Outsourced bookkeeping is when businesses hire outside bookkeeping and accounting firms, freelancers, or other third parties to manage their financial records.
Why should you outsource your accounting tasks? For several reasons: cutting costs, finding expert accountants for specialized and complex operations, bookkeeping for non-profit organizations and charities, replacing an absent employee, and more.
Keep on reading as we thoroughly cover the topic below!
The process of outsourcing your bookkeeping and/or accounting tasks may vary slightly depending on your exact needs and whether you hire a firm or an individual expert. That said, very similar steps apply in most cases:
Throughout the process, the accounting business will regularly communicate with you to update you on their progress and request further input if necessary. Most also provide ongoing support and adjust your services based on your changing needs.
Although used interchangeably in this and other articles, bookkeeping and accounting are complementary professions with subtle differences. Therefore, bookkeepers and accountants work together as their careers significantly overlap.
While outsourcing your bookkeeping needs typically costs less than hiring a full-time employee, determining the exact price is rather difficult since it varies from client to client based on numerous factors, including but not limited to the following:
Considering all of the above, small businesses can expect to pay around $500 to $1,500 per month, whereas medium companies with advanced accounting needs have to cover around $1,500 to $5,000 every month. Finally, large businesses with multiple locations will easily be charged over $10,000 on a monthly basis.
So which businesses need outsourced bookkeeping services?
First of all, small businesses lacking resources often look for a cost-effective alternative to hiring an in-house full-time bookkeeper and/or accountant.
Similarly, rapidly growing businesses also outsource their bookkeeping since their needs change regularly, and they apply their valuable time and resources elsewhere.
Firms struggling to hire a competent full-time accountant to handle their specific books can consider outsourcing to a third-party provider as well.
Companies looking for expert bookkeepers who can handle their very niche needs may also have no other option but to leverage outside bookkeeping firms.
Accounting for non-profit organizations and charities differs considerably from accounting for profit-based businesses, as it involves complex concepts, such as donations, tax-deductible receipts, and grants, requiring expert accountants. Plus, such organizations need expert knowledge of annual reporting obligations with regulatory bodies.
Lastly, some companies may need a temporary accountant as a replacement for an absent employee, for year-end accounting, or for audit purposes.
When hiring an outsourced accounting firm, businesses need something more than the processing of day-to-day transactions. Some of the most requested features and bookkeeping and accounting services include:
Note: Always inquire with accounting firms you are looking to hire whether or not they have the expertise needed to handle your every bookkeeping and accounting function.
To facilitate the transfer of accounts between your company and the outside bookkeeping and/or accounting firm, keep in mind all of the below.
Setting clear requirements and expectations right from the start is essential to avoiding future disputes. For that purpose, write up a document containing all agreed-upon terms and conditions before handing over your accounts to an outsourced firm.
Examine and strengthen your company’s data security policies, especially those about parties requesting outside access. That way, you’ll protect your property and the reliability of your internal processes. Also, discuss the relevant data security measures with the accounting service provider to ensure they employ proper safeguards.
You must establish a safe and secure data exchange method with the outside accounting firm, preferably a modern cloud-based approach. That way, the accountants can quickly pull the necessary information without wasting your time and resources.
In order for an outside company to easily access all your financial records, you must digitalize them and upload them to the cloud. Hence, gather, organize, and upload every financial document, including bank statements, invoices, receipts, tax returns, etc., via the online service you agree to use for your accounting purposes.
Below, we summarize the pros and cons of outsourced bookkeeping and accounting, which will help you see if this type of service fits your business structure:
Selecting an accounting service provider is a critical decision that can significantly impact the financial health of your business. So, find a firm with experience and expertise in your industry, check their credentials, and review testimonials from past clients. Then, consider the exact services they offer, their technology, and their prices.
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