Does outsourcing bookkeeping for CPAs make sense? Let’s look at two CPAs – Jack and Jill. Jack and Jill run their business using one full-time bookkeeper. The bookkeepers could help with data entry, invoicing, billing and related bookkeeping services. Both CPAs had reached a point where their bookkeepers were overloaded with client work. And, had to look into hiring a second bookkeeper.
Jack had used part-time staff in the past who he had to keep replacing for one reason or the other. So, this time he only wanted a full-time person. And he hired a second one at $3,000 per month. Jill had read about the benefits of virtual bookkeeping. So, she wanted to give it a try by starting off with a virtual bookkeeper who worked just 30 hours a month. And she could get an affordable bookkeeper for just $225 per month.
What are the real hourly rates?
How did Jack do with his two full-time bookkeepers? While they could share the load well, he could not keep both of them busy. Each bookkeeper was only 75% busy. He thought he was only paying $15 per hour. Instead, his real hourly costs were 33% more or $20 per hour. And that does not even include the other full-time bookkeeping costs.
And how about Jill? Jill was able to move load from her full-time bookkeeper to the new virtual one. Jill was only paying $7.50 per hour for that work. So, her net cost per hour was much lower now. Her real hourly rate was only $14 per hour. And as her workload went up her rates came down. So, her margins were much better. She reduced prices for some key clients which brought in more work. She used the extra savings to advertise as well.
What happened in 3 months?
Jack was struggling to make ends meet. He had to raise prices for his clients to maintain his profit margins. So, he lost a couple of clients which made matters worse. He had to lay off the second bookkeeper and the load was back on the first. The first bookkeeper could not take it anymore and ended up leaving the CPA firm. Jack now had to find and train a new one. The quality of work went down, and his clients were not happy.
On the other hand, Jill was able to add twenty new clients. That’s because she was marketing more and her lower rates helped her compete better. Since her bookkeeping rates were reasonable and she only had to pay for use, she was able to hire more bookkeepers for just $7.50 per hour. And her real rates kept coming down as she used more virtual staff. As Jill hired more virtual bookkeepers, her profit margins got better. Jill was able to reduce fees for key clients, increase marketing, improve profit margins and get more clients. And she thrilled her clients with better service at a lower cost.
Her original bookkeeper – Matt – did higher level tasks such as talking to clients and supervising virtual staff. Matt loved his work. Not only did he not have to do the grunt work. But he also felt great because he was now managing staff.
And in a year?
Jack was doing all the books by himself and serving just a handful of clients. However, he was working 60+ hours per week. And not having time for the better things in life.
In about a year, Jill had two in-house bookkeepers supervising the work of a more than fifty virtual bookkeepers. She had ended up hiring Jack’s bookkeeper as well. Jill was adding clients at a record pace. Her profit margins had never been better. Her clients were happy. But she had plenty of time to spend with friends and family.
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