How Delegating Your Bookkeeping Tasks Can Reduce Your Expenses

Outsource Your Bookkeeping Just Might Keep You Organized

It is quite uncommon for an owner or administrative assistant to possess the necessary education and experience to handle bookkeeping accurately.

Managing bookkeeping for startups and small businesses typically requires less than 5 or 6 hours each week. As an entrepreneur, you might have chosen to handle your own bookkeeping or delegate it to an administrative assistant or office manager to avoid hiring a bookkeeper or finance professional. However, it is uncommon for owners or administrative assistants to possess the necessary education and experience to perform bookkeeping accurately.

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When an unqualified individual attempts to handle bookkeeping, it can lead to disorganized, unreliable records that are costly to rectify. By the time the files are handed over to the accountant at the end of the year, they will need to dedicate numerous billable hours to correct mistakes before the tax return can be submitted and financial statements can be prepared.

The lack of experience among new business owners or administrative assistants handling their own bookkeeping can result in various issues, including bounced checks, late payment fees, vendors retracting terms, penalties for late government filings, and unexpected interest expenses. If expenses are overlooked, taxes may be higher, and inexperienced bookkeepers might not recognize costs—such as bank fees, utilities, insurance, and other overhead—that are disproportionate compared to similar businesses and warrant further investigation.

When significant mistakes occur in bookkeeping and accounting records, and the company undergoes an audit, the resulting fees and penalties can escalate dramatically.

Additionally, placing the burden of bookkeeping and financial responsibilities on an administrative assistant who lacks proper training can result in heightened stress, ultimately leading to higher turnover in that role.

When you take into account potential fines, interest, and lost savings, along with the rising hourly rates of accountants and their staff compared to a professional bookkeeper's fees, and then consider the time or costs involved for an admin assistant or owner handling bookkeeping tasks, it becomes clear that your business could have easily afforded to hire a part-time bookkeeper on payroll!

For startups and small businesses that aren't ready to hire an in-house finance team, collaborating with a contracted professional bookkeeper or bookkeeping firm could be the perfect solution. These experienced bookkeepers bring knowledge from various business types, software, and systems, helping you establish best practices for your bookkeeping and accounting right from the start.

Cost Comparison

Based on Intuit's 2016 survey of average billing rates, the typical hourly rate for a professional bookkeeper providing regular bookkeeping services in Canada is $80.00 per hour, although many are transitioning to a monthly fixed-fee structure.

For a typical small business that requires only 2 to 3 hours of bookkeeping each week, professional bookkeeping services would probably cost under $1,000 monthly. For a business generating $1 million in annual revenue, this accounts for less than 1.5% of their total income.

When considering year-end accounting fees, which usually range from $2,000 to $4,000 depending on the complexity of the business structure, the total expense still remains below 2% of the revenue.

On the other hand, if the business owner opts to handle their own bookkeeping, dedicating 6 hours of their time each week (as it typically takes them longer than a professional), and assuming their time is valued at a minimum of $50 per hour, they could end up losing approximately $300 each month by not hiring an expert. This figure does not even account for potential fees, fines, or penalties incurred from late or inaccurate payments or filings.

Many professional bookkeepers and firms now offer fixed-fee or value pricing structures, with rates determined by various factors such as the complexity of the business, the services needed, the number of employees, monthly revenue and expenses, and the volume of transactions each month.

This billing model is advantageous for both bookkeeping professionals and business owners. The business will pay a consistent monthly fee, leading to clear expectations regarding deliverables. By transitioning from an hourly rate system, the bookkeeper is incentivized for efficiency and accuracy rather than being penalized for inexperience or slower work.

Reputable bookkeepers and firms offer full-service fixed-fee bookkeeping packages starting at around $500 to $1,000 per month. These packages encompass everything necessary to keep your financial records up to date, ensure compliance with government deadlines to avoid penalties, and provide reliable financial reports and insights that support informed decision-making and business growth.

Written by Cher Savage @BiznessbyDesign