Cloud-based Accounting/Bookkeeping or "Conventional"?

October 24, 2023

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

Hello Everyone,

I have a deal I'm working on (post-LOI and financial diligence, in documentation), and as the process gets into the later stages, I'm starting to think about day one issues and beyond. One of those things, of course, is bookkeeping/accounting. I've seen a wide, wide range of pricing from CPAs when it comes to bookkeeping services. It seems that on the lower end, the accounting firm provides a cloud-based solution that I think is largely QuickBooks Online with some level of support for a few hundred dollars a month, while other firms provide a more "traditional" approach, that seems to cost literally 10x more. How should I go about making a decision between the two, given the gulf in pricing? Is it that hard to do the bulk of the work oneself in QuickBooks (without sinking so much time as to make it counterproductive)? Some potentially pertinent details:

1) Roughly $1.5mm in revenue

2) Checking account shows something like 800 transactions last year

3) The company currently uses a bookkeeper and a separate accountant; the bookkeeper is retiring and doesn't want to continue on long-term

4) This is my first rodeo; my background is in (large-company) finance

5) The company designs, markets, and sells fitness equipment; most sales are made online, and the product is manufactured abroad

6) Only about 3 other employees, and there doesn't seem to be anyone on staff that could handle the work out of the gate

Thanks!

Reply by a searcher
from Wilfrid Laurier University in Toronto, ON, Canada

I would sit down with the bookkeeper and have them show you what they do (as a start).

There is a trade off between quality of monthly reporting and cost of bookkeeping. A lot of small businesses I see only make accruals at year-end for example (as opposed to monthly). This saves some costs but then people like me have to go and re-build/estimate accruals when it comes time for doing a QofE. I would recommend accurate monthly BS reporting if it’s in the budget.

I would ask the bookkeeper to stay on for a few months if possible so you can get comfortable with the current reporting and see whether you want to alter/improve it. Quickbooks online should be fine (nice that this is accessible remotely). This way, you kick the decision down the field a bit. Happy to discuss further if you’d like.

Reply by a searcher
from University of Virginia in Bethesda, MD, USA

I would break it up - there's a software component and a functional role component. For example, you may have a bookkeeper on staff and use a third party accounting firm to do taxes and other activities. From there, you could use QBO (the most common), Rippling or one of the many other software tools. Or you could just outsource the whole accounting function as Patrick suggested... there's quite the list of possibilities, but differentiate software and staff role as they're two different things.

+3 more replies.

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