Why Business Owners are Moving Away from Outsourced Bookkeeping

By 2025, finance and accounting firms will lose 60% of their outsourcing contracts. That’s more than half of their usual patronage gone because buyers want more competitive prices and automated alternatives. And thanks to limited funds and less staff, small businesses are looking for even more flexibility.

Outsourced bookkeeping is on the decline because it takes control out of the hands of entrepreneurs. Basically, keeping a close eye on your finances isn’t easy to do if you hand over bookkeeping tasks to a third party. Instead, try automated bookkeeping to get a front-row view of your business’s financial health—without hiring anyone.

What is outsourced bookkeeping?

Outsourced bookkeeping refers to paying a service provider to record all or some of the day-to-day financial transactions of your business. You can engage a local bookkeeper or use a virtual service that provides a small accounting department to support you and/or your staff.

But in either instance, you stand on the outskirts of the process and have to trust that the bookkeeping service provider will keep secure and accurate records of your business transactions—and that your books will be up to date and ready for tax season.

To avoid the costs and risks associated with outsourcing to a bookkeeper or CPA (Certified Public Accountant), small business owners like you are choosing to do their own bookkeeping.

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1. Outsourced bookkeeping services are too expensive

Depending on the amount of work required, bookkeepers charge an average price of $500 to $2,500 a month. And as time goes on and your company grows—in terms of cash flow, transaction volume, and expenses—you may have to upgrade your outsourcing contract with the bookkeeper to a more expensive one.

Also, bookkeeping contracts only cover certain aspects of your accounting. So if your business needs change, you might end up paying more because the scope of work has expanded. For example, you may have paid for A/R (Accounts Receivable), and now you need to handle payroll and A/P (Accounts Payable) as well.

These prices can get too high for small business owners who are focused on growing their startups.

ScaleFactor, a company that offered automated bookkeeping tools and outsourced accounting services to small businesses, closed down in 2020 due to its steep pricing. Their packages cost about $6,000 to $30,000 a year, and they couldn’t convince small business owners that their service was worth it (particularly during COVID-19).

The bottom line? Even if you have that much money to pump into your business, it’s always better to invest in improving your operations than to overpay for services, right?

Think about it this way: With an affordable bookkeeping software, all your accounting needs are covered by the pricing plan you choose, and there are no surprises. Also, you won’t have to hire anyone and eat into your limited finances—especially if your small business is still relatively new.

2. Outsourced bookkeeping offers less control

If you rely on outsourced bookkeeping, you can’t check your finances as needed. Instead, you have to contact the bookkeeping service provider to ask for updates via email or chat—which you may have to wait for hours or days to get.

Hiring a bookkeeper is expensive, whether they’re on-call or part-time. But beyond that, they’ll also be splitting their time between you and their other clients.

With this, you’ll lack the control, visibility, and focus you need to stay up to speed on your profits and losses—a significant shortcoming during uncertain times.

For example, CB Insights found that 38% of small businesses fail because they ran out of cash. But in a situation where you do bookkeeping yourself, you’ll be working full time to make sure your financial reports are accurate.

That way, you’ll know if your business is running low on cash and can quickly start taking steps to restore stability. This could mean working from your home office to save money on rent, claiming all acceptable tax deductions, reissuing invoices for late payments, or making other cost-effective changes to stay afloat.

Similarly, you’ll easily notice if you are making a considerable profit to scale operations, e.g., hiring new people, setting up a production plant, getting health insurance for staff, or implementing new KPIs (Key Performance Indicators).

By choosing not to outsource your bookkeeping, you basically give yourself room to get really hands-on with your business’s growth. This will help you to quickly spot and correct any inconsistencies in your balance sheet caused by human errors—which you may miss if all you have are reports put together by your bookkeeper.

You’ll then be able to confidently do your tax filing, make financial forecasts, and draw up realistic budgets. Even more, using automated software will save you the valuable time you could be spending keeping your books manually or staying in sync with whomever you hired for your bookkeeping needs.

3. Outsourced bookkeeping poses a security risk

Sharing financial information with a virtual bookkeeping team can increase the risk of data breaches and hacks that expose confidential information, like credit card details or financial statements.

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Consider this: 60% of small businesses close down within six months of a cyberattack, and 41% of small-business data breaches are a result of third-party mistakes. If nothing else, these statistics show that it pays to be careful with outsourced bookkeeping.

Just imagine doing your own bookkeeping with an app that prioritizes security by taking measures like encrypting your stored files, monitoring its software 24/7, and performing external audits. You’ll literally eliminate the risks posed by cybercriminals and sleep like a baby, knowing that your financial data is very safe.

No hackers, no compromised bank accounts, and no leaked confidential information. Just you, your business dreams, and everything you’re putting into seeing them come alive!

Use in-house bookkeeping solutions instead of outsourcing

A great way to save money, gain more financial control of your business, and reduce cybersecurity risks is to avoid outsourced bookkeeping.

When you keep bookkeeping in-house, you can easily identify the right performance metrics to track and gain valuable insight into your company’s financial health. The simple hack for this is to use an accounting software. So even without a bookkeeper, you’ll be able to see your finances in real time, have complete control of your entire accounting process, and stay on the good side of the IRS.

Now, when choosing your bookkeeping software, look for one that’s secure and easy to use, offers simplified tax preparation, automatic financial reports, integration to other related apps, and a great support package. Automated bookkeeping software like Neat offers all these and helps you comfortably handle your business accounting by yourself.