When should a NZ business owner consider outsourcing their bookkeeping?
Bookkeeping is one of those business functions that often starts small.
In the early days, the business owner may handle everything themselves.
Invoices, bank reconciliations, expenses, payroll and financial records can all be managed after hours.
But as the business grows, this approach can become increasingly difficult to maintain.
The question is not simply whether you can do your bookkeeping yourself.
The better question is whether you should.
Your time has a value
Every hour spent on bookkeeping is an hour that cannot be spent on other activities.
For a business owner, those activities might include:
Winning new customers
Managing employees
Improving operations
Developing products
Building relationships
Planning growth
If your business is growing, your time may be more valuable elsewhere.
When bookkeeping starts taking over
One sign that it may be time to outsource is when bookkeeping becomes a constant source of unfinished work.
Perhaps you regularly tell yourself:
"I'll reconcile the accounts this weekend."
Or:
"I'll catch up on the invoices tonight."
Eventually, the backlog becomes larger.
This can make it difficult to understand your business's current financial position.
Late bookkeeping can lead to poor decisions
Financial information is most useful when it is timely.
If your accounts are several months behind, you may not know:
How profitable you really are
Which customers owe you money
Whether expenses are increasing
Whether margins are declining
How much cash is available
Whether you are on track against your targets
You may end up making decisions based on what you think is happening rather than what the numbers show.
Outsourcing isn't only for large businesses
Some small business owners assume that outsourcing bookkeeping is only appropriate once a company reaches a certain size.
That isn't necessarily the case.
A smaller business can benefit from professional bookkeeping if the owner:
Doesn't have the time
Doesn't enjoy financial administration
Is struggling to keep records up to date
Is growing quickly
Has increasingly complex transactions
Wants more reliable financial information
The objective is not simply to remove a task from your workload.
It is to create a more reliable financial management process.
What should a bookkeeper actually provide?
Good bookkeeping is more than entering transactions.
Depending on your needs, the process may include:
Bank reconciliations
Accounts payable
Accounts receivable
Invoice processing
Expense management
Payroll support
Financial reporting
Record maintenance
GST preparation support
The exact requirements will vary between businesses.
The important thing is that the process produces accurate and timely information.
Technology doesn't replace good financial processes
Cloud accounting platforms have made bookkeeping significantly easier.
However, software doesn't automatically guarantee accurate records.
A system is only as useful as the processes behind it.
Transactions still need to be correctly classified, accounts reconciled and financial information reviewed.
Technology can reduce administration, but professional oversight can help ensure the numbers make sense.
What should business owners still understand?
Outsourcing bookkeeping doesn't mean outsourcing financial responsibility.
Business owners should still understand the key numbers that drive their business.
You should be able to answer questions such as:
What is our current cash position?
How profitable are we?
What do customers owe us?
What do we owe suppliers?
What are our largest expenses?
Are margins improving or declining?
Your accountant or bookkeeper can help you get the information you need, but you still need to use that information to run the business.
When outsourcing becomes a strategic decision
The decision to outsource bookkeeping is ultimately about more than cost.
It is about how you want to spend your time and how much confidence you want in your financial information.
If bookkeeping is taking you away from activities that generate value, professional support may make sense.
At Affinity Accounting & Advisory Limited, we help New Zealand business owners manage their accounting and financial requirements so they can spend more time focusing on their businesses.
If your bookkeeping is becoming a burden, it may be worth reviewing whether your current approach is still right for your business.
What our clients say
“Dylan is one of the best accountants I've worked with. He makes a point of explaining things as plainly as possible to those of us who don't understand accounting speak. He has a solid knowledge of best practices in the industry, but most importantly he will always recommend what is most suitable for your specific business. I will continue to recommend Dylan and Affinity Accounting to my clients when they are looking for an accountant.”
-Jay Brooker