Employee vs. Independent Contractor Bookkeepers?

Employee vs. Independent Contractor Bookkeepers?

If you are someone who can spot a good accountant from a bad, has the desire to manage the HR component of having employees, like paying worker’s comp insurance, and don’t mind not being able to fire someone without worry about a lawsuit then an employee might be the best option.

Employees are dedicated to the company (meaning – not working for any other company), but also have that dreaded employee mindset. Most entrepreneurs we work with need people to think like them, act like them, and understand what it is to have your own business, even if it is a consulting service. Employees are limited in what they know. If they don’t know something, there isn’t anyone else on the “team” to ask. If the company outgrows them, there is no place for them to contribute and the hiring and knowledge transfer has to start over from scratch.

It makes sense for companies of a certain size to have accountants on staff, but for most entrepreneurs, it is too limiting to what they need and they simply can’t afford to make the wrong choice, usually can’t pay the employee desired benefits, and don’t have an HR team that can manage the hiring process.

Business owners should not be saddled with this time consuming process. In terms of risk management, accountants that are comfortable in their stable, steady position (where no one else really understands what they are doing) are in a place of trust and have a higher opportunity to commit fraud. It happens and there are ways to mitigate the risk of it happening to you.

My vote is stick with a part-time independent contractor until your business grows enough to warrant the additional fixed cost and salary burden. Usually around $1m of revenue, it makes sense to hire and pay an accountant $30-40k/yr. Rule of thumb accounting services run ~ 2-3% of gross revenues.

Should I Use A Placement Company For Finding A Good Accountant?

Should I Use A Placement Company For Finding A Good Accountant?


If hiring an employee makes sense for your business, and you don’t have an HR person on your team, I wouldn’t recommend winging it. Placement companies are not taking responsibility for the quality of work that employee produces, but they are taking responsibility for the quality of the person you hire.

There are lots of upsides of using a placement company. The greatest one that I can think of is LEVERAGE. It is time consuming to find, screen, and test for the right talent. If you don’t have the expertise, it is close to impossible to determine if the person you are hiring is truly qualified.

The biggest downside is that you usually have to pay for the placement at the time of hire. This fee is usually 30% of first year salary which is payable up front. It is worth it if you consider the cost of employee turnover when you hire the wrong person for your team, but again this is not usually the best option for an entrepreneur. And, all of the downsides of having an employee still exist, except the process of finding and hiring that person which you leverage the placement company for.

The employee you hire is still just one person, they have a limit to their skills and abilities, and have an employee mindset. Also, the placement company/client relationship ends when the placement happens. Who is there to make sure your needs are met after that? Again, it may make sense for some businesses.

We think the Agency model is a much better way for companies looking for an independent contractor. Our Agency is the perfect blend of “consulting firm” type services and relationship management combined with placement services (without the fees). For an employee search – use a placement firm that specializes in accounting talent.

Dangers Of The Low Cost Bookkeeper

Dangers Of The Low Cost Bookkeeper

For those that have never gone through the process of replacing their bookkeeper or have never worked with a professional accountant, let us share some of the lessons we learned the hard way. When we started our company, we were an accounting firm that believed that there was a way to include low cost data entry and bookkeeping professionals in the accounting service delivery and save our clients even more money.

In our commitment to keep prices low, we hired, trained, and supervised bookkeepers in the early stages of our business. We had CPAs review the work prior to delivering the work to the business owner. We charged $15 an hour for data entry, $30 an hour for the bookkeeping work and double for CPA review.

We discovered that after the review, clean-up, and correction, it always cost more in total no matter how well trained the lower skilled accountant was.

Our conclusion was universal (no matter how small or large the scope of work is,) it is less expensive to our clients to have a CPA provide the bookkeeping services than have a CPA clean-up, follow-up, train, and manage the work of a well trained bookkeeper. Depending on your volume of accounting activity, and the complexity or inherent risk of your business, we have found that the efficiencies of one accounting expert at $100 per hour cost the company about the same amount for a less proficient bookkeeper at $30 per hour.

It seems counter intuitive, but after a year of measuring the results, we understood why entrepreneurs have such poor accounting records.

Instead of asking”how much do you cost,” consider how much it will save you or make you to hire an accounting expert.

Tax CPAs Do Not Review Your Books

Tax CPAs Do Not Review Your Books

Some business owners are relieved because they have a qualified tax CPA filing their returns. Well, I hate to break the bad news, but by design a tax CPA is there to help business owners reduce their tax liability. Tax CPAs generally don’t review the books for accuracy.

So, a business owner believes that their tax CPA is reviewing their books for accuracy, and often this is not the case. This doesn’t mean you should fire your tax CPA. It is not their role or strength in business to review books.

Tax CPAs are also not reponsbile for supporting business owners around their needs to increase profitability, sales growth, cashflow management, or business operations. Often times, a tax CPA left alone can complicate a company’s accounting and legal structure with such one-sided perspective.

Even though we have accounting talent that can both keep the books and file tax returns, we still recommend that the bookkeeping/accounting function and tax preparer function be performed by two separate professionals whenever possible.