If you’re like most business owners, dealing with accounting tasks doesn’t exactly spark joy.
Here’s how you can take accounting off your to-do list and find more time to focus on your business—through the life-changing magic of outsourcing.
Accounting: All the moving parts
When we talk about accounting, what we’re really talking about is three interlinked processes: Bookkeeping, accounting, and tax planning.
- Bookkeeping tracks all your day-to-day transactions—money entering and leaving your business. It also categorizes those transactions, so you can see how you’re spending money, and how you’re making it.
- Accounting takes information from your bookkeeping, crunches the numbers, and shows you the big picture. Financial reports like income statements and balance sheets show you how much money you’re earning, and how much you have to work with.
- Tax planning involves looking at your bookkeeping and accounting figures, and using that info to save as much as possible on your taxes.
These three areas often overlap. For instance, your bookkeeper might prepare financial reports for you, and your accountant may help with your tax planning.
[ Related: Accounting 101 for entrepreneurs ]
Why outsource your accounting?
Small businesses often hire some kind of outside help to manage their accounting tasks. There are a few reasons why.
Accounting eats up time
There’s no way around it. Even if your spreadsheets are true works of art, DIY accounting will cut into time you could otherwise spend helping your business grow.
Accounting is high stakes
Make a mistake on your tax return, and you could get fined by the IRS—or even trigger an audit. Miscalculate your income for the month, and you could find yourself coming up short on cash when it’s time to pay vendors. Accounting is high stakes, and small errors can have big consequences.
Good accounting takes expertise
Even if you spend sleepless nights poring over textbooks, you won’t have the expertise of a professional bookkeeper, accountant, or tax planner. That’s because they have experience—they’ve worked with many businesses, and understand first-hand the mistakes to avoid. When your accounting is outsourced, you have experts fighting on your side.
How to outsource your bookkeeping
When you outsource your bookkeeping, a hired professional tracks money entering and leaving your business and categorizes it for you. That information can be used by an accountant to create financial statements.
There are two main options for outsourcing your bookkeeping: Hiring a local bookkeeper, or hiring an online bookkeeping service like Bench.
Hiring a local bookkeeper
Cost: $20 to $50 per hour, usually with a $100–150 monthly minimum.
Best for: Small to medium sized business owners who want to meet their bookkeeper face to face, or who work with a lot of paper records like receipts.
How it works:
When you hire a local bookkeeper, they’re either a freelancer, or a firm.
A freelancer works on their own. Their clients usually include a number of businesses. Many freelance bookkeepers will specialize in a certain industry—like restaurants.
A firm is a company that employs many bookkeepers. A large firm will serve any business, regardless of industry.
One of the best ways to find a local bookkeeper that serves your needs is to ask other business owners in your area. This is especially true if you’re looking for a freelancer specializing in your industry.
Pros and cons of hiring a local bookkeeper
Cost: Starting at $119 per month, flat rate
Best for: Small to medium sized business owners who use online banking and credit cards, and are comfortable working online with their bookkeeper.
How it works:
When you sign on with Bench, you get a dedicated team of remote bookkeepers who do all of your bookkeeping for you. You can login in Bench any time and see all of your transactions, and financial reports show you how your business is performing.
To communicate with your team, you message them through the Bench app. The mobile version of the app lets you manage your bookkeeping on the go.
Your business accounts are linked to Bench, so each new transaction is automatically imported. Then, your team categorizes it for you.
Pros and cons of using Bench
How to outsource your accounting
An accountant takes all of the info recorded and categorized by your bookkeeper, then produces financial reports that show you how your business is performing.
They can also advise you on financial decisions—such as taking out loans, bringing on employees, or expanding your business. And they can file your taxes for you, doing their best to save you money on your tax return.
Hiring a local accountant
Cost: An accountant will typically charge $150–$400 per hour, depending on their level of experience.
Best for: Businesses dealing with a lot of paper financial records, or business owners who want to meet with their accountant face to face.
How it works:
Like bookkeepers, accountants either work on their own as freelancers, or as a part of accounting firms. In fact, often bookkeepers and accountants will work together in one firm.
The way you work with your accountant will depend on your business. You may deliver your bookkeeping info to them on a monthly or quarterly basis, or all at once at the end of the year, before tax time.
Even if you use a bookkeeping service like Bench, which offers many of the same services as an accountant—like creating financial reports, and helping you track cash flow—you still benefit from hiring one. When you have an accountant working for you, you’ve got someone reliable you can turn to for financial advice.
Pros and cons of hiring a local accountant
Hiring an online accountant
Cost: According to Upwork, the cost of hiring an online accountant on their platform starts at $20–$35 per hour.
Best for: Business owners already comfortable with handling financial tasks online.
How it works:
To hire an accountant online, you can go one of two routes.
Large, national accounting firms often offer online versions of their in-person services. However, their services may be limited compared to face-to-face. And you may need to become acquainted with their online platform in order to use them.
The other option is to hire a freelancer on a platform like Upwork. An online freelancer is much like a local freelance accountant, but they may charge less than your local options. Also, because Upwork is global, you have many accountants to choose from—meaning you may have an easier time finding an accountant who specializes in your industry.
Pros and cons of hiring an online accountant
Outsourcing tax planning
Often, an accountant—especially a certified public accountant (CPA)—can help you plan your tax deductions. But in case your accountant isn’t up to the task, or if you’d like an especially in-depth look at all your tax options, tax planners are here to help.
While it costs money to hire a tax planner, you often save money in the long run because of the tax deductions you’re able to write off.
Hiring a local tax planner
Cost: According to the CPA Practice Advisor, it costs on average $273 to hire a tax planner to itemize your deductions at both the state and the federal level.
Best for: Business owners who want to meet face to face with their planner, or ones who keep mostly paper records.
How it works:
Your tax planner may work as a solo freelancer, or as an employee at a local accounting firm. You bring all your bookkeeping and accounting info to them, and they help you file for as many tax deductions as possible. In some cases, that means itemizing every deduction. In other cases, that means opting for a generalized deduction.
Hiring a tax planner will cost more depending on the state of your business records. The more time your tax planner needs to spend working for you, the more they’ll charge. If your bookkeeping is disorganized and you’ve got a shoebox of paper receipts that need to be sorted, be prepared to pay more.
Pros and cons of hiring a local tax planner
Hiring an online tax planner
Cost: Starting at around $30 per hour on Upwork, with total price according to scale
Best for: Business owners already familiar with managing finances online, or businesses in small communities where there are slim pickings for tax planners.
How it works:
Hiring a freelance tax planner on a platform like Upwork is similar to hiring an accountant in the same way. In fact, your accountant may offer tax planning services—or vice versa.
Once you’ve hired a planner, you deliver your financial records to them, and they help you through the process of planning how you’ll file your taxes in order to save the most amount of money possible.
As with a local tax planner, the total amount you pay will be based on how long it takes your tax planner to do their job. That means it’s smart to bring them organized financial records.
Pros and cons of hiring an online tax planner
Outsourcing your tax filing
The final step of outsourcing your accounting is to have your taxes taken care of. This is something that your bookkeeper or CPA might offer as an additional service.
If you’re outsourcing your books to Bench they can file your taxes after completing your year end financial package. So your bookkeeping and taxes are outsourced by the same team who takes care of your books throughout the year.
The first step to outsourcing your accounting is to hire a bookkeeper. Try Bench, and get one month’s worth of free bookkeeping.
Image by: Bench