Are you struggling to keep up with your startup’s finances while juggling a million other tasks? You’re not alone. Many startups find bookkeeping and accounting daunting, but there’s a solution that can save you time and money. Moreover, you’re probably worried about finances, marketing, sales, hiring the right people, etc. So it’s understandable if you don’t have time for accounting or bookkeeping, but it’s also crucial for your business to handle these responsibilities well. In fact, according to a recent study, 82% of businesses fail due to cash flow problems. For startups, efficient financial management is crucial, yet many struggle to keep up with accounting and bookkeeping tasks.
One way to ensure that happens is by outsourcing bookkeeping and accounting tasks to a bookkeeping VA specialist, who can take care of these tasks for you (and save you some precious time). Here are five reasons outsourcing bookkeeping and accounting matters for any growing business!
Outsourcing is Cost-Effective
How much are you spending on accounting? If you’re like most startups, the answer might surprise you. Here’s how outsourcing can cut your costs significantly.
Compared to hiring your bookkeeper, outsourcing is often less expensive, if not cost-effective. For example, if you hire a full-time employee for $50,000 a year and expect them to work 40 hours per week for 52 weeks of the year, you’re looking at the cost of $20/hour. However, startups that outsource their bookkeeping and accounting save an average of 20-30% compared to hiring in-house staff. For example, instead of paying a full-time employee $50,000 annually, startups can access professional services for a fraction of the cost, often as low as $15,000 per year.
That does not include benefits like health insurance or paid vacation days. If you outsource those tasks instead of hiring an employee, the outsourcing service will charge a base rate without extras such as a pension, medical, or paid vacation.
Other costs associated with hiring someone full-time instead of outsourcing include overhead expenses such as equipment, office space rental fees (if applicable), payroll taxes and filing fees, and more. For instance, a tech startup in San Francisco reported saving over $30,000 annually by outsourcing its accounting tasks, allowing them to reinvest in product development.
Outsourcing Frees Up Time to Focus on Your Core Competencies
Your business is unique, and so are the challenges that you face. It would be ideal if you could focus on what you do best; however, many tasks associated with running a small business take up valuable time.
Outsourcing can provide an alternative solution if you have limited resources or cannot hire staff to support your bookkeeping and accounting needs. This is, in fact, a strategic outsourcing technique that can level you up compared to the competition.
But remember the quote by the economist Arthur Laffer, who once said, “Outsource everything but your core business.” You can focus on what matters most for your business: growing your company by focusing on its core competencies or vision and goals while outsourcing all other administrative processes to experts in accounting who will work seamlessly with the banks (if applicable) to help keep up-to-date financial records. Studies show that business owners spend up to 40% of their time on non-core activities like bookkeeping. Outsourcing these tasks can free up significant time, allowing founders to focus on strategic initiatives. For example, a small e-commerce business outsourced its bookkeeping and dedicated 15 additional hours per week to enhancing its product line and marketing efforts. That can make a difference to your bottom line.
Outsourcing Lets You Access Expertise
Imagine having a team of financial experts at your disposal without the hefty price tag. Outsourcing brings specialized knowledge to your startup, ensuring you stay compliant and efficient. Outsourcing your bookkeeping and accounting gives you access to expertise in various areas. This includes:
- Knowledge of tax laws.
- Experience with small businesses.
- Knowledge of accounting software, including how to use it and what information it can provide.
- Expertise in bookkeeping, including accounting practices and procedures specific to your industry or business type (such as medical billing).
- A deep understanding of financial statements (e.g., balance sheets) that allows you to better analyze the health of your company’s finances at any given time—and make informed decisions about future growth opportunities or operations costs based on real-time data rather than estimates or experience alone.
To recap, outsourced accounting services offer expertise 80% of small businesses lack in-house, including specialized knowledge of tax laws and financial regulations. Jagdish Dalal once declared, “Figure out what you’re really good at and what you’re not. You can’t do everything for everyone.” This also relates to the concept of “Focus on the 20% that gives 80% of your results,” promoted by Stuart Wood, who also stated that companies should focus on their strengths. For example, a healthcare startup leveraged outsourced accounting expertise to navigate complex medical billing, saving them from costly errors and fines. This can make a difference when you scale your business.
Outsourcing Enables You to Remain Competitive
In a cutthroat market, staying ahead often means focusing on what you do best. Outsourcing your accounting can be a strategic move that lets you concentrate on innovation and growth. Outsourcing bookkeeping and accounting to a professional service provider allows you to focus on what’s most important for your company’s growth and expansion.
Companies that outsource can react 30% faster to market changes due to more streamlined operations. Additionally, you will no longer be bogged down by day-to-day operational tasks that prevent you from focusing on what makes you unique: your products and services, marketing, sales, etc. By using an outsourced accounting team, you can devote more time and energy to developing these aspects of your business.
Outsourcing is a Game-Changer for Your Company
90% of startups that outsource their financial management report improved business outcomes, including increased profitability and reduced operational risks. Outsourcing is a game-changer for your company because it will allow you to focus on your core competencies, access expertise, and remain competitive.
- First, outsourcing frees up time so that you can focus on the things that matter most for your business. This includes managing your team or building new products or services. It also means being able to keep an eye on the market and adjust accordingly when needed — staying agile as a startup.
- Second, outsourcing lets you tap into external talent where necessary so that you can increase efficiency while lowering costs at the same time. This means saving money while ensuring any project gets done right—without worrying about whether the person doing it knows what they’re doing!
- Finally (and perhaps most importantly), outsourcing helps ensure competitiveness in an increasingly competitive industry by providing profitability after overhead expenses have been covered—which lowers risk levels significantly since experts take care of these items instead of end users.
Summary of the Five Reasons Why You Should Outsource Your Bookkeeping and Accounting Responsibilities
- You can focus on your core competencies
- Also, you get access to expertise
- You can remain competitive in the marketplace
- Outsourcing is cost-effective
- Plus, outsourcing is a game changer for your company
The Bottom Line: 5 Motivations Why Startups Outsource Bookkeeping & Accounting
It’s time to leap. Outsource bookkeeping and accounting so you can focus on what’s most important for your company’s growth and expansion.
3 Key Takeaways
The three key takeaways on why startups should outsource bookkeeping and accounting:
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Cost-Effectiveness: Outsourcing is cheaper than hiring a full-time bookkeeper because you avoid additional expenses like benefits, payroll taxes, and office space.
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Focus on Core Competencies: By outsourcing, you free up valuable time to focus on what you do best, like growing your business and developing core products or services.
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Access to Expertise: Outsourcing bookkeeping grants access to professionals with specialized knowledge in tax laws, accounting software, and industry-specific practices. This expertise allows you to make informed decisions based on accurate financial data.