In-House vs. Outsourced Bookkeeping: How to Know When to Switch

At what point does it make more sense to hire an in-house bookkeeper instead of continuing to outsource? We hear this question often on discovery calls, and when owners weigh in-house vs. outsourced bookkeeping, the answer isn’t always what they expect. It doesn’t always point toward hiring, either.

There’s no revenue threshold or outside rule that tells you when to bring bookkeeping in-house. The decision depends on a few factors: the complexity of your accounting, the knowledge required for the role, and whether your outsourcing costs have risen enough to justify hiring a dedicated employee.

Why Revenue Doesn’t Decide It

No rule or regulation requires you to bring bookkeeping in-house once you reach a certain size, and revenue isn’t a reliable signal either. It’s easy to assume a smaller company with fewer transactions is a fit for outsourcing and a larger one needs an in-house hire. In practice, we’ve seen owners of $1 million businesses with an in-house bookkeeper and owners of $20 million businesses who fully outsource.

What matters more is complexity, and whether you need someone focused only on your business who is close enough to the team to understand what’s going on. An outsourced bookkeeper usually sees your books, but not the conversations happening in purchasing, operations, sales, or marketing. With steady communication between your team and the bookkeeper, that can still work well, and for many owners it does.

When Outsourcing Works Well

One client we worked with had $20 million in annual revenue and an outsourced bookkeeper. The bookkeeper’s job was fairly contained: coding routine transactions that looked the same every month, running a simple U.S. payroll through Gusto, completing bank reconciliations, and communicating with the CPA once a year.

Invoicing was different. Billing clients accurately required someone who understood the team and its projects. So, invoicing was done on the sales side, not by the bookkeeper. That’s often what makes outsourcing work: the tasks that depend on inside knowledge stay with someone inside the company.

6 Signs It’s Time to Consider In-House Bookkeeping

We use the word “bookkeeper” loosely here. Depending on the level of the person you hire, the role might be a bookkeeper or an accountant. If you’re not sure which one you need, our podcast episode on understanding different accounting roles for small businesses walks through the differences. Either way, we mean the person in charge of your company’s accounting.

1. Your Bookkeeper Needs Deep Operational Knowledge

Some accounting work is hard to do well from the outside. Your bookkeeper may need to stay updated on what’s happening in purchasing, the promotions that sales and marketing plan, and the start and end dates of discounts to ensure they record prices correctly. Someone in-house may be better positioned to keep up, especially if you want them on site and in team meetings.

We saw this with an e-commerce client whose outsourced firm specialized in e-commerce and knew all the same tools. There were still too many moving parts. Physical inventory arrived with paper documents that had to be entered into the system, and the accounting person needed to stay in contact with the people buying and packing inventory. Communication was difficult, mistakes kept happening, and the CEO wanted more oversight. We helped them hire for an in-house accounting role.

2. Transaction Volume Is Growing Fast

As transaction volume climbs, an outsourced arrangement can start to strain. Some providers limit how many transactions they’ll handle, and the monthly cost tends to rise with volume. If you keep running into those limits, it’s worth asking whether the arrangement still fits.

At some point, you may be paying for a full-time person’s worth of work plus the provider’s markup. Once the workload reaches that level, hiring someone who works only for your business may be more cost-effective.

3. Invoicing Has Become a Heavy Lift

Invoicing is often what leads owners to hire. Preparing accurate invoices takes institutional knowledge, and in many companies a sales manager or the CEO ends up doing it. Eventually, it makes sense to take that work off their plate.

This comes up a lot in B2B services. If you bill by time and materials, or if a project manager must approve invoices, they might need several reviews before reaching the client. Preparing them still takes someone who understands what’s happening in the business.

Invoicing alone may not be enough work to justify an in-house hire. Add tasks like coding transactions in QuickBooks and doing bank reconciliations. Then, the role begins to resemble a full-time position.

4. Your Outsourced Fees Are Approaching the Cost of an Employee

As you ask your outsourced bookkeeper to take on more, the monthly bill tends to grow with it. A simple check is to multiply that monthly amount by 12 and compare it to what a W-2 employee working only for your business would cost. That person might even be part-time.

Salary is only part of the comparison. Employers also pay their share of Social Security and Medicare taxes and federal unemployment tax on top of wages, along with the cost of any benefits you offer. Our free Cost of Hiring New Employee or Contractor calculator can help you estimate what a new hire would cost before you compare.

Pay for the role depends on what it covers and where you’re located, so there’s no single number to aim for. A marketing agency we worked with had high outsourced accounting fees. So, we helped them hire internally. The new hire took on more work for the same cost or less.

5. You Want an Embedded Team Member

Some owners want their bookkeeper to do more than look at the numbers. They want someone who participates on the team, shows up to meetings, and offers input.

Others like being able to walk into the bookkeeper’s office with a quick question, such as how much the company spent with a certain vendor last month. If you want easy access to someone dedicated to your business, an in-house hire might be a better choice. An in-house employee doesn’t have to work on-site. Some owners prefer having their bookkeeper in the same location, but with more teams working remotely, that’s less common than it used to be.

6. You’re Starting to Build a Finance Team

As a company grows, whether through new locations, more clients, or more sales, the accounting work can grow beyond bookkeeping. You might need someone for accounts payable, accounts receivable, or other accounting roles.

When bills and invoices pile up, it can overwhelm one person. In this case, an in-house team led by a controller or CFO is often better than using an outside firm. Growth alone doesn’t settle it, though. We’ve seen owners of $20 million businesses rely fully on outsourced teams.

Not sure which of these signs apply to your business? Schedule a Discovery Call and we’ll talk through what your accounting function needs.

The Right Setup Can Change in Either Direction

There’s no required path for an accounting function. You don’t have to move from outsourced bookkeeping to an in-house bookkeeper to a controller in that order.

A better habit is to keep asking whether you have the right people in the right seats, to borrow a phrase from EOS®. Is your accounting function working? If not, why, and does the role need to be rethought? If you run on EOS®, see what the finance seat looks like with a fractional CFO.

The answer doesn’t always point toward hiring. We’ve worked with owners paying an in-house employee a full salary for a small amount of accounting work. In those cases, we recommended outsourcing the bookkeeping to save money and moving that person’s few administrative tasks to someone else.

The reverse happens too. An outsourced bookkeeper may be too far removed from daily operations to give the owner the data, detail, or accuracy they need. When that happens, bringing the role in-house is the better path.

How to Decide Between In-House vs. Outsourced Bookkeeping

These questions can help you apply the signs above to your own situation. If you’re also sorting out what kind of bookkeeper you need, our podcast episode What Kind of Bookkeeper Does Your Business Need? covers how to match a bookkeeper’s skills to your needs.

How a Fractional CFO Helps You Evaluate Your Accounting Setup

When we work with clients, part of our role is checking whether the accounting support in place still fits the business. Sometimes that means spotting an efficiency problem. Other times, it means noticing the owner isn’t getting the information needed to make good decisions.

We’ve recommended changes in both directions, including helping owners hire for in-house accounting roles. Our clients use both models. They may have one in-house bookkeeper or a full accounting department. We work with whichever team is in place. If you want a partner who looks at your accounting structure as part of your broader financial strategy, learn more about our fractional CFO services.

Key Takeaways

• Revenue doesn’t decide when to bring bookkeeping in-house. Complexity and the need for inside knowledge do.
• Outsourcing can keep working when transactions are routine and someone on your team owns knowledge-heavy work like invoicing.
• When outsourced fees keep climbing, compare them to the full cost of an employee, not just a salary.
• The right setup can change in either direction, so check periodically whether your accounting function still fits.

Frequently Asked Questions