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Introduction
Most small businesses hesitate to outsource bookkeeping to reduce their overheads or because they need to know where to start. However, recent research by Clutch reveals that 37% of small businesses outsource accounting and IT services- and for good reason!
As your business expands and technology advances, many traditional in-house bookkeeping solutions struggle to manage your financial standing. On the contrary, an outsourced bookkeeping service provider offers access to a team of experts equipped to handle your small business’s growing and unique needs!
Below, we’ll dive into the six fantastic reasons to outsource bookkeeping and why it’s an excellent investment. Further in the article, we’ll delve into the costs associated with outsourced bookkeeping and the questions you should ask before investing.
Let’s dive in!
What is Outsourced Bookkeeping
Before we jump into the nitty-gritty of outsourced bookkeeping, let’s discuss the basics. Outsourced bookkeeping involves hiring an external accounting expert or firm to handle complex bookkeeping tasks, such as balance sheets and loss statements.
Moreover, outsourced bookkeeping teams serve as an extension of your workforce, offering the tools and expertise missing in your business. These provide additional value, time-saving, and reduced costs, thus helping you succeed without overcoming your budget.
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How Does Outsourced Bookkeeping Work?
Outsourced bookkeeping processes can vary depending on how you outsource the services, whether an independent bookkeeper or a firm. However, in all cases, you’ll sign a contract with the company and pay a fixed monthly fee for a tailored solution.
Next, the outsourced bookkeeper will align their services to meet your goals, provide detailed reports on bi-annual or annual performance, and adjust based on your comments. As a result, you’ll receive highly accurate and error-free financial statements without incurring the overhead costs of tools and full-time employees.
What are the Types of Outsourced Bookkeeping Services?
Before investing in outsourced bookkeeping services, it’s essential to consider the different types of outsourced bookkeeping services.
Let’s take a closer look to help you make the perfect choice.
Local Bookkeeping
Local bookkeepers are individuals or companies based near your business’s location. Select this service if you prefer meeting employees face-to-face and value physical records.
Moreover, local bookkeepers are ideal for small or mid-sized businesses that don’t use online payment systems and have limited services they want to outsource. There are two ways to outsource your local bookkeeper, whether a freelancer or a bookkeeping agency.
While freelance bookkeepers are ideal for a one-time job, bookkeeping agencies are better for long-term projects as they offer better assurance and a consistent quality of work. Furthermore, you don’t have to worry about absences with a bookkeeping firm.
Whether you hire a freelance bookkeeper or an agency, ensure you assess their ratings, security, and expertise.
Virtual Bookkeeping
Virtual bookkeeping is a paper-free (online) method of handling your books. The bookkeeper, whether an individual or firm, combines the best of both worlds to provide unique bookkeeping services and unwavering support.
Generally, virtual bookkeeper service providers manage your books and software for a flat monthly/hourly wage. The method is ideal for businesses that are comfortable using online banking and a mobile app to control their finances.
Typically, your virtual bookkeeper will connect with you via a secure online account, saving you time and automatically downloading your expenses. Next, they will manage your financial statements and communicate via a specific platform.
Reasons to Outsource Bookkeeping Services
Now that we’ve covered the basics, let’s explore the benefits of outsourcing bookkeeping services:
Take Advantage of Expertise
Outsourcing bookkeeping services provides you access to an individual or team of expert bookkeepers with the ideal skillset to manage your finances. That way, you’ll receive accurate, compliant, and error-free payrolls completed on time and cost-effectively!
Furthermore, outsourcing bookkeeping services provides a competitive edge, ensuring you’re up-to-date with the latest technologies. Besides this, you don’t have to worry about maintenance costs!
Boost Workplace Productivity
Another advantage of outsourced bookkeeping is that your employees will be more productive. When you and your workforce aren’t calculating taxes and preparing extensive reports, you can focus on priority tasks that require your expertise and creativity.
Moreover, you can attract top talent in your industry by offering this as a benefit in compensation packages!
Enjoy Cost Savings
Managing costs is integral when running a startup or small business that is launching. However, hiring a third party is generally more cost-effective than in-house hiring.
With outsourced bookkeeping service providers, you can save on employee compensation, paid vacations, office space, health benefits, and sick days. Furthermore, hiring a bookkeeping agency allows you to access diverse skills and avoid service gaps!
Ensure Scalability
Growing businesses need flexible and agile bookkeeping services that can grow with them. An outsourced bookkeeping individual or agency promises scalability, taking the stress of rehiring and investing in new accounting technologies off your shoulders.
You can enjoy scalability and flexibility by hiring an outsourced bookkeeping service provider!
Collaborate with a Dedicated Team
Employing an in-house bookkeeper can limit your outsourcing services, forcing you to hire a different person to fill new roles. However, an outsourced bookkeeping firm provides an agile team of experts with the skills necessary to help you succeed!
Whether forecasting, budgeting, reporting, or data entry, you can count on outsourced bookkeepers to handle your finances!
Automate as You Go
Hiring an outsourced bookkeeping service provider offers access to their software, systems, and tools, allowing you to streamline and automate your accounting tasks!
Moreover, you can reduce the costs spent on acquiring new technologies and maintenance. By outsourcing bookkeeping, you can save money while enhancing your business’s productivity!
Equip Yourself for Tax Season
Whether you hire a freelance bookkeeper or a firm, your external team will lay the groundwork for a compliant and smooth tax season. Having a team of bookkeepers with the skills and experience will help you prepare your books on time!
In addition, your bookkeeper team will ensure you categorize, document, and organize your expenses and transactions for a seamless taxation process. That way, you don’t have to spend hours looking for missing financial information, circling errors, and rewriting!
Who Should Use Outsourced Bookkeeping Services?
Outsourced bookkeeping services are a smart choice for small- to mid-sized businesses. Here’s why you should consider it:
Specialized Skills: Sometimes, your business needs complex financial tasks done right. Outsourced bookkeepers bring the professional know-how you need, like handling intricate financial statements or crafting reports for internal or external use.
Growing Companies: When your business is booming, managing a surge in transactions can be overwhelming. Outsourcing tasks like tax prep and payroll handling can free up your team’s time and resources while keeping quality in check.
What Services Can I Outsource from an Outsourced Bookkeeper
Outsourced bookkeepers offer various services to ease your financial workload:
- Importing Data: They can import financial info from sources like bank statements, payroll records, and invoices, often integrating with your existing tools.
- Sorting and Reconciling: They categorize and reconcile these transactions to ensure everything is present.
- Tracking Bills and Income: This includes managing accounts payable and accounts receivable to monitor outstanding payments.
- Maintaining Accuracy: They keep your books up-to-date and error-free.
- Financial Statements: Monthly or quarterly, they provide crucial financial statements like Profit and loss, cash flow statements, and balance sheets.
- Explanations: They help you understand these financial statements and other aspects of your bookkeeping.
- Reporting: They deliver accurate reports to investors, tax preparers, and other stakeholders.
Does Outsourcing Your Books Make Sense for You?
Outsourcing bookkeeping individuals or firms is ideal for small to mid-sized businesses that want to outsource books and don’t have an accounting background. Moreover, organizations that don’t have the time to manage finances can outsource bookkeeping to save time and costs.
Besides this, if you’re a growing company, it might make sense for your company to hire a freelancer or agency specializing in bookkeeping.
Things to Consider Before Making the Transition to Outsourced Bookkeeping
When contemplating the shift to outsourced bookkeeping, several critical considerations come into play to ensure a successful transition:
Set Clear Objectives
Identify the reasons for delegating bookkeeping to an external team. This clarity provides a roadmap for your business and the outsourced service provider. For instance, if you’re dealing with complex taxation matters, your objective might be to streamline tax preparation and compliance.
Choose the Right Partner
Partnering with the ideal BPO company is paramount. Seek a provider that aligns with your company’s values, understands your industry, and offers services tailored to your needs. Compatibility between your organizations fosters a productive and harmonious relationship.
Consider Collaboration
Assess the feasibility of collaboration with a global team. Examine technological compatibility and address time zone disparities to ensure efficient communication and workflow, especially when handling financial matters like high earners making over one million and taxes.
Appoint a Liaison
Designate a liaison within your company to oversee the external bookkeeping team. This individual should embrace change, possess in-depth knowledge of back-office outsourcing intricacies, and excel in communication. Their consistent availability for team meetings and discussions is vital for cohesion.
Common Mistakes to Avoid when Outsourcing Bookkeeping
There are four common mistakes businesses make when outsourcing bookkeeping, including:
Outsourcing Bookkeeping without Identifying Your Business Needs
Improve workplace productivity by delegating processes that can yield better results and revenue. For instance, hiring a third-party bookkeeper can ease the task if you struggle with forecasting and budgeting.
Besides this, consider creating a robust budget to narrow your options.
Hiring an Outsourced Bookkeeping Service Provider with Unaligned Values
Having a business partner that aligns with your values can mean the difference between success and failure. So, when evaluating candidates, determine if they share your organization’s vision and value to ensure the best results!
Partnering with a Bookkeeper who Doesn’t Understand Your Business
For businesses without a background in bookkeeping, asking the right questions during hiring can feel overwhelming. It can lead to a poor hire who doesn’t understand your business’s needs and missions.
The result? Your bookkeeper will only do what you ask if you recommend better solutions.
Spending Inadequate Time on Research before Hiring
Most small businesses assess the general background of a bookkeeper before hiring. However, organizations must look beyond the listed technical skills and determine their hard and soft skills.
Typically, hirers should ask candidates for their domain knowledge in bookkeeping, experience in the role they want to fill, and experience with long-term clients. Furthermore, seek feedback from previous companies and check their track record.
Questions to Ask an Outsourced Bookkeeping Company
Asking the right questions can go a long way in helping you find the perfect bookkeeper for your business. So, consider asking the following questions during the hiring process:
- What range of services do you provide?
- What is your experience regarding U.S. tax legislation?
- What certifications and training do you and your bookkeepers boast?
- What is your experience within my industry?
- What software do you use for bookkeeping?
- Can you provide me with references and testimonials?
- Will you create quarterly or monthly financial reports?
- How will you collaborate and keep track of bookkeeping work?
- What will you do to keep my data safe, and how will you handle disaster?
- Can I choose the staff I want to work with?
What are the Costs Associated with Outsourced Bookkeeping?
Outsourced bookkeeping comes with costs that can vary. Factors affecting these costs include the type of service you need and your involvement with the bookkeeper. Simple needs with occasional check-ins might do fine with hourly rates.
However, paying more upfront for ongoing services at a reduced rate can be worthwhile if you require comprehensive support, like tax planning. Pricing methods vary, too, with some charging per hour and others per transaction. Overhead expenses, like office space, add to the cost, going by location.
Typically, expect monthly outsourced bookkeeping expenses to range from $500 to $2,000. The rule is that the more complex your finances are, the higher the cost.
The Final Words
Outsourcing bookkeeping can be a game-changer for small businesses CEOs from press release launch. It offers cost-efficiency, expertise, and scalability that can be challenging to achieve with in-house solutions. The benefits are clear, from reducing overhead costs to gaining access to specialized skills.
Whether you opt for local or virtual bookkeeping services, aligning your choice with your business needs and preferences is key. Remember to ask the right questions, consider the costs, and assess its value to your organization.
By embracing outsourced bookkeeping, small businesses can focus on what they do best while leaving the financial management to the experts, ultimately paving the way for sustainable growth and success.
