Poor financial management is one of the major reasons that businesses fail. Unless you can stay on top of your finances, you will run into cash flow issues that could cripple your company. That’s why accurate bookkeeping and accounting is so important.
Traditionally, you have two options for handling your accounting; you can deal with it in-house, or outsource to an accounting firm. Although many business owners like to keep their accounting in-house and hire a full team of accounting professionals, this is not usually the best option. When you consider the costs of hiring and managing an in-house accounting team, you will see that it is simply too expensive. Outsourcing to an accounting firm will help you achieve more by saving time and money, and you will still have access to all of the financial expertise that your business needs to thrive.
This article will break down the costs of an in-house accounting team and suggest some of the ways that outsourcing your bookkeeping in Canada can save you money.
A very small business may be able to get by with a single accountant that handles all of the bookkeeping and payroll on their own. However, as your business grows, you will need a large team to manage your finances and that quickly gets very expensive. If you want to run an effective in-house accounting team, you will need a bookkeeper, payroll specialist, and a certified public accountant (CPA). These are skilled positions that command high salaries, so your staff costs quickly add up.
According to Nuevoo.com, the average salary for a bookkeeper in Canada is $45,110; however, the most experienced bookkeepers can earn up to $56,550 or more. Even an entry-level position still pays an average of $31,200.
The average salary of a payroll specialist and similar experts is even higher. It’s important that you hire an experienced candidate to handle your payroll because any mistakes can cause a lot of issues with staff morale and may even lead to legal problems. Hiring somebody with the necessary experience will cost you an average of $57,098 per year, according to Payscale.com. However, some companies pay as much as $62,000, and if you want the best candidates, you will have to offer a competitive salary.
Payscale also lists average salaries for CPAs, and even inexperienced accountants can command high salaries. A CPA with less than a year of experience can still expect to earn an average of $50,010, and their salary will increase to over $58,000 if they have between 1 and 4 years of experience. By the time they have over 10 years of experience, the average salary for a CPA reaches $79,709 to $92,466.
Even if you hire the least experienced candidates and pay salaries on the lower end of the scale, you still have an average staff cost of $152,208 per year. But where your finances are concerned, you can’t afford to cut corners so hiring less experienced candidates is always a risk. It is also important to remember that this figure does not include all of the other expenses you have to cover, like benefits and payroll taxes, etc.
If you want to attract the best talent to your business and improve employee productivity, you must offer good benefits. However, those benefits do come at a cost, so if you are trying to work out the financial burden of hiring an in-house accounting team, you need to consider them.
Studies show that as the average age of the population increases and mental health issues become more common, the cost of employee health benefits is rising. It is estimated that it costs an average of $8,330 to provide benefits to a full-time employee. If you add this cost to the salaries you are already paying, your total reaches $177,198 per year.
Although these figures are based on averages, and the true cost will depend on many factors, like the size of your business, your location and the experience of the candidates you hire, they still give a good indication of how expensive in-house accounting can be.
The other major issue is that there is often not enough work for a team this large so that investment is not worthwhile. However, if you outsource to a cloud accounting and bookkeeping company, it will be much cheaper than paying for all of those salaries and benefits.
As your business grows, it is essential that you manage your workload effectively. During a period of rapid growth, you may find that your in-house accounting team goes from having too little work to being overwhelmed in a short space of time, which means that you have to hire new employees very quickly.
When you are bringing new employees on board, there are certain hiring costs to consider. Rushing the hiring process because you are unable to manage your current workload also increases the likelihood of making a bad hire, which has long term detrimental effects on your company.
But if you outsource to an accounting business, you get the benefit of flexibility. They already have those resources available to you should you need them, so it is easy to adapt the service that they provide as your business grows.
Bookkeeping and accounting are complex and require a lot of knowledge and experience to get right. If you cannot afford to hire the most experienced candidates and only have a team of 3 or 4 inexperienced team members, the likelihood of errors is greatly increased. This is a big problem because a lack of effective financial planning has a big impact on the direction and decision-making in business, and it can lead to serious financial problems in the future.
Simple mistakes with things like payroll or filing your taxes can even land you in legal trouble, costing thousands (or hundreds of thousands) and cause friction with employees, so you have no margin for error. An experienced accounting company will provide you with a larger team of more experienced professionals, so mistakes are far less likely.
If you are looking for a solution to your accounting and bookkeeping in Canada, hiring an in-house team is rarely the right option. The overall cost of paying salaries and benefits is incredibly high, and any potential errors could be very costly to your business as well. But if you outsource to a cloud accounting and bookkeeping service, you will save a lot of money so you can focus your time and effort on achieving more for your business.