As your business grows, keeping the books in order becomes more complex. At some point you’ll need to decide whether to handle bookkeeping in-house or outsource to bookkeeping services. Both options have pros and cons — and the real cost of each goes beyond hourly rates or service fees. This article compares the financial and non-financial aspects of in-house vs outsourced bookkeeping so you can make an informed decision.
The True Cost of In-House Bookkeeping
Many business owners assume doing bookkeeping themselves or hiring an internal bookkeeper is cheaper. But in-house bookkeeping has several cost components:
1. Staff Time and Salaries
If you or an employee handles bookkeeping, that time comes at an opportunity cost — time not spent on sales, service, or growth. If you hire a dedicated bookkeeper, you must pay their salary, National Insurance, pension contributions, holiday pay, and training.
2. Software and Licences
Modern bookkeeping requires software. Subscriptions, updates, and support contracts add up. If you use desktop software, you also need backups and IT maintenance.
3. Training and Compliance
Bookkeeping rules and tax requirements change frequently. Staff need ongoing training to stay compliant, costing time and money.
4. Risk of Errors
Errors in VAT returns, PAYE, or categorising expenses can lead to HMRC penalties or overpaid tax. Fixing mistakes later can be expensive.
5. Security and Data Protection
Payroll and financial data are sensitive. In-house systems must be secured against loss or breach, requiring IT investment and policies.
When you factor in all these costs, in-house bookkeeping may be more expensive than it appears.
The Benefits of In-House Bookkeeping
There are reasons some businesses still prefer to keep bookkeeping internal:
Immediate Access: Staff on-site can handle ad hoc tasks and questions.
Tighter Control: You oversee every transaction and process.
Integration with Other Duties: For very small businesses, an admin person might combine bookkeeping with other roles cost-effectively.
Familiarity with the Business: Internal staff learn your operations deeply.
However, these benefits diminish as your transaction volume and compliance obligations increase.
The Cost and Value of Outsourcing to Bookkeeping Services
1. Predictable Fees
Bookkeeping services typically charge a fixed monthly or per-transaction fee. This makes costs easy to budget and scale.
2. No Employment Overheads
You don’t pay holiday, sick leave, National Insurance, or pensions for outsourced bookkeepers. There’s no recruitment cost or HR burden.
3. Software Included
Most bookkeeping services provide their own cloud-based software or include licences in their fees, saving you money and setup hassle.
4. Expertise Built-In
Professional bookkeepers stay current with tax rules, VAT, and HMRC requirements. You get compliance without paying for training.
5. Lower Error Risk
Specialist teams with internal checks reduce mistakes. If errors occur, they’re usually corrected at the provider’s expense.
6. Security Provided
Reputable bookkeeping services use encrypted, GDPR-compliant systems with secure backups — a level of security many small businesses struggle to match internally.
Comparing Costs: An Example
A business with 30 transactions per week might face:
In-House: One part-time employee at £15/hour for 10 hours per week = £600/month + £50/month software + training costs. Annual total: ~£7,800.
Outsourced: Bookkeeping services at £200/month including software. Annual total: £2,400.
Even if you add more reporting or services, outsourcing often costs significantly less once you include overheads and hidden costs.
Non-Financial Benefits of Outsourcing
Beyond direct cost savings, outsourcing offers:
Time Freed Up: Owners and staff focus on revenue-generating tasks.
Scalability: Services scale with your growth without hiring more staff.
Continuity: No disruption from staff holidays, illness, or turnover.
Expertise on Tap: Access to specialists who can handle VAT, payroll integration, or multi-entity consolidation.
Improved Reporting: Timely, accurate reports support better decisions.
These benefits can be as valuable as the financial savings.
When In-House Bookkeeping Makes Sense
You have very few transactions and simple finances.
You already have an admin person trained in bookkeeping whose time isn’t better used elsewhere.
You need someone physically on-site to handle cash or paper documents daily.
Even then, many businesses still use professional bookkeeping services at year-end or for VAT to ensure compliance.
Tips for Deciding Between In-House and Outsourcing
Calculate Total Cost: Include staff time, benefits, software, training, and risk of errors — not just wages.
Assess Complexity: The more transactions, VAT, payroll, or multiple entities, the more outsourcing makes sense.
Consider Growth Plans: If you expect to scale quickly, outsourcing avoids constant hiring and training.
Evaluate Data Security: Can you match the security standards of professional providers?
Try Hybrid Models: Some firms keep basic data entry in-house but outsource reconciliations, VAT, or reporting.
Case Example: A Yorkshire Service Business
A service company in Yorkshire hired a part-time admin to do bookkeeping in-house. As transactions grew, errors crept in, VAT returns were late, and their accountant charged extra to fix the books. Switching to bookkeeping services halved their admin cost, eliminated penalties, and delivered real-time reports. Management could finally trust their numbers and focus on clients.
The choice between in-house bookkeeping and outsourcing isn’t just about hourly rates. In-house may offer control but comes with hidden costs, training needs, and error risk. Bookkeeping services deliver predictable fees, built-in expertise, and secure, scalable systems that often cost less overall and provide better information.
Whether you’re a start-up in Leeds, a family-run firm in York, or a growing company in Sheffield, comparing the full cost and benefits will show whether outsourcing is the smarter move for your business.