Outsourced Bookkeeping: A Complete Guide
Managing your finances is essential to running a successful business, but doing it in-house can be costly and time-consuming. Outsourced bookkeeping has become an increasingly popular solution for small businesses, offering flexibility, cost savings, and access to expert knowledge. In this comprehensive guide, we’ll explore what outsourced bookkeeping is, its benefits, how to choose the right service provider, and tips for ensuring a successful partnership.
What is Outsourced Bookkeeping?
Outsourced bookkeeping involves delegating your business’s financial record-keeping to a third-party service. Rather than employing full-time staff, you leverage external professionals to handle critical financial tasks such as:
- Recording transactions: Ensuring that sales, purchases, and payments are accurately documented.
- Managing accounts payable: Keeping track of outgoing bills.
- Managing accounts receivable: Keeping track of incoming payments.
- Processing payroll: Handling employee wages, deductions, and tax obligations.
- Generating financial reports: Producing key documents like income statements, balance sheets, and cash flow reports.
- Preparing taxes: Ensuring compliance with tax laws and accurate filing.
How to Choose the Right Outsourced Bookkeeping Provider
1. Understand Your Business Needs
Before selecting a provider, determine what specific services your business requires. Do you need basic transaction recording, or do you require full-service bookkeeping with payroll, tax prep, and financial strategy? By clearly defining your needs, you can choose a provider that matches your requirements.
2. Look for Experience and Expertise
Check the provider’s credentials, including how long they have been in business and what industries they specialize in. Look for firms with strong client reviews, case studies, and experience handling businesses similar to yours.
3. Evaluate Technology Solutions
Ensure the provider uses modern bookkeeping software like QuickBooks Online, Xero, Wave, Sage or Zoho Books. These platforms offer automated bookkeeping features that enhance efficiency. Cloud-based solutions allow for seamless access to your financial data and real-time reporting, essential for monitoring your business’s financial health.
4. Communication and Transparency
Choose a provider that values open communication and provides regular updates. They should be able to explain financial reports in clear terms and respond quickly to your questions. A strong communication strategy is crucial for avoiding misunderstandings and keeping you informed of your financial status.
5. Consider Pricing and Contracts
Outsourced bookkeeping providers typically offer different pricing models, including hourly rates, monthly retainers, or package deals. Compare the costs against the services provided, ensuring there are no hidden fees or long-term commitments that may not suit your needs.
Best Practices for a Successful Outsourced Bookkeeping Partnership
1. Set Clear Expectations
From the beginning, it’s essential to outline the scope of work, timelines, and key deliverables. This includes defining how often you’ll receive financial reports, what documentation is required, and the level of support the provider will offer.
2. Regular Financial Check-Ins
To ensure your books are accurate and up-to-date, schedule regular check-ins with your bookkeeping provider. These meetings allow you to review reports, address any discrepancies, and adjust your financial strategies if necessary.
3. Keep Your Financial Documents Organized
Provide your bookkeeping provider with organized and timely access to all relevant financial documents. This includes bank statements, receipts, invoices, and payroll data. Efficient organization reduces the risk of errors and ensures a smoother workflow.
4. Monitor Performance with KPIs
Establish Key Performance Indicators (KPIs) to measure the effectiveness of your bookkeeping service. Common KPIs include accuracy in financial reporting, response times, and adherence to deadlines. Monitoring these indicators will help ensure your provider meets your expectations.
5. Flexibility and Adaptability
As your business grows and evolves, your bookkeeping needs may change. Be open to adapting your financial processes and discuss these changes with your provider to ensure they can accommodate them. A flexible partnership leads to long-term success.
Why Outsource Your Bookkeeping?
Outsourcing your bookkeeping comes with several benefits. Here are six reasons why it makes sense for your business.
1. Significant Cost Savings
Outsourcing bookkeeping eliminates the need to hire full-time staff, reducing costs associated with salaries, benefits, and office space. You only pay for the services you need, whether it’s monthly bookkeeping or more comprehensive financial management. For small businesses, this often results in a 30-50% reduction in bookkeeping costs compared to in-house teams.
2. Expertise and Access to Professionals
Outsourced bookkeeping firms employ experienced bookkeepers and accountants with specialized knowledge across industries. This ensures accuracy and compliance with regulatory requirements. Many firms also have CPAs on staff, providing an additional level of expertise that might be beyond the scope of an internal team.
3. Enhanced Focus on Core Business Activities
Bookkeeping can be time-consuming and distracting for business owners. By outsourcing this function, you can focus on growing your business, developing new products, and improving customer service. According to a study by QuickBooks, 67% of small business owners said outsourcing bookkeeping freed up time to focus on other essential aspects of their business.
4. Scalability and Flexibility
As your business grows, your financial management needs will evolve. Outsourced bookkeeping services are highly scalable, allowing you to easily adjust the level of service without the need for hiring new staff. Whether your business is expanding or going through seasonal fluctuations, outsourced bookkeeping provides the flexibility to scale up or down.
5. Improved Accuracy and Reduced Risk
Mistakes in bookkeeping can lead to costly penalties and legal issues. Outsourced services use industry-standard processes and technology, ensuring higher accuracy and compliance with financial regulations. By working with experts, you reduce the risk of errors and improve your financial health.
6. Real-Time Access to Financial Data
With cloud-based bookkeeping solutions, you gain real-time access to your financial records from anywhere. This transparency allows for better decision-making and financial planning. Cloud accounting platforms like QuickBooks Online, Xero, Wave, Sage or Zoho enable you to view and share financial reports instantly, giving you full control over your business finances.
How Does Outsourced Bookkeeping Work?
Outsourced bookkeeping offers flexibility in how your bookkeeper accesses and updates your financial records. There are three primary ways an outsourced bookkeeper can work with your QuickBooks or other bookkeeping data: using their local desktop, accessing a remote desktop, or using QuickBooks Online (QBO). Let’s explore these options in detail.
1. Local Desktop Option – QuickBooks Running on Bookkeeper’s Computer
In this setup, the bookkeeping provider works on QuickBooks installed on their local computer. Businesses can either start with a new QuickBooks file or transfer an existing one.
- Initial Setup: To transfer an existing file, clients can save the QuickBooks file in QBM format and upload it to a shared folder, such as Dropbox.
- Document Sharing: Businesses can share relevant documents for data entry via email, Dropbox, or through downloads from websites.
- Updates: The bookkeeper updates the local QuickBooks file, and clients receive financial reports in Excel or PDF format via email.
- Backup: The QuickBooks file is regularly backed up in QBM format to the shared folder after major updates.
Pros:
- No need to purchase additional QuickBooks licenses, as the bookkeeper uses their own.
- The service provider maintains the software and ensures that clients receive accurate reports.
- Works efficiently for large volumes of data entry.
- In case of service termination, all data is saved on Dropbox and remains accessible to the client.
Cons:
- Since QuickBooks runs locally on the bookkeeper’s computer, only the provider can make changes to the file.
- Clients without QuickBooks can only view, but not modify, backup data.
2. Remote Access Option – QuickBooks Running on Client’s Computer
For businesses that prefer to maintain control of their QuickBooks software, the bookkeeper can remotely access QuickBooks running on the client’s computer using remote desktop software.
- Initial Setup: The bookkeeper can either create a new QuickBooks file or use the client’s existing file stored on a remote desktop.
- Document Sharing: Clients can share documents via email, Dropbox, or by saving files directly on the remote desktop.
- Updates: The bookkeeper connects to the remote desktop over the internet to update the QuickBooks file in real time.
- Backup: After each significant update, the file is backed up to the shared Dropbox folder.
Pros:
- Both the business and the bookkeeper can work on the same QuickBooks file, providing real-time updates and collaboration.
- Client can watch over the bookkeeper’s actual work and see everything the bookkeeper does on their computers.
- Clients can run their own reports and view changes made by the bookkeeper.
- If services are terminated, all data remains stored on the client’s machine and Dropbox.
Cons:
- Hosting QuickBooks on a dedicated computer can increase costs (around $500 for a new machine).
- Additional QuickBooks licenses and remote access software may be required, which can add up to $200 every few years and $10 per month, respectively.
- Can be slower for large data entry tasks.
3. Online Option – QuickBooks Online (QBO)
QuickBooks Online provides the most flexibility, allowing both the client and the outsourced bookkeeper to access and update financial data from anywhere with an internet connection.
- Initial Setup: Clients can either start a new QBO account or transfer an existing QuickBooks Desktop file to QBO.
- Document Sharing: Documents can be shared via email, Dropbox, or downloaded from other platforms.
- Updates: The bookkeeper is invited to the QBO account and can make updates online.
- Backup: The file is backed up regularly by the software provider.
Pros:
- Both parties can access and update the same QBO account simultaneously, ensuring real-time collaboration.
- QuickBooks Online is accessible from any device, including mobile phones and tablets.
- QBO is continuously updated with the latest features, making it a forward-looking solution for financial management.
- Even if services are discontinued, all financial information remains in the client’s QBO account and Dropbox.
Cons:
- While QBO starts at $25 per month, costs can increase to $180 per month as more features and users are added.
- QBO lacks certain advanced features still available in QuickBooks Desktop.
- The system can be slow when handling large data entries.
- QBO relies heavily on a stable internet connection.
Outsourced Bookkeeping Case Studies
Case Study 1: Startup Success with Outsourced Bookkeeping
A fast-growing tech startup outsourced its bookkeeping after struggling with in-house financial management. By partnering with an external provider, they reduced bookkeeping costs by 40% and were able to focus on securing additional funding. The startup’s financial health improved drastically as the provider implemented automated reporting tools, giving the leadership team real-time insights into cash flow and profitability.
Case Study 2: Retail Business Growth
A retail chain with multiple locations outsourced its bookkeeping to handle increased financial complexity. By scaling up bookkeeping services during the holiday season and scaling down during slower months, the business maintained accurate financial records without overstaffing. This flexible approach resulted in a 25% increase in operational efficiency and allowed the business to focus on customer service and inventory management.
Why Choose Us for Outsourcing?
There are numerous bookkeeping providers to choose from. How can compare us the best bookkeeping services? When you decide to outsource your bookkeeping, here’s why we stand out from the rest.
1. High-Quality Bookkeeping
With over 17 years of experience, we’ve been focused exclusively on bookkeeping since 2005. We don’t lock you into proprietary software, but instead, work with popular tools like Intuit QuickBooks, Xero, Wave and Sage. Our best practices ensure that your books are clean and accurate.
2. Focus on Bookkeeping
Our teams are experts in bookkeeping and work with thousands of clients, including CPAs and businesses. Unlike in-house bookkeepers, who handle multiple tasks, we focus 100% on managing your books.
3. QuickBooks Expertise
We specialize in QuickBooks bookkeeping—both Desktop and Online versions—so you can trust us to handle all aspects of your financial management.
4. Daily Updates
We can update your books daily or as often as you need. You’ll always have up-to-date financial information without the hassle of managing it yourself.
5. Built-In Supervision
All our plans include a supervisor who reviews the quality of your books before they’re delivered to you. This extra layer of oversight ensures that your financial data is accurate and complete.
6. Best Practices
We serve thousands of clients across various industries, so we can apply the best practices for your specific needs, ensuring your books are managed efficiently.
7. Save Money and Improve Cash Flow
Outsourcing your bookkeeping can save you significant money. Our rates are lower than in-house solutions, starting at $7.50 per hour. By outsourcing, you only pay for the hours you need. Our flexible plans start at just $50 per month, offering you cost-effective solutions.
Beyond cost savings, outsourcing helps you manage cash flow more effectively. Our expert bookkeepers track your financials to help you avoid cash flow issues and improve overall financial health.
8. Free Up Time for What Matters
By outsourcing your bookkeeping, you free up valuable time to focus on your business and your family. Let us handle the tax prep, work with your CPA, and ensure your books are ready for tax season. Enjoy peace of mind knowing your finances are in good hands.
Conclusion
Outsourced bookkeeping offers small businesses a powerful tool for reducing costs, improving accuracy, and gaining expert financial insights. By carefully choosing the right provider and following best practices, you can streamline your financial processes and focus on driving business growth.
General Outsourced Bookkeeping Questions:
Q: What is outsourced bookkeeping?
A: Outsourced bookkeeping is the practice of hiring a third-party service to manage your financial records, including tasks like recording transactions, reconciling accounts, and generating financial reports. This allows business owners to focus on their core operations while professionals handle their financial management.
Q: How does outsourced bookkeeping work?
A: Outsourced bookkeeping works by assigning a dedicated bookkeeper to your business. Depending on the arrangement, they can access your financial records remotely through software like QuickBooks Desktop or QuickBooks Online. They handle all bookkeeping tasks, provide regular updates, and ensure your books are always accurate and up to date.
Q: What are the benefits of outsourcing bookkeeping?
A: Outsourcing bookkeeping saves time, reduces overhead costs, ensures accuracy, and gives you access to expert financial management. You only pay for the services you need, without the burden of hiring full-time employees. Additionally, outsourced bookkeepers can offer insights into your business’s financial health with real-time updates and reports.
Q: How do I know if outsourced bookkeeping is right for my business?
A: Outsourced bookkeeping is a great fit if you want to focus on running your business rather than managing day-to-day finances. It’s ideal for businesses that need accurate financial reporting but don’t have the resources to hire full-time bookkeeping staff.
Q: What types of businesses can benefit from outsourced bookkeeping?
A: Any business that requires consistent financial management can benefit from outsourced bookkeeping, including small businesses, startups, e-commerce companies, professional services firms, and more. It’s especially useful for businesses looking to scale without increasing internal staff.
Q: What bookkeeping tasks can I outsource?
A: You can outsource tasks such as transaction recording, invoicing, accounts payable and receivable, payroll processing, bank reconciliation, financial reporting, tax preparation, and more.
Q: Can I outsource my bookkeeping if I already have an in-house accountant?
A: Yes, you can. Many businesses supplement their in-house accounting teams by outsourcing routine bookkeeping tasks. This allows your in-house team to focus on higher-level financial strategy and tax planning.
Q: How do outsourced bookkeepers maintain accuracy?
A: Outsourced bookkeepers use best practices, advanced accounting software, and cloud-based solutions to maintain accuracy. They also have built-in checks and balances, such as supervisory oversight and regular reviews, to ensure your financial records are correct.
Q: How can I monitor the work being done by an outsourced bookkeeper?
A: Most outsourced bookkeeping services offer cloud-based platforms like QuickBooks Online, where you can view real-time updates and reports. Regular communication, financial reports, and scheduled reviews ensure transparency and give you control over the process.
Services and Pricing:
Q: What services are included in your outsourced bookkeeping package?
A: Our bookkeeping packages include transaction recording, bank reconciliations, financial reporting, payroll processing, tax preparation, and more. We can also customize services based on your specific business needs.
Q: How much does it cost to outsource bookkeeping?
A: Our rates start as low as $7.50 per hour for CPAs and $10 per hour for small businesses. We also offer monthly plans starting at $50 per month, making outsourcing bookkeeping highly affordable compared to in-house options.
Q: What payment plans are available for outsourced bookkeeping?
A: We offer flexible payment plans, including hourly rates and monthly retainers. You can choose the plan that fits your business’s bookkeeping needs and budget.
Q: Are there any hidden fees with your bookkeeping services?
A: No, we operate transparently. All pricing is disclosed upfront, and there are no hidden fees. You only pay for the services you use.
Q: Do I need to sign a long-term contract to outsource bookkeeping?
A: No, we offer flexible, no-commitment plans. You can cancel at any time without long-term contracts or penalties.
Q: How often will my books be updated?
A: We can update your books as frequently as needed, from daily updates to weekly or monthly reviews. You set the schedule that works best for your business.
Q: Can you provide daily bookkeeping updates?
A: Yes, we offer daily bookkeeping updates to keep your financial records current. This is especially useful for businesses with high transaction volumes or complex financial needs.
Q: Do you offer specialized services for industries like retail, construction, or e-commerce?
A: Yes, we serve a wide range of industries and tailor our services to meet the specific needs of each one. Our bookkeepers are experienced in handling retail, construction, e-commerce, professional services, and more.
QuickBooks and Technology:
Q: Do you specialize in QuickBooks?
A: Yes, we specialize in both QuickBooks Desktop and QuickBooks Online. Our team is highly experienced in using QuickBooks to manage bookkeeping tasks efficiently.
Q: Can I use QuickBooks Desktop or QuickBooks Online with outsourced bookkeeping?
A: Yes, we support both QuickBooks Desktop and QuickBooks Online, depending on your preference. We can access your QuickBooks remotely and manage your bookkeeping through either version.
Q: Do I need to purchase a QuickBooks license?
A: If you are using QuickBooks Online, you will need an active subscription. If you prefer QuickBooks Desktop, we can use our own licenses to manage your books, saving you the cost.
Q: How do you access my QuickBooks file remotely?
A: We can securely access your QuickBooks file through remote desktop software for QuickBooks Desktop or via login to your QuickBooks Online account. All access is encrypted for your protection.
Q: Is my financial information safe if it’s hosted in the cloud?
A: Yes, cloud-based solutions like QuickBooks Online use industry-standard encryption and security measures to protect your data. We also follow strict confidentiality protocols to ensure your information stays secure.
Q: Do you provide support for other accounting software like Xero or Zoho Books?
A: While we specialize in QuickBooks, we also support other accounting platforms like Xero and Zoho Books. Let us know your preferred software, and we’ll adapt to it.
Q: How do you handle document sharing and data entry?
A: We use secure platforms like Dropbox or Google Drive for document sharing, and we can also download documents directly from your systems or websites as needed.
Q: Can I view and access my QuickBooks account while the bookkeeper is working?
A: Yes, with QuickBooks Online, you can view and access your account in real time. You’ll be able to see any updates and changes made by your bookkeeper.
Security and Privacy:
Q: How do you ensure the security of my financial data?
A: We use encrypted platforms for all data exchanges and maintain strict confidentiality agreements with our staff. Our servers and cloud systems are protected with the latest security protocols.
Q: Who has access to my bookkeeping information?
A: Only your assigned bookkeeper and supervisor will have access to your bookkeeping information. Access is granted on a need-to-know basis to ensure data security.
Q: What measures are in place to protect my privacy?
A: We have strict privacy policies, and our team is trained to handle sensitive information confidentially. Non-disclosure agreements (NDAs) are signed with all our clients to ensure your information stays private.
Q: Will you sign a non-disclosure agreement (NDA)?
A: Yes, we are happy to sign an NDA to ensure your financial information remains confidential.
Q: How do you back up my financial records?
A: We back up all financial records regularly to secure cloud storage systems. These backups are encrypted and available for restoration in case of data loss.
Q: What happens to my data if I decide to stop using your services?
A: Your financial data remains yours. If you discontinue our services, we will transfer all files and documents to you or your designated accountant securely.
Working with an Outsourced Bookkeeper:
Q: What documents do I need to provide to start outsourced bookkeeping?
A: Typically, you’ll need to provide bank statements, receipts, invoices, payroll records, and any other financial documents. We’ll give you a checklist of what’s needed based on your business.
Q: How do you handle communication and updates with clients?
A: We communicate through regular email updates, phone calls, or video meetings. You can also contact your dedicated bookkeeper or supervisor anytime with questions.
Q: How do I share my financial documents with you?
A: You can share documents securely via email, Dropbox, Google Drive, or other cloud services. We can also retrieve documents from your accounting software, and bank & credit card websites if needed.
Q: How do I transition from in-house bookkeeping to outsourced bookkeeping?
A: We will work closely with you to transfer your existing records smoothly. This includes migrating files from QuickBooks or other accounting software, setting up document sharing, and aligning with your current financial processes.
Q: Can I contact my bookkeeper directly?
A: Yes, you’ll have direct access to your assigned bookkeeper for any questions or concerns. When you sign up with us, you will get an assigned group email that will include your supervisor, the bookkeeper, you and anyone else from your team you want on it. You can use this group email for communications and to request calls with the supervisor.
Q: Who will be my main point of contact?
A: You will be assigned a dedicated supervisor who acts as your primary point of contact. They ensure the quality of your books and coordinate with your bookkeeper.
Q: What happens if my assigned bookkeeper is unavailable?
A: Every client gets an assigned supervisor and a bookkeeper. If your assigned bookkeeper is unavailable, the supervisor who is very familiar with your books will transition the work to a secondary bookkeeper. So, if your primary bookkeeper is unavailable, the secondary bookkeeper will step in without interruption.
Q: Can you help with tax preparation?
A: Yes, we assist with tax preparation and work with the CPA of your choice or use our own CPA to ensure that your books are ready for tax filing.
Q: Do you work with my CPA or accountant during tax season?
A: Absolutely! We collaborate with your CPA or accountant to make tax season as smooth as possible.
