Outsourcing vs. Hiring a Bookkeeper for Your Law Firm: Pros and Cons to Consider

If You’re Growing And Scaling, You’ve Either Already Considered This Question Or You’re Starting To Ask Yourself This Question.

Hope is not a strategy, so when your client base grows to fit the time you have to dedicate to work, your next step is to delegate the tasks that someone else can easily take over for you allowing you to re-invest your time into tasks that are bringing more money into your firm. In this blog post, we’ll go over the pros and cons of outsourcing vs. hiring a bookkeeper for your business to help you decide which option is best for your specific needs.

Part-time Bookkeeper vs. Outsourcing: Which Accounting Option is Best for Your Business?

Before we get into the pros and cons of outsourcing vs. hiring a bookkeeper, it’s important to understand the different accounting specialists that can help your business.

• Bookkeeper - Bookkeepers are data entry specialists in your accounting system. This person enters data and maintains the accuracy of the books and software.
• Accountant - Accountants look at the compiled information in the form of financial reports and specialize in compliance.
• Certified Public Accountants (CPA) - CPAs have more of an accounting focus. Their state licensing permits them to perform public audits, making them accounting and compliance experts.
• Enrolled Agents (EA) - EAs are the tax experts. They are licensed to practice in all states and focus their education on taxes and tax strategy.
• Certified Tax Coach/Planner - These amazing folks are harder to find and for good reason. There’s a difference between getting your taxes done once a year and planning your taxes out over the next 5-7 years. Tax planners know tax “loopholes” inside and out and analyze your unique situation so they can apply a strategic tax plan for your business and personal life. This is where the real money is saved in taxes.

Accounting involves the overall management of your finances, including creating financial statements, analyzing financial data, and making strategic financial decisions. Bookkeeping, on the other hand, involves the day-to-day management of your financial records, including data entry, bank reconciliations, and invoicing. So, which one do you really need?

Most Commonly Delegrated Areas

Sales, administrative work, and accounting work are three areas that commonly get delegated first. Accounting isn’t the whole picture but it sets a great stage. When you first venture off on your own, you may have done your books for a while. It worked at first because you were still building your client base and had enough time each month to pay attention to things like invoicing, paying bills, collecting money, and recording it all in the accounting and case management software. Then something happened. Your time shifted towards working with clients and new cases as things started to pick up. The books started to get overlooked. Perhaps at this point, you even hire help but lo and behold, you still didn’t have time to set aside to get the books caught up with training and managing a new employee. There you are, your books have been left in the dust and you find yourself wondering if it’s time to let someone else keep up with the books. Now you’ve got a decision to make.

Outsourcing Bookkeeping Pros and Cons

Outsourcing your bookkeeping is often the easiest way to get your books back in order. You can outsource to an accounting firm or hire an online bookkeeping service. With outsourcing, you’ll have a team of professionals working on your books. This means that you’ll have access to a wider range of skills and expertise.

Here are some pros and cons to consider before outsourcing your bookkeeping:

Pros:

• More time for you: By outsourcing your bookkeeping, you can free up time to focus on other aspects of your business.
• Cost-effective: Outsourcing can be more cost-effective than hiring a part-time bookkeeper. Compared to hiring a full-time employee you only pay for the services you need. You won’t have to pay for benefits or taxes.
• Scalability: If you grow or scale your business, it’s easier to increase the level of service with an outsourced accounting service.
• Expertise: By outsourcing, you get access to a team of accounting specialists who can offer the latest knowledge and expertise in accounting and bookkeeping for small businesses.
• Flexibility: Outsourcing allows you to scale up or down as needed. You can adjust the services based on your needs or budget, making it more flexible than hiring an employee.

Cons:

• Communication and trust: When outsourcing, you need to have clear communication with the service provider to ensure they understand your business and financial goals. Trust can also be an issue, especially if you're dealing with sensitive financial information.
• Lack of control: Outsourcing means you're giving up some control over your bookkeeping tasks. You'll need to be comfortable with giving your service provider access to your financial information and trust that they're doing everything correctly.
• Time zones and availability: If you're outsourcing to a provider in another time zone, it can be challenging to coordinate communication and support.

Here are some pros and cons to consider before hiring a bookkeeper:

Pros:

• Control: When you hire a bookkeeper, you have more control over the tasks and processes involved in your bookkeeping tasks. You can ensure that your bookkeeper understands your business and is meeting your financial goals.
• Availability: A bookkeeper that is physically present in your office will be more readily available to answer questions and provide support as needed.
• Understanding your business: Hiring a bookkeeper means that you have someone who understands your business and can provide personalized solutions that work for you.

Cons:

• Cost: Hiring a bookkeeper can be more expensive than outsourcing as they are now a W2 employee with a salary or hourly wage plus benefits.
• Employee Management – Managing a team doesn’t happen without intent and time invested. W2 employees are different than outsourced service providers who are 1099’d in two main ways, the employee management and the payroll reporting and tax requirements. Managing an employee takes time in the form of employee reviews, vacation time tracking, HR functions, and administrative oversight to name a few. In addition to the time is the extra costs per employee in the form of employer taxes and workers comp at a minimum. Not to mention if your PT bookkeeper quits, so does the progress of your books.
• Limitation of skill set – Bookkeeping is data entry. The power in numbers comes after the data entry is done. When you want to use your numbers to develop a strategy that increases profitability and efficiency, you’re going to need another set of skills from an accountant and/or tax specialist. It is also advised that the work be reviewed for accuracy. Are you the best person to manage that type of work? Do you know what to look for? Are you having a professional review the books at regular points during the year?

Final Thoughts

So, which is better: outsourcing or hiring a bookkeeper? It really depends on your business needs and budget. No matter which option you choose, it's important to understand the role of accounting and bookkeeping in your business.

For small businesses, having a good understanding of both accounting and bookkeeping is crucial for financial success. It's important to work with professionals who can help you navigate the complexities of managing your finances, whether that's through outsourcing or hiring a part-time bookkeeper.

If you’re struggling to keep up with your books, or you’re keeping up with them but also working 60+ hours each week, outsourcing your books is the next step in order to scale your firm while remaining profitable.

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