Why outsourced bookkeeping is important for your business
Feb 16, 2023 | 10 Min Read
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Although the inauguration of a new business is a riveting milestone for any entrepreneur, it can also be truly overwhelming. From organizing meetings with clients to the formulation of growth strategies, it is vital for entrepreneurs to remain composed, focused, and decisive from the get-go. Like established firms, a new venture will also incur various costs, expenditures, and decisions related to normal day-to-day operations such as purchases, utilities, sales mix & pricing strategies, and so on. All such transactions, need to be recorded in a routine, organized manner – said another way, a new business needs effective bookkeeping from day one.
But first,
we need to understand what is bookkeeping. Bookkeeping
is the process of recording and organizing transactions into accounts.
Bookkeeping, although may seem to be a
monotonous and repetitive task, it is a critical function for the growth and
success of any business. It is of no surprise that entrepreneurs are likely to
be engaged in divergent business affairs on a regular basis, thereby making it
nearly impossible to be fully involved in each business area. On the flip side,
this presents an opportunity for every business owner to analyze which
functions they should focus on, why, and to what extent.
What is Outsourced Bookkeeping?
Outsourced Bookkeeping is when an organization hires an external Individual or a firm to handle its bookkeeping. This process includes the recording of the financial transactions of a business and creating financial statements like balance sheets and profit and loss statements. This strategic decision allows businesses to focus on core operations or on their clients while experts manage their financial data.
Outsourcing an organization can save time and money. An outsourced bookkeeper can also add value by providing specialized expertise as a QuickBooks Pro Advisor and can provide reports directly using the software. Outsourced Bookkeepers can be on a contract basis or can be hired as a full-time staff member.
Types of outsourced bookkeeping
Outsourced bookkeeping can be done through the hiring of an individual bookkeeper, a virtual one, or through a firm like Accountimize.
A business may prefer a local bookkeeper if they rely on physical records, have little or no online transactions, and adopt physical meetings with the bookkeeper, rather than online meetings.
Although an individual bookkeeper may be cost-effective, there is no guarantee that the work will be of a high caliber or effective for the circumstances needed. Furthermore, the bookkeeping operations would be halted amid personal matters requiring time off, or other leaves of absence, leaving the company without a key, the critical business process being overseen and handled – the ongoing recording and processing of financial transactions. Also, another prominent concern that may arise is the security and confidentiality of certain crucial financial information when hiring a freelancer.
A bookkeeping firm, on the other hand, can solve the aforementioned issues as they’ll have proficient and professionally certified employees on staff, able and available. This can ensure that the bookkeeping operations are streamlined in the absence of those that were initially designated with the bookkeeping of the firm and handled by a backup when the primary bookkeeper is away. This will prevent the piling up of and halting of the bookkeeping process.
On the other hand, a virtual bookkeeper or virtual bookkeeping firm is simply one that performs the bookkeeping task online, leveraging most of the 21st-century technology available to businesses of all sizes. Virtual bookkeepers and virtual bookkeeping firms make use of cloud accounting software, enabling all records and reports to be accessed using a mobile device. It is a great opportunity for those businesses that prefer online meetings over physical conversations and understand the value and power of digital communication and associated digitized processes and record keeping.
How Does Outsourced Bookkeeping Work?
The procedure for outsourced bookkeeping services depends on whether you opt for an independent professional bookkeeper or a bookkeeping firm. However, the process is not complicated at all.
To begin with the services, you will need to make a contract with the firm and pay them their fixed monthly charges. Then the bookkeeping service provider will engage with your business to understand its requirements and objectives. In the next step, a detailed financial performance report will be provided on a monthly basis or quarterly. There will be an opportunity to discuss and make the necessary changes before the next report is issued. You will be able to contact them for support.
While working with an accounting firm here is how outsourced bookkeeping works:
Step 1: Your designated account manager will collaborate closely with you to configure integrations and connect with all the financial accounts and tools that your business is currently using. From that point onwards, the process operates with reliability and automation, efficiently extracting your financial data from all the sources into cloud-based accounting software such as QuickBooks. There is simply no need to worry about uploading and downloading PDFs because everything will be automatically done.
Step 2: Your designated account manager systematically records, categorizes, and reconciles all financial transactions. This process operates with the same reliability and efficiency as Step 1, ensuring that data from various sources is accurately captured and organized without the need for manual data entry.
Step 3: Your dedicated account manager proceeds to produce monthly financial statements that are clean and accurate. Just like the previous steps, this stage operates with automation and dependability, providing consistent, error-free financial reports.
What are the Benefits of Outsourcing Bookkeeping?
There are several benefits of outsourcing bookkeeping which are discussed below.
1. Ample time to focus on core competencies:
Although bookkeeping is vital, it is a back-end support function, better managed by professionals. Outsourced bookkeeping allows the management & owners to spend more time on more essential activities such as sales growth, and other strategic initiatives to make the operations more resilient and sustainable. Further, it results in the business owners having sufficient time for leisure as well, minimizing stress and increasing productivity. It may also result in the rerouting of cost savings towards the training and development of staff in areas that highly contribute to the core functions of the business.
2. Cost Effective:
Hiring full-time employees increases the cost of the business in terms of wages and other benefits such as insurance, recruitment costs, training costs, paid leaves, office space, and furniture. When your in-house bookkeeper resigns, time will be needed in recruiting, training, and supervising the new employee. With outsourced bookkeeping, you pay only for the specific services subscribed to, with no need to woe over absent days.
3. Expertise:
Outsourced bookkeeping firms are experts in their domain, possessing the latest skills and knowledge of bookkeeping as well as experience in advising the business on the best course of action and strategies for success.
4. Flexibility:
Outsourcing allows for enhanced flexibility with regard to changes in bookkeeping task volumes, which may increase or decrease during the different business phases. On the flip side, in-house bookkeeping would either require the hiring of more employees or overburdening existing employees with additional work. The latter may result in an increase in wages via overtime pay, or the hiring of an employee without a full-time workload to keep fully occupied.
5. Reduction of errors:
Inexperienced bookkeepers and managers with a lack of training may result in inaccurate accounting. Bookkeeping firms have professionals with proven track records. The bookkeeping process is embedded with frequent reviews and quality checks in order to reduce the possibility of errors. Businesses no longer need to worry about incorrect postings, duplicate entries, or constant supplier/customer reconciliations. It also eliminates the possibility of fraud and embezzlement, via segregation of responsibilities, which small businesses encounter regularly.
6. Access to bookkeeping software:
Businesses can avoid the upfront software costs by outsourcing their bookkeeping. They can also gain access to additional services at competitive rates. Automation of accounting services results in the generation of financial reports in real-time. Automation technology reduces the risk of error and internal fraud as well. The use of cloud accounting streamlines the bookkeeping process, and reduces paperwork and storage space, as all financial information is available at the touch of a button. Bookkeeping service providers are often highly qualified in specialized software such as Quickbooks, and Xero among others. Some accounting professionals make use of artificial intelligence and machine learning, which are costly to implement in-house owing to the extravagant training and software development expenses.
7. Ability to grow with the client:
The close and constant relationship of the business with the accounting service provider results in the bookkeeping service providing valuable insight on the business’s current financial position, as well as measures to be taken for the long-term growth and stability of the firm. The bookkeeping firm can use experience from the success stories of other clients to turn the company around or assist in the decision-making process. They can notice red flags in advance and inform the business to take corrective action.
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Common Concerns About Outsourced Bookkeeping
Notwithstanding the benefits of bookkeeping, businesses may have some concerns related to the security of data, transparency, quality of work, lack of control, and associated unknowns.
Outsourcing the bookkeeping process results in the transfer of sensitive financial information of the business over to a third party. Oftentimes, businesses are concerned about the integrity of the bookkeeping firm, raising the risk of a breach of confidentiality. This uncertainty can be eliminated by hiring a company that makes use of cloud technology and other automation systems, which are coupled with stringent protocols regarding the security of clients’ data. Some outsourcing firms may offer assistance in adopting certain technologies and processes to further strengthen the security of information.
Furthermore, transparency in the client-firm relationship from the start is essential for a successful relationship. Transparency is often discussed in terms of costs and expectations. Clients may feel abandoned after the contract is signed due to a lack of understanding in the roles of the outsourced company. They may also experience hidden costs throughout the relationship, eliminating all expectations of cost savings. A simple guide to avoiding this problem is to have a detailed onboarding process regarding the total costs, roles, and responsibilities of the bookkeeper, and other expectations the business has before finalizing the best fit for the outsourced accounting services. Increased client satisfaction may also be achieved by providing references to the existing customer base of the bookkeeping firm.
In comparison to an in-house workforce, it may be expected that an outsourced workforce may not be as accessible as an employee on the job, which could result in various kinds of delays. However, the use of cloud accounting software enables easy and quick access to financial information. Professional bookkeeping services would also have an effective communication channel in place to ensure that they are accessible when needed.
How Accountimize Can Help You with Your Outsourcing needs
At Accountimize, we employ the best-in-class global talent, trained and supervised by a team of CPA Canada charter holders. We provide customized processes, tailored to each individual client’s requirements and preferences.
With Accountimize by your side, businesses no longer need to worry about the accuracy of their accounts as we employ state-of-the-art technology to ensure their books are accurately and efficiently updated. We offer the most transparent and efficient onboarding process by assigning a dedicated team, developing a work plan, and providing a realistic depiction of the engagement, in order to establish long-term relationships.
If you are ready to outsource your bookkeeping, call us to discover more about the value we can provide to your business.
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