You likely didn’t go into business to do bookkeeping. But as a new business owner, performing your own bookkeepingand accounting can help you curb costs while also enabling you to keep close tabs on business income and spending.
As your business grows, however, there’s often less time to manage the books. You also might need more expertise as finances become more complex. If that’s the case, it may be time to engage a professional and outsource your bookkeeping or all of your accounting to better manage your business.
Outsourcing any part of your business can be scary. Outsourcing a task that includes your financial information can be particularly daunting and a potential business risk.
But outsourcing functions that are not your specialty can allow you to spend more time focused on your mission and goals. This can also enable you to benefit from the knowledge and expertise of someone who practices bookkeeping professionally. It's often cheaper than hiring your own full-time, in-house bookkeeper.
Businesses should carefully consider the pros and cons before deciding.
When to Outsource Bookkeeping
If you’ve been doing your own bookkeeping, there are a few indicators it might be time to seek help.
For one, bookkeeping may take up too much time, pulling you away from other tasks that need attention. You might also fall behind on the books or struggle to deeply understand cash flow or track accounts receivable and payable.
When working with an outsourced bookkeeper, you benefit from the oversight of experienced professionals. You won't have to guess - or spend time researching - the correct information or form to use.
Suppose you are at a point where you need help but aren’t quite ready to hire a full-time bookkeeper. In that case, a good option might be to outsource to a contract bookkeeper who will work for a set number of hours per month or to a bookkeeping service that serves multiple clients.
What Do Outsourced Bookkeeping Services Provide?
The specific tasks an outsourced bookkeeper performs can vary. When outsourcing, it’s important to clearly define what services the bookkeeper will provide.
Typical bookkeeping tasks include:
- Recording transactions
- Importing, categorizing, and reconciling financial information from bank statements, credit card statements, payroll records, and invoices
- Managing accounts payable
- Ensuring books are up-to-date and accurate
- Providing monthly or quarterly financial statements – profit and loss, cash flows, balance sheet
- Producing complete and accurate financial reporting for investors and others as needed
When working with an outsourced bookkeeper, you benefit from the oversight of experienced professionals. You won't have to guess – or spend time researching – the correct information or form to use.
Advantages of Outsourced Bookkeeping Services
There are several potential advantages to outsourced bookkeeping. The biggest advantage is that it removes a time-consuming yet critical business task from your plate, giving you more time to focus on mission-critical tasks and opportunities for growth. Assuming you find a good bookkeeper or bookkeeping service, you'll no longer need to worry about things like inaccuracies or falling behind on your books.
Other potential advantages to outsourced bookkeeping include:
1. Regular Reports
The outsourced bookkeeper should regularly deliver the critical reports and financial statements every business owner needs. These will likely include balance sheets, income statements, and cash-flow statements that show how the business is performing. These reports are also important should you need to raise money or potentially sell your company because they have all the data lenders or buyers would need to make an informed decision.
2. Expertise and Reduced Errors
When working with an outsourced bookkeeper, you benefit from the oversight of experienced professionals. You won't have to guess – or spend time researching – the correct information or form to use. An experienced bookkeeper knows how to complete these tasks efficiently and accurately, which can save time and money in the long run as the business is less likely to have to deal with bookkeeping errors.
3. Access to Technology
If doing the books in-house, you may be overwhelmed by the different accounting software available. Determining which will work best for your business can take a lot of time and effort. Outsourced bookkeepers likely already use software they know and trust. This saves time and may eliminate software licensing costs – bookkeeping software is usually included in outsourced bookkeeping packages. Today, many bookkeeping services use cloud-based software, which means you can log in at any time to see the status of accounts or download reports.
Disadvantages of Outsourced Accounting Services
There are a few potential disadvantages to outsourced bookkeeping and accounting. They include:
1. Potential Business Risk
Putting the business’s financial information in a third party’s hands creates inherent risk. Any sensitive information is beyond your control; there is a possibility it could end up in the wrong place. To reduce this risk, thoroughly research and interview the person or business you are considering. Ask for references and then check them to ensure you’re dealing with a trustworthy business that other companies use and approve.
2. Hidden Costs
It’s important to thoroughly understand the associated costs that come with outsourcing accounting services and which tasks the bookkeeper will perform. Double check the contract to ensure there are no hidden costs that could surprise you later.
3. Lack of Communication
Communication is critical to a successful outsourcing arrangement. Determine how and how often you’ll communicate with the bookkeeper. Ensure you have a fixed point of contact reachable at any time.
4. Overdependence
A business that relies on outsourced bookkeeping risks being caught off guard should its provider suddenly close or raise its prices dramatically, requiring the business to quickly move the function in-house or to a new provider.
The Takeaway
Every business needs accurate and complete financial books. But doing your own bookkeeping and accounting isn’t the only option. Choosing to outsource accounting services, such as bookkeeping, to an experienced professional can save time and allow you to focus on growing your business. Outsourcing can also provide other benefits such as quick and easy access to important financial reports, the skills of an experienced professional, and use of the latest accounting software. But before you decide whether to outsource bookkeeping, make sure to weigh the pros and cons.
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