I get this question all the time. The entrepreneurs I talk to understand the value of the accurate and efficient accounting that inDinero provides. But because they want to make data-driven decisions about their businesses, they often don’t want to commit to a solution before it’s the “right” time.
The bad news: There’s no hard-and-fast industry benchmark that dictates the best time to outsource your accounting.
The good news: I just found this free tool from Clearer Thinking that can help you determine your own hourly rate, how much you value your time, and when it makes sense to outsource all kinds of tasks, from doing your laundry to, yes, bookkeeping and accounting.
When it comes to finding the right accounting and tax solution, guessing isn’t a good idea. Download this interactive guide to choose.
The Right Time to Outsource Small Business Accounting: The Short Answer
In my experience, many companies choose to transition to an outsourced accounting solution at a certain milestone, like:
- You’re hiring your first employee
- Your expenses are have reached $15-20,000 per month
- You’re about to see significant growth and don’t want to waste your time on back-office tasks
Outsourced Accounting: Here’s the Longer Answer
If you spend so much time on your accounting and tax related tasks that you are sacrificing revenue-generating activities, it’s time to consider outsourcing. At this point, the opportunity costs of continuing to do your own accounting are higher than the cost of outsourcing it. After all, you make money from meeting with clients, adding new features to your app, or producing videos—not from keeping your books. Check out my colleague’s article for more on the true cost of DIY accounting.
As Entrepreneur.com advises, you can’t make up for lost opportunities, so it simply makes more sense to outsource: “Find a good bookkeeper for day-to-day accounting and an even better CPA for tax accounting.”
(inDinero clients only need one vendor for these things because we handle it all for them.)
Here’s Why You Shouldn’t Wait to Outsource Your Small Business Accounting
Even if you don’t mind the extra time it takes and think you’re keeping your books correctly—you’re probably not. Most small business owners are not accounting experts, especially if they think they are.
When we bring on new clients at inDinero, we often find that their books aren’t in great shape, even for business owners who have been keeping meticulous records. That means they’ve been basing important business decisions on faulty data.
We also see this when it comes to taxes. Many startup founders and early-stage entrepreneurs connect with a neighbor or family friend who specializes in filing personal income taxes. While these people are possibly experts at making sure individuals claim their deductions and get their taxes paid on time, they just don’t have a firm grasp on the complexities of small business taxes. That’s a big risk that many small businesses don’t even realize they’re taking.
Regardless of what stage your company is at, don’t hesitate to ask for expert advice and consider your options.