7 Costly Warning Signs It’s Time to Outsource Your Accounting

Deciding When To Outsource Your Bookkeeping and Accounting Is Vital To a Growing Business

As a business grows, the bookkeeping system that once worked well can become a source of delays, errors, and lost time. Consistently falling behind, increasing transaction volume, complicated payroll, multiple financial accounts, inventory or job-costing requirements, unanswered financial questions, and spending nights or weekends on accounting can all indicate that it’s time to consider outsourcing. The goal isn’t to give up control of your finances—it’s to create a more reliable accounting process that gives Business Owners better information while freeing their time to focus on running and growing the business.

When Should a Business Owner Outsource Their Accounting? 7 Signs You’ve Outgrown Your Current System

Most Entrepreneurs don’t start a business because they’re excited about reconciling bank accounts, processing payroll, or analyzing financial statements.

In the early stages, handling the books yourself—or relying on a basic bookkeeping process—may make perfect sense. There aren’t many transactions, the financial structure is relatively straightforward, and keeping everything organized doesn’t require much time.

But businesses change.

More customers mean more transactions. Employees introduce payroll. Additional accounts create more reconciliations. Inventory, financing, and increasingly complex operations add another layer of financial management.

Eventually, the accounting system that worked perfectly well at one stage of the business may no longer be adequate for the next.

So, when should a Business Owner consider outsourcing their accounting?

Here are seven signs you’ve probably outgrown your current system.

1. Your Books Are Consistently Falling Behind

Being a few days behind occasionally isn’t necessarily a problem. Being several weeks—or months—behind routinely is.

When bookkeeping becomes something you continually promise yourself you’ll “catch up on,” your financial information begins losing much of its value. Good record-keeping isn’t just about preparing for tax season. The U.S. Small Business Administration emphasizes the importance of proper bookkeeping, cash flow projections, and financial statements as tools for managing a business. Their guide to managing business finances provides additional resources for Business Owners who want to strengthen their financial management practices.

You may still be able to get everything cleaned up for tax preparation, but that’s very different from having current financial information available to run the business.

If you’re looking at May’s numbers in August, those reports can’t tell you much about what you should do today.

Being able to outsource can establish a regular accounting schedule so reconciliations, transaction categorization, and financial reporting happen consistently rather than whenever someone finds the time.

2. Your Transaction Volume Has Increased Significantly

Growth creates accounting work.

A business processing 50 transactions per month has very different bookkeeping needs than one processing 500—or 5,000.

As volume increases, so does the opportunity for duplicate transactions, miscategorizations, missed expenses, unreconciled balances, and other errors.

At some point, the question becomes less about whether you can continue doing the bookkeeping yourself and more about whether doing so remains the best use of your time.

Growth should make your accounting system stronger, not overwhelm it.

3. Payroll Is Becoming Complicated

Payroll can become complex surprisingly quickly.

Adding employees, changing compensation, managing payroll taxes, tracking benefits, handling reimbursements, and dealing with employees in different jurisdictions can turn what was once a simple process into an important administrative responsibility.

And unlike some bookkeeping tasks, payroll comes with deadlines and compliance requirements that aren’t particularly forgiving. Employers have responsibilities involving federal income tax withholding, Social Security and Medicare taxes, unemployment taxes, deposits, and reporting. The IRS provides an overview of these requirements in its Employment Taxes guide.

If payroll is taking increasing amounts of your time—or you’re uncertain whether it’s being handled correctly—it may be a strong indication that additional accounting support is needed and it is time to outsource.

4. You Have Multiple Bank and Credit Accounts

One checking account and one credit card are relatively easy to monitor.

Add additional checking and savings accounts, multiple credit cards, loans, lines of credit, payment processors, and other financial accounts, and the picture changes quickly.

Every account needs to be properly recorded and reconciled.

More accounts also create more opportunities for transfers to be recorded incorrectly, transactions to be duplicated, or balances on the books to stop matching reality.

If you’re no longer confident that every account is being reconciled accurately each month, your business may have outgrown its current bookkeeping process and it is time to outsource.

5. Inventory or Job Costing Has Entered the Picture

Some businesses need more than basic income and expense tracking.

If you carry inventory, you need to understand what you own, what it costs, and how those costs ultimately affect profitability.

If you operate a project- or job-based business, simply knowing that the company made money isn’t enough. You may need to know which jobs made money—and which ones didn’t.

That requires a financial system designed around the way your business actually operates.

Without proper inventory or job-costing information, Business Owners can generate impressive revenue while unknowingly losing money on certain products, services, or projects.

6. You Can’t Answer Important Financial Questions

This may be the biggest warning sign of all.

Consider whether you can confidently answer questions such as:

• How profitable are we year to date?
• How does that compare with last year?
• Are our margins improving or declining?
• Which expenses are increasing the fastest?
• How much cash do we realistically need over the next few months?
• Can we afford to hire another employee?
• Which products, services, or jobs are actually making us money?

You don’t necessarily need to know every number from memory.

But your accounting system should allow you to get reliable answers relatively quickly.

If important business decisions are routinely based on your bank balance, intuition, or a spreadsheet you aren’t completely confident in, the problem isn’t simply bookkeeping.

It’s a lack of usable financial information.

7. You’re Spending Evenings and Weekends Doing Accounting

There is another cost to DIY accounting that never appears on your Profit & Loss Statement:

Your time. There’s a real opportunity cost when Business Owners spend hours on accounting instead of activities where their expertise creates more value. SCORE’s discussion of whether to hire an accountant raises an important question: Is bookkeeping really the best use of the owner’s time? Being capable of doing something yourself doesn’t necessarily mean you should continue doing it as the business grows.

Suppose you’re spending five hours every week handling bookkeeping, payroll, reconciliations, and financial administration.

That’s roughly 250 hours a year.

What could those hours be worth if they were spent generating business, serving customers, developing employees, improving operations—or simply giving you some of your personal time back?

Outsourcing isn’t automatically worthwhile just because bookkeeping takes time. You should still compare the cost of outside help with the value it provides.

But your own time isn’t free simply because you aren’t writing yourself a check for it.

Outsourcing Doesn’t Mean Giving Up Financial Control

Some Business Owners hesitate to outsource accounting because they believe it means becoming less involved in their finances.

A good accounting relationship should accomplish exactly the opposite. Outsourcing also doesn’t necessarily eliminate a Business Owner’s financial or compliance responsibilities. For example, the IRS notes that while outsourcing payroll duties can streamline business operations, employers generally remain responsible for ensuring certain federal tax obligations are handled correctly. That’s an important distinction: outsourcing should provide better systems and professional support, not disconnect you from what’s happening financially in your business.

The objective is to remove the administrative burden while providing better financial visibility.

You should still understand your financial statements. You should still ask questions. You should still review performance and make the important decisions.

But you shouldn’t necessarily have to spend Saturday afternoon reconciling the company credit card to do it.

Has Your Business Outgrown Its Accounting System?

There’s no specific revenue level, employee count, or transaction volume at which every business should outsource its accounting.

The better question is whether your current system is still keeping pace with your business.

If your books are consistently behind, financial complexity is increasing, or you aren’t getting the information you need to make good decisions, waiting longer may actually cost more than getting help.

At United Accounting Solutions, we work with Business Owners who have reached that point. We can help establish a consistent bookkeeping and accounting process, improve the quality of your financial reporting, and give you better information for managing your business.

If you’re wondering whether you’ve outgrown your current accounting system, let’s have a conversation about where things stand today and what level of support actually makes sense for your business.

I hope you found this information helpful. If you have questions about your finances or would like guidance tailored to your situation, I’d be happy to talk. With years of experience helping individuals and businesses gain clarity and confidence in their numbers, my goal is to help you make informed decisions and move forward with confidence. Feel free to call me anytime at 260-579-1516 or email me at mike@unitedaccountingsolutions.com.

Michael J Archbold
Accountant
United Accounting Solutions
8101 Coldwater Rd
Fort Wayne, IN 46825
c. 260-579-1516
e. Mike@UnitedAccountingSolutions.com
w. www.UnitedAccountingSolutiions.com

Know someone who could use clarity and confidence in their finances? I’m NEVER too busy for your referrals.

United Accounting Solutions – 7 Costly Warning Signs It’s Time to Outsource Your Accounting…

… brought to you by Michael Archbold and United Accounting Solutions.

The consummate professional, Michael Archbold brings a diversified background to the world of accounting. Born and raised in Fort Wayne, IN, Mike received bachelors degrees in Accounting in 1997 from the Indiana University Kelley School of Business and Information Technology in 2005 from Indiana Wesleyan University. Mike has more than 25 years of experience in accounting and real estate investing/sales.