Why a Specialized Outsourced Bookkeeper is a Better Choice
Who is keeping your books: a tax accountant or an outsourced bookkeeper?
Managing your business finances is crucial for decision making, maintaining a healthy bottom line, and complying with tax regulations. When it comes to tracking your financial transactions, two common options are hiring a tax accountant or outsourcing to a specialized bookkeeper. While tax accountants are adept at tax planning and preparation, they might not be the best fit for day-to-day bookkeeping tasks. In a sense, using a tax accountant to manage your accounting is like expecting a real estate attorney to defend a client accused of a crime. Specialization matters.
In this article, we’ll explore the pitfalls of using a tax accountant for bookkeeping and discuss why a specialized outsourced bookkeeper is a better choice for your business.
1. Lack of Focus on Core Competencies
Tax accountants are primarily trained to handle tax-related matters, including strategic tax planning and filing. Assigning them bookkeeping tasks can divert their focus away from their core competencies.
Tax accountants are in the business of doing tax work and, in a sense, the bookkeeping is a side hustle that is not their top priority. As a result, your business may not receive the specialized attention it needs for accurate and organized financial record-keeping.
Outsourced bookkeepers, on the other hand, live and breathe financial record keeping and keeping the books organized and properly classified and do not have competing priorities.
2. Limited Scope of Expertise
Tax accountants may lack the in-depth knowledge and experience required for comprehensive bookkeeping. Bookkeeping involves recording financial transactions, reconciling accounts, managing invoices, and categorizing expenses, among other tasks. Specialized bookkeepers, on the other hand, possess specific expertise in these areas, leading to more precise and efficient bookkeeping practices.
In addition, different industries have different revenue recognition standards, reporting requirements, and financial presentation formats. A good bookkeeper translates financial results into useful information that others in the industry can understand and make actionable.
3. Increased Risk of Errors
Bookkeeping demands meticulous attention to detail, as even a minor mistake can lead to financial discrepancies down the line.
Tax accountants, while skilled in handling complex tax matters, might not have the same level of attention to detail necessary for precise bookkeeping. This could lead to errors that impact financial reporting, decision-making, and compliance.
Also, in tax accountants may not capture all of the relevant important details on transactions like sales by location, salesperson, or match expenses to the right projects. Those details matter and help owners and operators better assess performance and what actions to take with their business.
If those details are not recorded regularly, it can be difficult and time-consuming to recreate historic transactions and find missing details.
4. Time-Consuming Nature
Bookkeeping is an ongoing process that requires consistent attention and regular updates.
Tax accountants often have busy schedules, particularly during peak tax seasons, which can lead to delays in bookkeeping tasks. Also, tax accountants need to keep up to date on changes in the tax laws. They spend their time focusing on their top priority: taxes.
In contrast, specialized bookkeepers are dedicated to maintaining your financial records in a timely and organized manner, ensuring accurate reporting and reducing the risk of missed deadlines. An outsourced bookkeeper is focused on changes in their domain including industry and specialized software changes.
5. Limited Software Proficiency
Effective bookkeeping often involves using specialized accounting software to streamline processes and ensure accuracy.
Tax accountants might not be well-versed in the latest bookkeeping software or lack the proficiency required to leverage its full potential. Specialized bookkeepers, however, are well-trained in using these tools to optimize your financial management processes. Increasingly, industry specialization is becoming more standard and most tax accountants will not be aware of different software integrations or tools used within different business verticals.
6. Potential Cost Inefficiencies
While tax accountants might offer bookkeeping services, their hourly rates are often higher than those of specialized bookkeepers. Allocating high-priced resources to routine bookkeeping tasks can result in cost inefficiencies for your business. Outsourcing bookkeeping to specialized professionals can provide cost-effective solutions without compromising on accuracy.
In other words, bookkeeping is often not most tax accountants’ highest and best use.
7. Compliance and Audit Preparedness
Accurate financial records are crucial not only for day-to-day operations but also for compliance and audits. Specialized bookkeepers are well-versed in maintaining organized financial records that meet regulatory standards. Relying solely on a tax accountant for bookkeeping might leave your business unprepared for audits or regulatory inquiries.
Wrapping Up
While tax accountants are indispensable for tax planning and preparation, they may not be the best fit for handling intricate bookkeeping tasks. A specialized outsourced bookkeeper brings targeted expertise, attention to detail, and software proficiency that can significantly improve your business’s financial record-keeping practices. By avoiding the pitfalls of using a tax accountant for bookkeeping and opting for specialized bookkeeping services, you can ensure accurate financial reporting, compliance, and more efficient business operations.
An outsourced bookkeeper is less expensive, more efficient, and specialized than a tax accountant at keeping your books. Reversed, few would expect deep tax expertise from their bookkeeper.
If you are interested in talking about outsourcing your bookkeeping, please reach out to us:
SanitasAccounting.com / LinkedIn / Email
We’re also proudly located in Boulder, CO.