A lot of small businesses hire people to handle their payroll and other administrative tasks. I don’t think it’s a good idea.
Most companies that do this think of themselves as “buying time”. It’s cheaper than hiring extra employees, and the time they buy is mostly spent on things that someone with a business degree could do just as well.
This doesn’t really save time. If all your administrative work is going to be done by someone you pay by the hour, you’ll spend more time on it than if you did it yourself. That’s because there is no such thing as a free lunch. When you outsource a task, you end up spending more time dealing with that task, because now it’s your problem. You have to stay a step ahead of the contractor, making sure he is doing what you wanted him to do and not screwing up in some way you haven’t foreseen. And if he does make a mistake, fixing it is your problem too.
In theory you can avoid this by hiring a contractor who will do exactly what you want without your needing to supervise him at all. In practice I’ve never seen this work well for anyone but the contractor himself: since all his customers are paying him to oversee their projects
You can save a lot on administrative costs by outsourcing them to a professional firm, which on the whole is likely to be cheaper than an in-house solution. But if you do this, you may need to change your accounting software.
When you hire an assistant, you are outsourcing. But you can outsource to non-employees as well. If you have a project that will take more than a few hours, it’s worth looking for someone outside your organization who can do part of it.
You might want to start by asking around among the people you know: who knows how to do bookkeeping or tax preparation? Who has good ideas for an Internet business? Who would be a reliable person to help with social media?
If the people you know don’t have the right skills, they probably know someone who does. Over time, your network will expand to include almost everyone in your profession.
In a small company, you may have to do your own bookkeeping. In a startup, you should definitely outsource it.
Sure, you could hire someone to do it, but why bother? You can get the same thing much cheaper by hiring a virtual assistant. VA’s come in two varieties: full-time and freelance.
Full-time VAs are hired directly by the company and work out of its office. They usually have some accounting training, though often not enough to do a full set of books for a business; they also know something about payroll and taxes.
The tax part is especially important because there are many deductions available only to companies, not individuals; with the right VA, these deductions can make the difference between profit and loss.
In the past, most people had to be experts at all kinds of things: farming, carpentry, blacksmithing and so on. Now we can buy these things from specialists and focus more on what we do best.
So why not apply the same approach to administrative work? This is exactly what we do in large companies. Why shouldn’t you do it too?
For any job that doesn’t require your expertise, consider if there is some specialist you could hire to do it for you. If you run a small business with fewer than ten employees, you already have one: an accountant or bookkeeper. Even if you manage a staff of hundreds or thousands of people, you still have one: a human resources department.
Consider delegating other jobs too: legal and financial advice, management of your apartments and property investments, interior design of your home office — even hiring and paying staff you don’t directly supervise. You might not need to do these things yourself at all.”
The magic machine would be a software program that could do your taxes and your bookkeeping and your invoicing and so on. If you got such a machine, you would need fewer employees, and many employees who did similar things would become more valuable.
Money is an IOU, and the most convenient way to keep track of it is with ledgers. Some of these ledgers are physical, like the ones in banks or in old-fashioned shops where they still write down every sale in a notebook. Others are digital. And others exist only in the cloud.
Let’s say you get a magic machine that does your accounting for you. It costs $200 per month, which is less than one employee making minimum wage (which has to be at least $7.25 per hour). What happens? You hire more employees! You can afford them; the accounting machine pays for itself almost immediately; it frees up time for you to do customer service and other things. But you still have to do some accounting work; if you don’t, the government will get suspicious of all that free time you’re enjoying (or maybe they’ll just get suspicious of your business.
It’s been a few years since I worked in a corporate job, and I’m pretty sure the corporate world has changed. But back when I did, we had a department devoted to “personnel,” and one devoted to “administration,” and another to “accounting.”
The business we were in was information technology. Our marketing department was constantly stressing how important it was to be able to tell the difference between the stuff that mattered and the stuff that didn’t. Yet we had whole departments devoted to stuff that didn’t!