How much does it cost to work with an outsourced bookkeeper?
If you have a small business, working with an outsourced bookkeeper or accountant can be the best way to get help with your financial records. People often ask me how much it costs to hire an outsourced bookkeeper and my answer always is: “It depends.” Yeah, I know that’s not much help. But the reality is that you’re paying for the bookkeeper’s time. And how much of that time you need depends on many different factors. Some of those factors are within your control and some aren’t.
How Much Help Does Your Business Need?
What are those factors? One is how many accounts your business has. Of course, the more accounts you have, the longer your bookkeeper’s to-do list gets. Another factor is the time of year; there is seasonal variation. Bookkeepers usually need to spend more time with your records in January if you are issuing 1099s and February and March as you get ready to file taxes.
Something else that’s not really under your control is how many transactions your business has. A service business with a few clients might have ten transactions per month. Whereas many retail businesses could have 100 or more transactions a week. It’s vitally important to your business that you track each transaction, but that does consume more of your bookkeeper’s time. In addition, if you have different points of sale, it will take more time for a bookkeeper to issue invoices.
How Granular is the Information?
You might think of your financial records as a lump of uninteresting numbers, but your books actually tell a story about your business. Exactly what story they tell depends on the level of detail and how you categorize your data. You can get a high-level overview without much detail or you can get a close examination of every part of your business. There’s no right or wrong way to tell the story, but the way it’s told should be useful to you.
For example, if you run a construction business, you can track the labor by the job and by what you did on the job each day. That might seem like an unnecessary hassle, but knowing that information will help you figure out if you over- or underestimated some part of the project. And that is good to know the next time you’re assembling a bid. Likewise, carefully categorizing your business expenses can help you figure out what you are actually spending and why. You will know if you’re charging the right amount for the profit margin you want.
Balancing Detailed Information and Cost
On the other hand, this extra information is useful only if it affects your business decision making. Some business owners think that they want every possible detail about their finances. But it can be difficult to digest an 8-page spreadsheet of accounting codes and figure out how to make meaningful use of the data. The level of granularity is a balancing act between useful information and spending more than you need. Categorizing data by different lines of business could be very useful, but is it worth the extra cost?
I had one client who was tracking everything in minute detail and asked her, “Are you really using all that data?” When she confessed that didn’t have time to review all that information, I recommended that she could save some money by making her records less granular. I encourage all my clients to keep it simple as long as they are getting the information they need.
Whatever the level of detail in your books, you should have some process in plan for how you will use the information. “I hope to look at that information next week,” is not a plan. You should have some event that will trigger you to actually review and use the information—whether it’s reaching a certain dollar figure in one category or setting a monthly schedule. That will help you avoid paying more for more detail than you can use.
You know your business, so you are in the best position to know how these factors will influence your bookkeeping. But that will only give you a rough idea of whether you are at the low or high end. For a better idea, contact an outsourced bookkeeper for an estimate.
Do you need more information about your business? Contact Office Accomplice and see if we can help!