Accounting for Entrepreneurs
Hiring a Bookkeeper
Written by Andrew Goldman for Gaebler Ventures
Small businesses often outsource their bookkeeping function. This can be a costly approach. Make sure you're not paying too much for a bookkeeper.
Many small businesses start out having to outsource certain business functions.
In my consulting experience, one of the most commonly outsourced business functions is bookkeeping.
The reason for this has to do with the high costs of bringing someone on fulltime and the small business manager's unfamiliarity with the ins and outs of bookkeeping. While both of these are valid reasons, companies that outsource their bookkeeping usually pay a premium.
Before you pay this premium, make sure you're getting your money's worth.
While it's true that bringing someone on fulltime is expensive, you need to identify your overall accounting needs before making this decision.
If you have a lot of accounting work that needs to get done, assess the amount and go from there. It may be that you have 20 hours a week, in which case you could bring someone on part-time. If you have more than 20 hours a week, it may be possible to bring someone on full-time and supplement their accounting work with job duties in other areas. If you have only a few hours a week of bookkeeping duties, outsourcing seems like the obvious answer, but there are alternatives.
Try posting a job description with the few hours of work. You may get lucky and find someone looking for a few hours of extra work a week.
If you can find someone that fits your exact needs, you'll save on the premiums paid to outside companies and have the benefit of keeping the employee in house. Obviously, you'll have to pay more overhead expenses if you bring the person on your payroll.
With both cases, you should carefully calculate the overall cost and make your decision from there. In general, when you have the bookkeeper in house, you have much more control over their work, which is a crucial benefit.
Don't be afraid to try and learn the job that bookkeeping requires. You may be able to do some of the functions yourself, or find someone on your current staff who can handle that level of work. While this can be risky, as the duties of accounting are critical, you'd be surprised as how easily some of it can be accomplished.
If you have a star employee looking to learn and develop, this may be a great opportunity to offer them a new experience. By presenting an employee with new challenging work, their job satisfaction will likely increase and you'll be more likely to retain the employee. You can also supplement their knowledge by offering education reimbursement.
If you decide to take on the bookkeeping duties yourself, you need to understand that this cannot be a permanent situation. As your company grows the job requirements of the bookkeeper will follow suit.
Once you pass a certain threshold, you should bring someone on full or part-time to alleviate yourself of the bookkeeping duties. If you outsource your bookkeeping, as soon as the amount of work becomes consistent enough to warrant bringing someone on the payroll, you should make that leap.
By bringing someone in-house, you eliminate the outsourcing premium and have more control over the bookkeeping functions.
Andrew Goldman is an Isenberg School of Management MBA student at the University of Massachusetts Amherst. He has extensive experience working with small businesses on a consulting basis.
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