Have a question about a small business topic? Let our resident expert Chris Griffiths take a run at it. E-mail your questions to firstname.lastname@example.org. Confidentiality ensured.
The question: I have a small manufacturing business doing about $3-million per year. Currently I use an outside bookkeeper, but feel like it might be time to move the function in-house. I feel the time I spend sharing information and directing how certain expenses should be allocated with my bookkeeper could be served in house, in real time, for less money. Should I hire, or continue to subcontract?
The answer: You've struck a nerve with this one. Since I'm a columnist, and not a journalist, I warn you that my personal bias is going to shine through here.
If you have an experienced employee on staff who can provide guidance on how things should be entered, tracked and reported, and if you have other value-add work that needs to be done in the office, then an in-house bookkeeper can be incredibly useful.
Based on the level of your revenue, you're probably in a great position to adapt a current administrative position to include bookkeeping or add this type of position to your team. I have done my own bookkeeping since my first business and have become addicted to controlling proper allocation of revenue and expenses, and being able to generate reports in real time that allow me to manage my business, make strategic decisions and track my profitability and cash flow.
Some people will tell you that your core competency is in manufacturing and providing services, so don't get bogged down in the details of bookkeeping. They'll tell you to outsource those tasks out to professionals who do it every day. I'd agree that many small business owners don't know a lot about income statements and balance sheets and as such are happy to subcontract that work, as they don't have strong opinions one way or another. However, the way you phrased your question suggests that you give a lot of direction to your outside bookkeeper already. No doubt someone on your team is writing checks, entering bills, issuing invoices, collecting receivables and making deposits – so one has to wonder how far off you are from adding the bank reconciliations, depreciation calculations and other remaining bookkeeping tasks that would take you where you want to go?
I think your decision should be less about saving money and more about the control and usefulness you will gain by having up-to-the minute data that can drive strategic decision making. Running up to date reports from your bookkeeping package, such as Quickbooks or Simply Accounting (– allows you to see where the money is going and track your cash flow and profitability daily.
Furthermore, assuming you're using online banking, much of the data, like line items from bank and credit card statements and transfers between bank and line of credit accounts, can be downloaded daily, weekly or monthly – thus eliminating time consuming data entry.
Any long-term client that I've worked with has always brought their bookkeeping in-house, regardless of their business size or complexity. As we get their books up to date, in real time, we review the statements and I show them how seeing the numbers in their own business prompts them to ask questions, dig deeper and run their operations more effectively. None of my clients regret their decision. They are hooked on the story told by a clean set of financials.
So while outside bookkeepers have a lot to offer small businesses, especially those owners who aren't particular over how entries are allocated or are not interested in seeing a lot of reports, I think your case can certainly benefit from in-house attention. It's less about saving money and more about having key data points about your business up to date and at your fingertips. Good luck!
Chris Griffiths is the Toronto-based director of fine tune consulting, a boutique management consulting practice. Over the past 20 years, he has started or acquired and exited seven businesses.