Think about the bookkeeper you want to hire and what tasks you imagine they’ll accomplish in a given month. To get these tasks done you’re forking over about $60k a year for an bookkeeper who can also turn on the coffee pot in the morning.
Some firms are beginning to outsource their billing and accounting needs to professional services firms who can do the same thing but for a fraction of the costs. Outsourced accounting is no different than your proposed bookkeeper except that your financials are managed by a real accountant and for about 1/5th the cost.
Now I’m not proposing that you fire your entire staff and immediately place a collect-call to China. Rather, I’m saying that if you’re about to hire another employee, think about whether or not you can get better utilization out of your existing staff by outsourcing some of their activities.
Let’s say you hire someone to post payables, record receipts, manage trust accounts, run pre-bills, make corrections, print and send invoices and run financial reports. These tasks typically fall within the scope of an bookkeeper or Office Manager who can cost around $60k a year to staff after salary, vacation, medical, etc. The comparable monthly investment utilizing outsourced accounting costs, on average, somewhere around $12k a year – nearly 1/5th the cost. Why so cheap? Here are a few reasons why:
- Experience – Essentially, outsourced accounting firms usually employ actual accountants who understand law firms, taxes, payroll, and general accounting on a deeper level than do others without similar backgrounds. This experience results in less head-scratching and more doing. If you or your Office Manager doesn’t fully understand WIP, a balance sheet, or an income statement, you might not catch important accounting errors.
- Expertise – Outsourced accounting firms often know your billing & accounting software better than you and your staff do. That’s because if they don’t know the software, they can’t get their work done efficiently. Their expertise in the systems you use results in far more efficient, accurate, and effective use – which results in less wasted money each month, higher margins for you, and a better Christmas party for the whole firm.
- Resources – Whether your or another employee is doing it, sometimes billing & accounting can take a back seat to fighting fires in the kitchen or waiting on hold with American Express to find out who ordered a crate of ice cream bars and had them shipped to Antigua. By outsourcing this activity, you’re leveraging a large staff that is dedicated solely to fixing your pre-bills, creating invoices, posting receipts, recording trust activity, etc. And, really, you’re not only leveraging their staff and redundant resources, you’re also leveraging their infrastructure, knowledge, expertise, and best-practices. This can free up you to run your business or your Office Manager to process more time into billing.
So my challenge for you: think about how outsourcing can improve your firm. We’d like to hear your thoughts on this.