Many UK business owners underestimate the true cost of in-house bookkeeping. Beyond the obvious salary expenses, numerous hidden costs can significantly impact your bottom line. This article explores these hidden costs of in-house bookkeeping and shows how outsourcing bookkeeping can provide substantial savings and benefits for your business.
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When calculating the cost of in-house bookkeepers, most businesses focus solely on salary. However, the actual expense extends far beyond this basic figure. Let’s examine what in-house bookkeeping really costs your business:
1. Employee Overhead
Maintaining an in-house bookkeeping team comes with substantial overhead expenses. These include providing workspace, equipment and other resources essential for daily operations.
Office space in the UK costs £300-£1,200 per desk monthly, depending on location. Add to this the cost of computers, furniture, heating, lighting and other utilities.
2. Training and Retention
Bookkeeping regulations and best practices constantly evolve, particularly in the UK’s complex tax environment. Continuous professional development is essential but often overlooked when budgeting for in-house bookkeeping.
Annual training costs can range from £500-£2,000 per bookkeeper. Factor in the time away from productive work during training sessions, which represents a significant opportunity cost.
3. Software Subscriptions
Quality accounting software is essential for accurate bookkeeping. Popular options for UK businesses include:
- Xero: £12-£33 per month
- QuickBooks: £8-£30 per month
- Sage: £12-£40 per month
Additionally, businesses often need specialised add-ons for payroll, inventory, or industry-specific requirements, adding £10-£50 monthly per solution.
4. Payroll and Holiday Cover
When your in-house bookkeeper takes annual leave or falls ill, work often piles up or requires temporary replacement. This creates inefficiency in manual bookkeeping processes and can lead to costly errors or delays.
Temporary bookkeeping help in the UK typically costs £150-£250 per day, significantly higher than your regular employee’s daily rate.
5. Opportunity Cost
Perhaps the most significant hidden cost is opportunity cost the value of time business owners spend managing bookkeeping functions rather than focusing on revenue-generating activities.
According to research, small business owners spend an average of 10-15 hours monthly overseeing bookkeeping functions, even with dedicated staff. At an average business owner’s hourly value of £100+, this represents £1,000-£1,500 in lost opportunity every month.
6. Direct Employment Costs
The Outsourcing advantage: In-house Bookkeeping vs Outsourcing
When evaluating in-house bookkeeping vs outsourcing, the financial advantages of outsourcing become clear. You may explore the bookkeeping cost comparison between in house and outsource bookkeeping UK below:
| Cost Factor | In-House (Annual) | Outsourced (Annual) | Potential Savings |
| Direct Employment | £27,000 – £38,000 | N/A | 100% |
| Overhead | £4,000 – £16,000 | N/A | 100% |
| Training | £500 – £2,000 | N/A | 100% |
| Software | £360 – £1,500 | Often included | 80-100% |
| Cover for Absence | £1,500 – £3,000 | N/A | 100% |
| Management Time | £12,000 – £18,000 | £2,000 – £4,000 | 70-80% |
| Outsourcing Fees | N/A | £3,600 – £18,000 | N/A |
| Total | £45,360 – £78,500 | £5,600 – £22,000 | £39,760 – £56,500 |
Benefits of Outsourced Bookkeeping beyond cost savings
Outsourcing bookkeeping services offers numerous advantages that extend beyond simple cost reduction:
1. Access to expertise
Outsourced bookkeeping providers employ teams of experts who specialise in different aspects of accounting. This means your business benefits from collective expertise rather than relying on a single person’s knowledge for accounting outsourcing for SMEs.
UK tax regulations are complex and frequently change. Professional bookkeeping services stay current with all regulatory updates, reducing your compliance risk.
2. Scalability
As your business grows, your bookkeeping needs will evolve. Outsourced services can easily scale with your business without the disruption of hiring new staff or restructuring your finance department.
This flexibility is particularly valuable for seasonal businesses or those experiencing rapid growth.
3. Improved technology access
Professional bookkeeping firms invest in advanced accounting software and technologies that might be cost-prohibitive for individual businesses, especially SMEs.
These technologies automate manual processes, reduce errors, and provide better financial insights through sophisticated reporting tools.
4. Focus on core business
By eliminating the need to manage bookkeeping functions internally, business owners and managers can redirect their attention to revenue-generating activities and strategic initiatives.
This refocusing of energy and resources often leads to improved business performance and growth.
The above contributes to outsourced bookkeeping benefits.
How UK businesses are reducing finance department costs?
Many UK businesses are strategically outsourcing financial functions to streamline operations and reduce costs. Small business bookkeeping expenses can be dramatically reduced through selective outsourcing.
Making the transition: How to successfully Outsource your Bookkeeping?
If you’re considering whether outsourcing bookkeeping is cheaper for your small business, follow these steps to ensure a smooth transition:
- Assess your current bookkeeping costs – Calculate all direct and indirect expenses associated with your in-house bookkeeping functions.
- Research qualified providers – Look for firms with expertise in your industry and positive client testimonials.
- Evaluate service packages – Determine which functions to outsource and which (if any) to maintain in-house.
- Plan for knowledge transfer – Develop a comprehensive transition plan to share existing processes and systems with your new service provider.
- Establish clear communication channels – Set expectations for regular updates and financial reporting frequencies.
Need help getting started? Schedule a free consultation with our onboarding team.
Conclusion
The decision between outsourcing bookkeeping vs hiring a full-time bookkeeper ultimately comes down to understanding the true costs involved. For most UK businesses, particularly SMEs, outsourcing offers significant financial benefits while providing access to expert services.
By recognising the hidden costs of in-house bookkeeping and embracing the outsourcing model, businesses can reduce expenses, improve financial management, and focus resources on core business functions that drive growth and profitability.
Outsource smarter, not harder. Let’s talk about how we can help your business thrive
FAQs
Is Outsourcing Bookkeeping cheaper for small businesses?
When you add everything up, in-house bookkeeping usually ends up costing you about 2-4 times more than outsourcing. It’s not just the salary – it’s all those extras like desk space, software, training, and the time you spend managing them that really add up.
I’m worried about sharing my financial info. Is outsourcing safe?
It’s a common worry, but good bookkeeping firms actually have better security than most small businesses. They invest in proper systems because their reputation depends on it. Just make sure to ask them about their security measures before you sign up.
Can I outsource some bookkeeping tasks but keep others in-house?
Absolutely! Lots of businesses do this. You might want to outsource the complicated bits like payroll or VAT returns while keeping day-to-day entries in-house. It’s totally flexible – you can mix and match what works for you.
How will I know if outsourcing my bookkeeping is actually working out?
The most obvious sign is having more money in the bank and more time on your hands! But you can also look for things like getting your reports on time, fewer errors on your tax returns, and spending less time worrying about your books and more time growing your business.
Why are so many UK small businesses switching to outsourced bookkeeping lately?
It’s really about getting more for less. Business owners are realising they can save money while actually getting better financial support. Plus, with all the recent tax rule changes, having experts handle your books just makes life easier.
My business is tiny – just me and a part-timer. Is outsourcing still worth it?
Smaller businesses often benefit the most! Instead of struggling with the books yourself or paying for a part-time bookkeeper who might not have all the skills you need, you get access to a whole team of experts for a fraction of the cost. And you only pay for what you actually need.
Parul is a dedicated writer and expert in the accounting industry, known for her insightful and well researched content. Her writing covers a wide range of topics, including tax regulations, financial reporting standards, and best practices for compliance. She is committed to producing content that not only informs but also empowers readers to make informed decisions.