BusinessTN

When Laura Deleot launched Crookston Design, a Nashville graphic design business, several years ago, she didn't think she could afford a bookkeeper. But after about a year, she'd brought in enough business that bookkeeping tasks were taking away from

what she does best.

"I discovered that I could outsource [bookkeeping] for less money than I was spending in my billable time," Deleot says. "And since my expertise is creative and visual, not financial, it made sense for me to outsource that sector of the business."

Bookkeeping is far from glamorous, nor is it the reason most entrepreneurs like Deleot started their businesses in the first place. Still, it's a crucial part of any business endeavor, and there are paths to sound financial footing that don't have to include a small business owner's precious time at the wheel.

Determining whether to outsource bookkeeping responsibilities or keep them in-house, however, can be a difficult decision. Before making it, Larry Rossini, director of the Small Business Development Center in Knoxville, says business owners should attend an IRS small business tax workshop to understand tax requirements associated with payroll and other bookkeeping functions. (Visit www.tsbdc.org to find one near you.)

"Once they understand what is required, they will better be able to determine if they have the skills in-house or if they need to outsource it," Rossini says.

It's important to realize that there is no set formula for whether or when to outsource bookkeeping functions, and that what works for one business may not work for another.

"Every business is different," Rossini says. "There's no pat answer. You can't say, for example, until you have three employees, do it in-house. It depends on the literacy of the people in the company."

For those who want to keep bookkeeping tasks in-house, Rossini and others recommend using a bookkeeping software program such as QuickBooks. But even though Rossini says the program is user-friendly, it may not be for everyone.

"If you're going to have a long learning curve, or you're not computer literate enough, you should probably use an outside service," Rossini says. "You have to consider the time spent learning. If you could use that time to grow your business, then I think you would be better served outsourcing."

Hunter Robinson, principal of Robinson CPA firm in Memphis, says most small business owners don't have the capability to do bookkeeping work internally, and if they do, they've spent quite a bit of money to hire the right person on a full-time basis.

"We typically find that small businesses are better off spending their resources on other things, such as sales, marketing and internal management," he says. "We tell businesses that if they outsource to us, it's going to be cheaper in the long run, and they will also have multiple benefits."

Such benefits are associated with having an independent resource review the numbers—checking for errors, unauthorized transactions, double postings, etc. Plus, Robinson says, most firms that specialize in such services have multiple levels of supervision, allowing for checks and balances. If tasks are performed internally, Robinson adds, it can be "a last-minute hodgepodge review."

And hiring an outside firm shouldn't break a budget. Robinson CPA firm, which typically works with businesses that have one to 20 employees, charges anywhere from $200 to $500 a month. (Robinson says the majority of their clients require services that bill at the low end of the spectrum.)

But if one decides outsourcing is, in fact, the way to go, how should one go about finding a suitable bookkeeper? Rossini suggests contacting local chamber offices for a list of members in the bookkeeping/accounting service business. From there, he recommends interviewing individuals as if one were hiring a full-time employee. Consider experience, the number of clients the individual or company currently serves, references, community reputation and cost.

Both Rossini and Robinson agree that hiring a CPA firm that specializes in handling taxes, payroll and bookkeeping services for small businesses can also be beneficial and may even be the best bet. Most small businesses already have an accountant for year-end tax planning, so doing it this way can give business owners more bang for their buck in more ways than one.

"The firm will be aware of the business' transaction history through-out the year and have a good familiarity with the business, so they will be able to better apply bookkeeping transactions to tax planning," Robinson says.

Depending on which route one takes, both experts warn not to underestimate the importance of getting it right from the beginning.

"First of all, you could be audited, and secondly, if you've done something in error—like not computing your employees' payroll correctly—you could have back wages or penalties in interest," Rossini says. "All of this takes away from the business."

But if one chooses to outsource the function, remember that out of sight does not mean out of mind. It's vital that business owners understand the financial structure of their business, regardless of whether they're getting help from the outside.