If you are starting a business, you will need to keep track of your finances and have a system for accounting. This is where bookkeeping and accounting come in. Bookkeeping is the process of recording the financial transactions of a business: sales, purchases, receivables, payables and more. Accounting is the process of analysing, interpreting and reporting those financial transactions. Many startups consider bookkeeping software and outsourcing services for this.
But for startups the major concern is the cost. In this article we look at the factors that determine what it costs to outsource bookkeeping and accounting for a startup.
Factors impacting the bookkeeping and accounting cost for a startup
1. Company structure and size
The structure and size of your company plays a role in how complex and costly your bookkeeping and accounting system will be. A sole proprietorship, for example, will have a simpler system than a publicly traded corporation.
2. Business activity
The type and volume of business activity also impacts bookkeeping and accounting costs. A company with a high volume of transactions needs a more sophisticated system than a company with a low volume of transactions.
3. Accounting method
The accounting method a company uses — cash basis or accrual basis — impacts costs. A company using accrual basis accounting will have higher costs than one using cash basis accounting.
4. Reporting requirements
A company’s reporting requirements also impact costs. A company with complex reporting requirements will have higher costs than a company with simple ones.
5. Industry
Bookkeeping and accounting costs for a company in a regulated industry will be higher than for one in an unregulated industry, because of the added compliance work involved.
6. Location
The geographic location of a company can impact costs. Rates and local filing obligations differ from country to country, and both feed into what you pay.
7. Technology
The level of technology a company uses also impacts costs. A company that uses paperless accounting or invoice software will have lower costs than a company that relies on manual accounting methods.
Is outsourcing bookkeeping and accounting good for a startup?
The main downside of outsourcing your bookkeeping and accounting is that it can be expensive. You will need to consider carefully whether the savings from not hiring in-house staff offset the fees you pay your outsourcing provider. There is also the potential for miscommunication, since you will not be working side by side with your bookkeeper or accountant.
Use Invoice Office and save time and money
Outsourcing is not the only route. For startups, accounting and bookkeeping software can cover the day-to-day work: Invoice Office helps you produce your financial reports without the manual bookkeeping in between. Many startups end up with a middle path — software for the day-to-day, and an accountant for the year-end and the decisions that genuinely need one.