Is It Okay To Handle Bookkeeping In-House For Your Startup? An In-House Vs. Outsourcing Bookkeeping Comparison
Yes, it is okay to handle bookkeeping in-house for your startup. Especially in this age of advanced accounting software, having an in-house accounting setup can be the most budget-friendly and safest solution you can opt for.
Having said that, having an in-house bookkeeping department or wing may only be suitable for some startups. You must recognize the rise in the number of companies offering payroll and bookkeeping services in the USA.
Over a span of five years (2018-23), the “Payroll & Bookkeeping Services industry in the US has grown 2.3% per year on average.” So, there is an increasing demand for outsourcing services for sure.
In fact, as of 2023, the USA has 330,814 Payroll & Bookkeeping companies. There is a sharp 2.3% growth in the number of companies from 2022.
So, the suitability of a bookkeeping setup, in-house or outsourced, depends on multiple factors. You have to consider the size of your business and its budget.
Further, the complexity of its operations will have a say in deciding whether your business needs an in-house or outsourced bookkeeping service.
Do you want to know more about the benefits of an in-house bookkeeping service for your startup business? Do you wish to assess the in-house and outsourced bookkeeping services? Here is a guide for you.
| Okey Magazine Speaks: The global cloud accounting software market is experiencing massive growth. The global accounting software is likely to reach 20,408.0 Million by 2026. This rising demand for computerized accounting can make having an in-house bookkeeping setup more profitable and beneficial for startups. The implementation of this software will minimize the infrastructure cost, and your in-house accounts department will be able to operate with fewer employees. So, there will be a considerable deduction in the employee cost. |
THESE Are The Benefits Of Having Bookkeeping In-House For Your Startup
There are three parameters on which booking in-house for your startup has no match. These three parameters are:
- Better control
- Complete customization
- Complete safety of data
Further, having an in-house bookkeeping service ensures immediate access to your company’s financial data. Even the smallest financial transaction will be brought to your immediate attention.
Above all, your in-house bookkeeper or accountant, as an organization employee, will be aware of the specific preferences and needs. So, the service will be more customized.
In addition, tax-paying and keeping track of the deductions and deductibles will be easier with an in-house bookkeeping service for your startup business.
Does Opting For Bookkeeping In-House For Your Startup Have Any Downside?
Yes, despite an in-house bookkeeping service offering many benefits, it has many downsides. The simple reason is that bookkeeping work is time and effort-consuming.
Further, data entry and creating reports are tough tasks, with the slightest errors creating the biggest loopholes. Moreover, there is constant pressure to remain up-to-date about the tax rules and endless compliance issues.
Please complete all of these to avoid exorbitant penalties. However, these are just the tip of the iceberg.
Overall, the challenges of having an in-house bookkeeping service are:
- Infrastructure and employee expenses
- The pressure of maintaining impeccable records
- Limited resources and often a lack of expertise and ability to adapt to the latest technology*
- Technological difficulties and training the employees in using the accounting software
- Changes in tax rules
- Failure to adhere to the legal and statutory compliance
- Failed deadlines resulting in heavy penalties
Moreover, spending much time in bookkeeping and maintaining financial accounts can cause deviation from other core responsibilities. This can impact customer service and delivery of your product or service.
So, many startup companies outsource their bookkeeping tasks.
* AICPA, or the American Institute of Certified Public Accountants, has done a study, and according to that, 92% of certified public accountants (CPA) are not ready to fit into the future of bookkeeping.
THESE Are The Advantages Of Outsourcing Bookkeeping Services For Your Startup
You can easily overcome the shortfalls of having an in-house bookkeeping service by outsourcing it. For example, cost-saving, enhanced expertise, and focusing on core activities are major benefits of outsourcing the bookkeeping service of your startup business.
However, the biggest benefits of using an outsourcing company for bookkeeping are scalability and compliance and risk management.
Outsourcing Bookkeeping Services For Better Scalability
The bookkeeping requirements for your startup company can go up or down. In an in-house setup, you have to maintain a fixed setup, and upsizing and downsizing are not possible randomly.
On the other hand, you can always upscale or downscale the bookkeeping services when working with an outsourcing company.
Better Compliance And Risk Management With Outsourced Bookkeeping Service
When you outsource the bookkeeping service to a responsible firm, the onus is on the company to adhere to the federal and state tax laws as well as the norms of the Internal Revenue Service (IRS).
So, there is less fear of missing deadlines and paying penalties.
Are There Downsides Of Outsourcing The Bookkeeping Service Of Your Company?
The biggest challenge in outsourcing the bookkeeping service of your company is data and financial safety. Further, like your bookkeeping employees, the outsourced company will not always be on the ball.
As a result, you will experience reduced flexibility. Moreover, communication breakdowns between you and the points of contact of the company/individual you have hired may get disrupted at any time. This can cause delay, inconsistency, and mistakes in the bookkeeping process.
Bookkeeping In-House For Your Startup Vs. Outsourcing The Service: Know The Differences
As the owner of a startup, you must know the differences between in-house and outsourced bookkeeping services. So, the table below furnishes a better overview.
| Factor of Comparison | In-House Bookkeeping Service | Outsourced Bookkeeping Service |
| Control | Complete control over the bookkeeping process | Lesser control, with service providers accessing and managing your financial records |
| Cost | High | Less |
| Scalability | Difficult | Easy |
| Data Safety | Complete data safety | Risks of data compromise |
| Flexibility | Better flexibility as you can tailor the services according to your business needs | Standardized processes are followed with lesser flexibility |
| Responsiveness | Immediate access to data and prompt communication | Delays in communication may occur, and you may have to wait for access to essential data. |
| Compliance | Risks of failing to adhere to compliance and penalties | Familiarity with the latest compliance norms and rules. |
| Technology | Additional expenditure on integrating technologies and training the employees | A reputed bookkeeping firm will anyway use the latest technology. |
⁕⁕Okey Magazine Tip⁕⁕
Before outsourcing the bookkeeping service of your company to a firm, make sure that it has experience in dealing with businesses from a similar industry. Prior experience will help the firm identify and resolve the hiccups specific to your business and the industry you are operating.
Is It Okay To Choose Bookkeeping In-House For Your Startup?
Outsourcing the bookkeeping service or choosing a bookkeeping in-house for your startup depends on your financial scenario, expectations and goals to achieve.
Further, you have to consider the scope for scalability based on the complexity of your business operations. In other words, if your business involves simple operations and the frequency of transactions is not very frequent, it is absolutely okay to choose bookkeeping in-house for your startup.
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