Why You Need to Outsource Your Accounting (and What Can Happen If You Don’t)
As the owner and operator of a field services business, accounting can be either the rock that weighs you down, or the tide that floats your boat.
If, in addition to being a skilled tradesperson, you happen to be a registered CPA and tax expert with lots of extra time on your hands then, by all means, do your own books. Otherwise, you’d be smart to outsource it.
“Putting together a proper set of financial statements takes time but it’s a smart investment,” says Quan Ly, Partner at McRally Accounting. “Banks, creditors, and the taxman all require these, and it’s going to be extra expensive if the books aren’t done right the first time.”
Why you should outsource
The primary benefit of outsourcing your accounting, bookkeeping, and tax preparation is that it lets you focus on the things that produce revenue for your company, while simultaneously reducing the risk of potential costs.
“Accounting mistakes are expensive to fix,” says Ly. “In the case of a tax accounting error, by the time you go through the whole process it may end up setting you back two to three times the direct accounting expense, never mind any penalties and interest.”
Quan Ly, Partner, McRally Accounting
Good people add opportunity that offsets their cost. If paying a pro bookkeeper even $50 per hour frees you to go out and generate $150 to $200 hour in revenue, why wouldn’t you do that?
A professional bookkeeper can also break down sales so you understand revenue sources better and help optimize your business. “Good people add opportunity that offsets their cost. If paying a pro bookkeeper even $50 per hour frees you to go out and generate $150 to $200 hour in revenue, why wouldn’t you do that?” Ly asks.
Tack-on the qualitative business value of having a Service Level Agreement in place that ensures you get each figure/form/report exactly when you need it, and there’s no real argument to be made against outsourcing your accounting.
Outsourcing vs hiring
If you’re big enough, you may consider hiring your own in-house staff, but the wide range of competencies your business may require, along with the inherently uneven workloads of accounting, could make finding the right person difficult.
In a field services business in particular, you want to make sure you’re working with someone accustomed to managing the unique nuances of the industry: the complexities of often disjointed documentation that are the result of a mobile workforce, the challenges of working with a number of sub-vendors and/or seasonal staff, and the seemingly endless tax implications.
The risks of getting it wrong
In Canada, GST remittance is a common area for field services businesses to get in trouble.
“The basic requirement is that you have to collect and remit,” says Ly. Sounds simple enough, but misplace any money, or miss a tax threshold, and you will find yourself reaching into your own pocket to cover the difference. “It’s not a good feeling,” says Ly.
The government will come after you. They will demand that you go on an aggressive repayment plan (up to 80% of your personal monthly income, according to Ly). The government can put liens on your business, or even come after personal assets.
“I had one field services client who had been doing his own books for 10 years, making honest errors on his GST remittance the whole time—just simple stuff that he was missing that any decent bookkeeper could have caught,” Ly recalls. “In the end, he owed more than $160,000. The government came after his house and the whole thing took more than two very expensive years to sort out.”
Quan Ly, Partner, McRally Accounting
I had one field services client who had been doing his own books for 10 years, making honest errors on his GST remittance the whole time—just simple stuff that he was missing that any decent bookkeeper could have caught. In the end, he owed more than $160,000.
An easy spend
Do the math and you’ll come to the conclusion that outsourcing the accounting of your field services business to a pro like Quan Ly is a no-brainer. The equation likes like this:
(Better focus + Easy access to quality data + Flexibility to scale) minus (HR headaches, Tax risk and inefficiency) = Improved business valuation, financial preparedness and thousands in annual savings
“It’s the classic business problem—you don’t know what you don’t know,” says Ly. “Outsource the work to someone who does and get back to growing your company.”
Wondering what the difference is between an accountant and a bookkeeper? Us too. Ly explains how the two professions differ.