In-House vs Virtual Bookkeeper: What’s Better for Your Firm?

The Covid-19 pandemic has changed how we see and handle everything through virtual means. One of the ways that emerged is how businesses adapted to it through virtual work. With new technology, software, and tools, the world gained access to new standards. An example of this is virtual assistants that continue to rise at 20.3% CAGR according to world metrics. Virtual bookkeepers are seeing popularity in the legal industry, and it's no surprise because having access to a global talent pool that can work for you anywhere and anytime is one major advantage of virtual bookkeepers.

Today, virtual has been added to the choices for law firms in how they handle operations. This gives them a question: should you hire an in-house bookkeeper or work with a virtual one? This is a big decision that can affect everything from your monthly overhead to your ability to scale operations. The answer isn’t one-size-fits-all. Your firm’s size, budget, growth trajectory and specific needs all play a key role in determining which option is best for you. Let’s explore both options.

Understanding In-House and Virtual Bookkeepers for Law Firms

Before we dive into the comparisons, let’s clarify what each type of bookkeeping entails for a legal practice like yours.

An in-house bookkeeper is employed and works directly for a law firm or company to handle your books from your office, using your systems, and reports directly to you. This person becomes part of your team and focuses exclusively on your firm's financial records.

Virtual bookkeepers, on the other hand, perform the same financial management tasks but work remotely without the need for physical office space. They provide the same bookkeeping services as in-house bookkeepers, but they do it using technologies like cloud-based accounting software and virtual collaboration platforms.

Main Differences Between Virtual and In-House Bookkeepers

The legal industry's unique bookkeeping and financial requirements make bookkeeping expertise valuable. While both approaches aim to keep your books accurate and compliant, their operational models create main distinctions:

• Physical Presence vs. Remote Access: The most obvious difference is location. An in-house bookkeeper works from your office during set hours, making them immediately available for face-to-face interaction. Virtual bookkeepers work remotely and may operate across different time zones that need to match your time zone, relying on digital tools to provide communication channels and scheduled check-ins.
• Control and Oversight: With an in-house bookkeeper, you have direct oversight of their work and can easily integrate them into your firm's culture. While you maintain control over the outcomes with a virtual bookkeeper, the supervision is primarily remote, relying on time tracking and a work tracking platform that shows everything they're doing with auto-generated reports.
• Cost Structure: An in-house bookkeeper typically involves a fixed salary, benefits, taxes, office space, equipment, and training costs. Virtual bookkeepers often work on a contract basis, hourly rate, or a fixed monthly fee for specific services, eliminating many of the overhead expenses associated with an employee. Plus, you only need to pay for their productive hours and no idle time.‍
• Expertise and Specialization: In-house bookkeepers focus solely on your firm but may have limited exposure to industry best practices. Virtual bookkeeping firms or independent contractors often work with multiple law firms, giving them broader experience in various financial scenarios and industry best practices.

Benefits of In-House Bookkeepers

Having a bookkeeper on staff can offer advantages for your law firm:

• Immediate Availability: Your in-house bookkeeper is physically present, allowing for instant communication, quick questions, and support. This can be particularly beneficial for urgent financial matters or complex inquiries.
• Cultural Integration: An in-house bookkeeper becomes a part of your team and firm's culture, creating a sense of shared responsibility and potentially contributing to a more cohesive office environment.‍
• Direct Control: You have direct oversight and control over how tasks are performed, allowing you to implement specific protocols and ensure they are followed precisely within your office environment.

Challenges of an In-House Bookkeeper

While beneficial, the in-house model also presents certain challenges:

• Higher Costs: The biggest challenge is often the financial commitment. Beyond salary, you are responsible for benefits, taxes, office space, equipment, software licenses, and ongoing training. These additional costs can increase your total expense by 30-50% above the base salary.
• Slow Scalability: If your firm experiences periods of slow growth or a sudden decrease in workload, you are still committed to a fixed salary and related expenses. Conversely, during peak times, a single in-house bookkeeper might become overwhelmed, requiring you to consider additional hires.
• Limited Expertise: Unless you hire a senior professional, your in-house bookkeeper may lack exposure to advanced accounting practices or industry-specific requirements.‍
• Need for Continuous Training: You are responsible for ensuring they stay up-to-date with evolving tax laws, legal compliance requirements, and software updates. This requires time and resources for training and ongoing supervision.

Benefits of a Virtual Bookkeeper

Virtual bookkeeping has gained popularity as a practical solution for many law firms:

• Cost Efficiency: You pay only for the services you need without the overhead costs like benefits, office space, or equipment costs. This predictable expense model helps with budgeting and often costs up to 60% less than an in-house bookkeeper.
• Specialized Expertise: Many virtual bookkeepers or bookkeeping firms specialize in legal accounting, including complex trust accounting and IOLTA compliance. You can gain access to professionals with specific industry knowledge without needing to train them.
• Scalability: Whether your workload increases during tax season or decreases during a slower period, your virtual bookkeeper can adjust their services accordingly through contracts or by bringing in more professionals instantly.
• Reduced Administrative Burden: With a virtual bookkeeper, you spend less time on recruitment, onboarding, and managing an employee. The service provider typically handles their own HR, payroll, and infrastructure.‍
• Security and Technology: Given that they rely on digital platforms, virtual bookkeepers or providers invest heavily in software, security systems, and backup procedures that protect your sensitive financial information, often exceeding what an individual in-house setup might offer. You benefit from technology without the investment or maintenance responsibilities.

Challenges of a Virtual Bookkeeper

While offering many advantages, virtual bookkeeping can have its own considerations:

• Communication Barriers: Remote professionals rely on internet access, cloud software, and consistent communication channels. Any technical issues or communication breakdowns can impact efficiency.
• Potential for Less Personal Connection: While professional, the remote nature means less informal interaction and a different kind of working relationship than you might develop with an in-house staff member.‍
• Trust and Security Concerns: Sharing financial data with external parties requires trust and security measures. While professional firms maintain high security standards, some attorneys prefer keeping financial information entirely in-house.

When Hiring a Virtual Bookkeeper Works Best

Virtual bookkeepers excel for firms that are looking for ways to modernize and expand the capabilities of their practice while saving costs. This option works particularly well if your firm operates primarily in the cloud and you're comfortable with remote collaboration. Adding a virtual bookkeeper to your team can be an excellent consideration for your law firm in several scenarios:

• Firm Size Considerations: If you're a solo attorney or run a small firm, having a virtual bookkeeping assistant can be a huge advantage with its cost savings that you can invest in your development and reduced administrative burden that gives you an opportunity to compete with other firms bigger than you.
• Budget is a Primary Concern: If minimizing overhead and fixed costs is a key financial objective, virtual bookkeeping offers clear monthly costs without the variables of employee benefits, sick days, or equipment needs, which makes financial planning more straightforward.
• Need for Legal Accounting Expertise: If your firm deals with complex trust accounting and compliance requirements, a virtual bookkeeping service specializing in law firms can provide the necessary expertise without you needing to find, hire, and train an in-house expert.
• Your Firm is Already Cloud-Based: If your firm already uses cloud-based legal practice management software and embraces digital workflows, virtual bookkeepers can easily integrate into your operations without disruption in your workflow and operations because they're trained for that and proficient with it.‍
• You Want to Focus on Practicing Law: Outsourcing your bookkeeping allows you and your team to dedicate more time and energy to billable work and client service rather than spending time on financial administrative burdens.

The choice between in-house and virtual bookkeeping isn't permanent. Many firms start with virtual services and transition to in-house staff as they grow, or vice versa. However, with either of these choices, you want to start small and test out what works best for you. If you see improvements and efficiencies, then you add more and grow with them. 

You also need to be patient and willing to learn because this is a process that requires your expertise, and these choices are big for your operations as they shape the way you're going to be successful.

If you want to explore virtual bookkeepers or just want to meet one, just contact Bookkeeper.law and we'll love to talk with you to discuss what you could achieve.