salary. Second, there are the costs of employee salary or wages.
According to GlassDoor, U.S. salaries average $43,874 for a bookkeeper, $55,093 for a staff accountant, and $100,705 for a controller annually. Of course, there are also additional costs such as benefits, paid time off, retirement, overhead, etc. And last but not least, you have a contractual and financial commitment to the employee--You can’t simply let them go without a certain financial obligation.
In contrast, an accountant’s firm will cost between $24k-$60k annually depending on the size of your company and the type of services you require. On average, you can expect to pay around $2,500 per month when you outsource your business’s bookkeeping and accounting. That’s considerably less than hiring a full-time bookkeeper!
If you want to learn more about how outsourcing your accounting can help your business, contact us at GrowthForce. We’re always happy to learn about your business needs and discuss how we can help you achieve your financial goals.