Should I hire an accountant?
As discussed in other posts, maintaining accurate record keeping is an extremely important pillar in any successful business.
In order to maintain accurate financials and bookkeeping, however, business owners and entrepreneurs must dedicate sufficient resources to this function. Those resources can come in the form of a few different areas, or a combination of them. In this post, we will address the pros and cons of three potential ways to allocate resources to your company’s accounting function.
1: Doing it yourself. For virtually all businesses that exist, no matter the size, there was one point in time where the original owners were maintaining the accounting function. Entrepreneurs are always wearing multiple hats, and this is typically one of them during the beginning stages of the life cycle
Pros:
- Not having someone on payroll or paying an external company to maintain this function, which can save money. You can do it yourself, right? Sometimes yes, sometimes no, it depends on the size and complexity of your business.
Cons:
- Opportunity cost: by spending the time doing your own books, you are not spending time improving other areas of your business, like sales and operations.
- Expertise: most entrepreneurs do not have a technical accounting background and as such, do not have expertise in this area. This can cause frustration, inefficiency and error in your accounting records, again, depending on size and complexity of the business.
Hiring someone in-house: At some point in time in a company’s life cycle, business owners typically end up hiring an accountant in house. I’ll note that for a lot of small businesses, this role is typically intertwined with a few others, such as office manager and Human Resources.
Pros:
- This immediately gets you, the business owner out of the administrative weeds, opening up time for you to focus on scaling the business.
- Employee dedicated solely to your business. Someone that will invest the time in to learning your specific operations and helping scale your business with you.
Cons:
- The expertise of the person you hire. For the most part, someone doesn’t need an accounting degree to maintain most aspects of your business. Invoicing customers, paying vendors, etc. But most people in the market for these types of jobs typically do not have a lot of expertise in more complex concepts, such as accounting for debt and investments.
- The costs/risks that come along with hiring any other type of employee, resulting in marginal additional overhead costs.
Using a third-party: There are many companies out there, ours included, that you can outsource your accounting/bookkeeping function to.
Pros:
- These outsourced firms have the expertise and resources to ensure that your books are always accurate and timely.
Cons:
- You’ll typically end up paying a little more form an hourly basis than if you had someone in house.
So what’s the best?
As mentioned a few times in this post, it really all depends on the size, complexity and stage in your company’s life cycle. I personally think the best approach for a many small businesses with limited resources is to do the following: use internal resources (the owner, but more preferably, an employee) to do the day-to-day bookkeeping, but build a relationship with an external resource (such as us, your tax accountant, or another accounting firm) to help build the process, review your financials on a monthly or quarterly basis to ensure accuracy and provide analysis.
Accruity
