Keep the Books Yourself or Outsource? Run the Numbers With Your Own

At a glance

What it costs varies with company size, transaction volume and scope of service; this article gives you the method, not a market quote.

Work out your own number first

Do not look at someone else’s figures. Use yours:

Real cost of DIY = software + (hours a month × 12 × your hourly rate) + expected cost of errors

Three variables, all yours to fill in:

1. Hours a month. Bookkeeping, bank reconciliation, filing receipts — how long does it actually take? Do not estimate; track it for one month.

2. Your hourly rate. Use your most conservative figure — if the same hours went into seeing clients or building the product, what would they be worth?

3. The expected cost of errors. The hardest one to estimate, but it is not zero. Understated income means back tax plus additional tax, a missed deductible expense is money simply paid over, and a late return triggers an estimated assessment.

The second variable is the one that decides it. If your hourly rate is low — early days, nothing else competing for the time — doing it yourself genuinely pays. Once that rate rises, the answer flips.

There is no universal answer here, which is why any article insisting you must outsource deserves scepticism, including one written by us.

Four signs it is time to outsource

Two of these together usually means yes:

1. You have employees. Payroll, MPF contributions, the annual employer’s return — three authorities, three sets of deadlines, and a penalty attached to each.

2. You hold inventory. Inventory valuation and the year-end count feed straight into profit, and getting them wrong changes the tax you pay.

3. You are cross-border or multi-currency. Translation method has to stay consistent, and an offshore claim needs records behind it.

4. You have already started putting it off. The most practical signal of all — if you notice yourself deferring the books every month, changing software will not fix it. Changing who does it will.

Four situations where DIY still makes sense

• Very few transactions a month (a dozen or so invoices)
• No employees, no inventory
• A simple model — freelancer, solo consultant
• You have an accounting background yourself

Worth noting: sole proprietorships and partnerships do not require a statutory audit, so the bookkeeping burden is lighter than a limited company’s. But the seven-year retention requirement in s.51C of the Inland Revenue Ordinance applies regardless of the form of business. See whether a freelancer should incorporate.

The hybrid arrangement most SMEs actually run

Not all-in-house or all-outsourced, but:

• Day-to-day entries in-house — in accounting software or a spreadsheet, with a monthly bank reconciliation
• A monthly or quarterly review and adjustment by an accountant
• Year end, audit and tax filing outsourced

That keeps the cost controlled without letting problems accumulate. And what you hand over is a properly categorised set of books, which naturally costs less to audit than a bag of receipts.

A question that matters more than who does it

Most people frame this as in-house versus outsourced. What actually decides the outcome is how often it gets done.

Doing it yourself monthly, in software, beats outsourcing it once a year. Because the once-a-year company has nothing to look at mid-year, cannot produce eight months of accounts when it wants to hold over provisional tax, and has to reconstruct a year from memory at the year end.

Two separate questions:

• Who does it — you, software, or an outside firm
• How often — monthly, quarterly, or once a year

Frequency affects the outcome more than the operator does. See monthly or annual bookkeeping.

If you do outsource, what should you compare?

Do not compare monthly fees alone. Compare these four:

1. What is included — bookkeeping, tax filing, dealing with the auditor, employer’s returns; check them off individually
2. Frequency — monthly, quarterly, or only at the year end
3. Whether you get management accounts — is there a page for you each month (see management accounts versus statutory accounts)
4. Whether you can take your data with you — if you change provider later, can the books be handed over intact

Almost nobody asks the fourth, and it does most to determine how free you are later.

An online platform or a traditional accounting firm?

Having decided to outsource, there is a second choice. Broadly:

How to decide: the more standard your case (single business, local income and expenses, no inventory), the better a platform works; the more unusual it is (group structure, multiple currencies, an offshore claim, a dispute), the more it is worth having an experienced person on it.

If you are cross-border or making an offshore claim, the question is not who is cheapest but whether they have handled a case like yours — weak substantiation gives the saving straight back in back tax.

Want someone to run the numbers with you?

Tell us your transaction volume and the hours you currently spend each month, and we can look at which combination works out best — including the answer “carry on doing it yourself for now”.

Talk to us, or get started.

This article is general information and does not constitute accounting or tax advice. The right bookkeeping arrangement depends on the individual company; the statutory requirements are governed by the Companies Ordinance, the Inland Revenue Ordinance and the IRD’s latest published guidance.