Summary
In this article, we discuss the benefits of outsourcing bookkeeping and how the whole thing works. It gives you a walkthrough of why businesses are leaning more towards outsourcing over the traditional approach of in-house bookkeeping.
With so many things to handle as a business owner, bookkeeping isn’t something you would enjoy. But it is necessary, so the perfect solution is to outsource it and save up on your precious time for growth strategies.
In this guide, we talk about the benefits of outsourcing bookkeeping and how it works. By the end of this, you will get a clear view of why businesses are switching to this.
What is Outsourced Bookkeeping?
Straight up, outsourced bookkeeping is when an outside individual or company handles your bookkeeping. This mostly happens remotely, outside your office. So, here you will hand over all your financial information to a third party. Then they will crunch the numbers to track your finances and prepare reports.
When you compare this to the traditional in-house bookkeeping method, you will notice several advantages.
- Firstly, it cuts out the whole need for office space, as the work will happen outside the office.
- Since you won’t have to pay salaries and only take specific services, it also saves money.
- You can also save on resources, such as manpower and time.
- It’s comparatively easier to scale through outsourcing bookkeeping
What Are the Benefits of Outsourcing Bookkeeping Work?
Below, we have the exact reasons most businesses are shifting towards outsourcing a lot more –
1. Cost Savings
The biggest savings you get to make with outsourcing a bookkeeper are in the money. You don’t have the hiring cost, office space cost, or the overhead costs of having an in-house employee. With outsourcing, you simply pay for the hours you use their service.
2. Time Efficiency
Another key reason businesses are outsourcing bookkeeping is that it saves a lot of time. As the outsourced company or individual does your bookkeeping, you get to focus on growth strategies or maybe even take a break.
3. Access to Expertise
Most of the time, when you outsource bookkeeping, you get access to expert bookkeepers. Usually, they have been doing it for a while, so they know all the different kinds of potential problems and their solutions. Acquiring such in-house talent can cost you a lot.
4. Improved Accuracy and Compliance
When you outsource your bookkeeping process, you get guaranteed accuracy. How? Well, most of these outsourced bookkeepers will use industry-standard, professional software to do the job.
5. Scalability and Flexibility
Outsourcing bookkeeping lets you adjust how much work you need to get done. Here’s how it works –
- You can increase work hours during periods of high transaction volume.
- When the pressure is lower, you can decrease the necessary work hours.
6. Business Continuity and Risk Reduction
The primary benefit you get from outsourcing bookkeeping is that they don’t take leave or get sick. If one bookkeeper from your partnering agency gets sick, you will receive an instant replacement. Also, these bookkeepers are specialists, so they know the documented procedures and secure methods to manage your finances.
How Does Outsourced Bookkeeping Work?
The outsourcing process of bookkeepers stays the same no matter where you are coming from. Here’s the 5-step working process –
- Step 1: Assessing Business Needs: The first step is to figure out what you need to outsource and why you need it. You can just check the current transaction volume, see what reports you need, and clarify your pain points to determine that.
- Step 2: Establishing a Timeline: Define when you need the bookkeeping provider to begin their service and how often you expect them to present reports. Setting all of these expectations right will help you stay structured and find a suitable partner.
- Step 3: Researching and Selecting a Provider: Explore the internet and see what the different bookkeeping services are offering that meet your needs. You should always check the reviews or their portfolio to determine if they are good enough and have experience or not.
- Step 4: Defining Scope and Expectations: The next thing is to tell the provider what you want them to take care of. It can be something specific, like payroll or financial statements and reporting. It can also handle the whole bookkeeping operation.
- Step 5: Contracting and Onboarding the Provider: Write down the working policy and process in a contract with the provider. It will include all the details and agreements between the two parties. Then, you simply teach them your ways and give them access to the necessary information.
- Step 6: Monitoring Performance and Maintaining Communication: The last thing to do is, see how your outsourced bookkeeping service is performing and communicate with them. If you see things aren’t working out that well, then you can redo the whole thing.
When To Consider Outsourcing Bookkeeping?
Confused about whether you truly need to outsource bookkeeping or not? Then, we have some scenarios that may guide you through the process. See if you can relate to any of the situations. If yes, then you need to outsource bookkeeping —
- Spending Too Much Time on Bookkeeping: If you or your employees spend a lot of time on bookkeeping, you need to outsource it. You can use the time you save on core business activities, such as developing strategies.
- Lack of expertise: Here’s the thing: You tried out bookkeeping, your team tried, but it’s not up to mark. This is the perfect place to outsource your bookkeeping to experts.
- Industry-Specific Requirements: Some industries, like healthcare, legal firms, or non-profit organizations, need a unique reporting standard. If you don’t have knowledge or expertise in the reporting standards of these industries, outsourcing is the only option for you.
- Limited time or resources: When you don’t have enough time or manpower to allocate for bookkeeping, you go for outsourcing. Because while it’s time-consuming, it’s also something you can’t ignore.
- Compliance Concerns: Honestly, you never want to deal with legal issues related to tax penalty or an audit. If you can’t create reports that are compliant with the standards, then outsourcing is the way to go.
- Scalability: In the growing stage of your business, the transaction volume will increase significantly. It’s only natural that you, with a small team, might not be able to handle that. So, outsourcing bookkeeping can be an easy solution.
Read More: Bookkeeping Tips for Small Businesses
Conclusion
Ultimately, outsourcing your bookkeeping could be the wisest decision you make for your expansion. It’s now quite evident that the benefits of outsourcing bookkeeping are convincing and effective enough for growth.
It all depends on whether you are in a situation to outsource bookkeeping or not. We have provided some guidelines for that; follow them, and you will get your answer to that as well.
FAQ
What are the costs of outsourced bookkeeping vs in-house for small businesses?
| Bookkeeping method | Cost (Basic/ Beginner) | Cost (Advanced/ Experts) |
|---|---|---|
| Outsource | $300 | $2500 |
| In-house | $4000 | $6000 |
What to look for when hiring an outsourced bookkeeping provider?
Right away, you look for industry expertise. You can never compromise on a bookkeeper’s experience and expertise when outsourcing. Then, you check how good they are with technology. They need to be masters of tools like QuickBooks Online. After that, you see whether they have any credentials.
Why do small businesses need bookkeeping?
Small businesses struggle with tracking cash flow; that’s where bookkeeping helps a lot. They also need bookkeeping to meet legal and tax compliance. Lastly, having proper financial reports helps with funding requests.
What are the types of bookkeeping?
There are two types of bookkeeping: single-entry and double-entry. Singly entries are simple and only record transactions once. Double-entry is where you see the standard accounting format of debit and credit along with the assets, liabilities and equity equation. It’s the perfect bookkeeping method for financial statements and reports.
