Traditional bookkeeping isn’t a task that small-business owners are exactly thrilled to complete in-house. But only 14% of small and midsize businesses (SMBs) fully outsource bookkeeping.
Why? Ultimately, despite the pain of tracking transactions and juggling financial documents, small-business owners still want regular insights into their business’s financial health. It’s difficult to have these insights if owners hand their financials over to someone else.
Let’s take a look at specific problems of completely outsourced bookkeeping. And let’s also look at improved in-house bookkeeping solutions — i.e., software that provides easy organization and tracking of transactions — so that you, as the small-business owner, can understand and be involved with your business’s health.
Outsourced bookkeeping is riddled with problems for small-business owners
Outsourced bookkeeping means you hire a local bookkeeper or a virtual service that completes bookkeeping tasks online. In either instance, you stand on the outskirts of the process and trust that the person or service will keep accurate records of your business transactions — and that your books will be ready come tax season.
According to one survey, 45% of small businesses do not employ an accountant or a bookkeeper, choosing instead to do the bookkeeping process themselves — slogging through transactions, finding the right categories, and spotting/fixing inaccuracies.
In other words, traditional bookkeeping is tough (and unnecessary), but it’s still not enough to make small-business owners outsource. Here are three key reasons why.
1. Outsourced bookkeeping is too expensive.
Depending on the amount of work required, small-business owners can pay from $500 to $2,500 a month to outsource their bookkeeping. These prices are too high for small-business owners who are just trying to pay the rent and keep the lights on for their business every month.
Take the company ScaleFactor, which offered automated bookkeeping tools and outsourced services to small businesses. The pricing was steep. Packages began at around $6,000 and went up to $30,000 a year. The company couldn’t convince small-business owners that their service was a necessity to justify the cost (particularly during COVID-19). ScaleFactor closed their doors in June 2020.
How Neat can help: At Neat, our prices are up front and affordable. You pay $13 per month (charged on an annual basis) for our Basic Plan and $29 per month for our Complete Plan. With these plans, you can store thousands of financial documents (e.g., bills), generate reports for general business expenses and taxes, and automatically stream transactions into Neat. You also have the ability to reconcile transactions with one tap on your mobile phone. There are no hidden costs with our service — what you see is what you get.
2. It offers less control and visibility over your business’s financial health.
With outsourced bookkeeping, you, as the business owner, can’t check your financials as needed; instead, you have to email or ping the bookkeeping service to ask for updates. This lack of control and visibility means that you’re not up to speed on your profits and losses, a significant shortcoming during uncertain times.
CBInsights found that 29% of small business owners fail because they ran out of cash. It’s crucial that you be hands-on with the bookkeeping process so you’re aware if you need to cut expenses, especially if COVID-19 continues to take its toll. With outsourced bookkeeping, you might get spreadsheets and reports from your provider at the end of every month, but this still doesn’t give you the crucial information needed to make business decisions in real time. You’re in the background of your company’s financials, relying on someone else to tell you how you’re performing.
How Neat can help: With Neat, you’re in the driver’s seat of your business’s financials. In addition to uploading and organizing financial documents in real time, you can check the main dashboard and helpful financial data reports at any time to see how much money you have coming in and going out (aka your cash flow) and whether you need to make adjustments. And you don’t have to be an accounting major to use and understand our bookkeeping software. Simply ensure that business transactions are recorded and legitimate, are categorized correctly, and have a financial document attached.
3. You risk the security of your business’s financials.
Sharing financial information with bookkeeping services can increase the risk of data breaches and hacks that access confidential information. With 60% of small businesses going out of business within six months of a cyberattack, it pays to err on the side of caution before outsourcing bookkeeping.
Forty-one percent of small-business data breaches are a result of third-party mistakes. If your outsourced bookkeeping provider has poor security procedures or sends highly sensitive tax and financial documents via email attachments (which many accountants still do), becoming a victim of a cyber attack is a legitimate concern.
Even file sharing websites pose security risks. Forty-five percent of businesses that outsource worry that “a cloud-based service may not be stable or reliable enough.” This fear is not unfounded: 40% of participants of one survey cited file-sharing services as the cause for an accidental breach by employees.
How Neat can help: Security is a top priority at Neat. As one example, we encrypt your stored files with the same standard used by the U.S. government, banks, and credit agencies. Our infrastructure is also monitored on a 24/7 basis, our software and applications are hosted with leading data-center providers, and we perform security audits to maintain security and compliance requirements. In short, we ensure that your business’s financials are secure so you can rest easy.
Use in-house solutions instead of outsourced bookkeeping
Outsourced bookkeeping may have had its place in the traditional business environment. But in today’s world of intuitive software and streamlined bookkeeping processes, it’s simply unnecessary. Too, you miss out on key insights about your business. By using the right software, you can keep bookkeeping in-house, understand the process, and have a 360-degree view of your financial health.
At Neat, we’re on a mission to ensure that small-business owners can breeze through the bookkeeping process without handing it over to someone else. Check out our software here!