If you are a small business owner, chances are that you wear many hats.  Unfortunately, while it may seem like this strategy gives you complete control over your entire business, it could very well be costing you in terms of income.  For example, if you are a doctor running a solo practice (or a lawyer, or salesperson) and doing the books at the same time, you are costing yourself important billable time (or time that you can be selling). 

So, if you spend 1-2 hours a day paying bills, balancing the checkbook, running reports, etc. and an hour of your time is worth $100 (for argument’s sake) you are losing approximately $100-$200 a day.  That may not seem like much, but pro-rate that over 240 business days (48 weeks x 5 business days conservatively assuming you close for holidays, personal days, and vacation time), and you could be potentially be costing your business between $24,000 and $48,000 a year.  Now, if you were to hire an accounting firm that charges even $1,000 a month to handle all of the bookeeping, bank reconciliations, and report analysis, it would only cost your business a total of $12,000 for the year.  This comes out to a savings of 50%-75% annually. 

Even if you already have a bookeeper on your payroll, outsourcing still makes monetary sense from the standpoint that if this person is very knowledgable and skilled you are still paying much more than $12,000 a year to employ them not to mention any secondary costs such as insurance, payroll taxes, supplies, etc.  in addition to the time when they are getting paid for idle time.  The other side of the equation is that you are employing a less skilled and knowledgable person, in which case you will benefit from outsourcing the accounting duties by not only saving money but also acquiring a built-in support system.   Yes, it may be difficult to give up control and oversight over such an important aspect of your business, but then again you most likely went into business for yourself to make money, not to let it go towards costs that you can minimize by taking proactive measures.  And, if you do all of your bookeeping after-hours, wouldn’t you rather have that time to spend with friends and family, and save yourself from getting burned out in the future? 

Of course the figures used are just examples, and if your time is worth more than the value used, you will be saving your business even more money, which ultimately leaves more money for you to either put back into the business for growth or to take personally as salary.

This entry was posted on Saturday, December 29th, 2007 at 10:17 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.