For starter and small business owners, regular bookkeeping is essential in maintaining an understanding of the business’s current financial position, while others outsource their book work altogether. This is not to mention the legal and tax ramifications of not having accurate updated accounts. But what’s more beneficial? In house or outsourced bookkeeping? There is no simple answer unfortunately; different business stages require different accounting measures. For example; would you expect the CEO of apple, to write down the daily expenses and spending or would you expect that they would have a different system in place? Perhaps a whole sector even?
The arguments for the use of in house bookkeeping are that managers and founders develop a deeper understanding of their business as they experience first-hand the expenses and costs from daily activities and how that impacts the company. After all how can you run a business without knowing how much you can spend and how you’re spending? Not very well of course as you would expect! Small businesses managers who have the time to do such bookkeeping should undertake the role at least at the very beginning when revenue streams are low and expenses need to be minimised.
It can also be outlined that small businesses, apart from simply not having the capital, don’t have the capacity to hire a whole other staff member in charge of maintaining and controlling the accounts. This is especially true when the product or service is highly seasonal and parts of the year are filled with almost no business at all. Take an ice cream vendor by the beach for an extreme but simplistic example, majority of sales would be in summer and winter it might even be closed the whole time. Would the manager of such an establishment hire a full time bookkeeper in summer and fire them over winter? Hopefully not due to ethical standards of today.
The experience gained from such in house bookkeeping is, in a lot of cases priceless and can build the character and knowledge of the manager that undertakes it substantially. But with growth come change, and as companies develop, such managers that had the time will find that there are tasks that should be outsourced. The team at Nudge Accounting offers such solutions to this growing requirement for small businesses that are becoming more time poor with the plethora of new work that comes with growth.
What such knowledge is gained from doing my own bookkeeping? Don’t be scared by the thought of mindless data entry because it is more than that. Especially if you have not much experience in accounting it can be an eye opener to what different dynamics need to be considered. For instance, when your career develops and company grows, you will already understand what the terms and definitions mean making your decision making abilities faster and more educated. Which in turn equals a better overall leader.
It is a stage that all managers run into when developing the company processes and growing consistently. The struggle to decide what is both financially and physically viable in terms of where the company is currently and also where it is going in the future. Some key considerations when deciding this particular element are time, money and opportunity cost for doing either method. For instance, do you have time and money to interview recruit and train staff of the company and what is expected in doing the bookwork or is outsourcing more desirable where the cost of the book work is purely tailored to what you need and can be set up in a fraction of the time?
This is why there is no definitive answer; every business is different and has different needs and costs. It is up to you to know what is best for the company in terms of where the business is, not just financially but also in terms of the specific growth parameters. Starter companies are a great way to learn especially for managers that want to develop their accounting knowledge. Accounting knowledge that will carry through with the life of the business as it grows. Which method are you going to use?