7 Benefits of Outsourcing Bookkeeping
As a business owner, you may have considered having an inhouse bookkeeper or outsourcing your accounting work. More than one-third of businesses outsource their accounting work. Managing all accounting operations in-house isn't ideal for cost efficiency or productivity. Think of a day where you do not have to do any bookkeeping. You could use your time better, focusing on your business growth.
Bookkeeping is a necessary process for accounting firms. It records your business's financial transactions into organized accounts daily. However, it is tiresome and time-consuming, making it difficult to handle in-house. So, it is better to assign the bookkeeping tasks to a third-party provider.
What are the Benefits of Outsourcing Bookkeeping?
The practice of outsourcing promotes cost savings along with facilitating expansion. It works well for small business owners who can not afford in-house bookkeeping. Let's take a look at the benefits outsourcing bookkeeping offers:
1. Saves Operating Costs
Outsourcing helps you to save costs on hiring full-time or part-time bookkeepers. In-house bookkeepers charge from 35,000$ to 55,000$ a year. You only pay for the accounting services you need when you outsource the work. This helps your company to save 40% to 60% on overall revenue.
Hiring an employee involves more costs than just payroll services. The other expenses include insurance, training, benefits, and recruiting. Someone in your business will have to devote time to training a bookkeeper. You will need a person to cover sick leave and public holidays for the bookkeeper. When total personnel costs are calculated, outsourcing bookkeeping is a cost-saving option.
Instead of allocating funds towards bookkeeping, you can spend it on essential employees. For instance, hire more mechanics if you own a car maintenance shop. This will decrease wait time and improve productivity.
2. Save Time and Reduces Paperwork
Managing and reconciling financial records takes considerable time of your day. Loads of physical paperwork are pretty time-consuming. A benefit of outsourcing bookkeeping is that you save much time at a much lower cost.
When burdensome work of bookkeeping is outsourced, you can focus on aspects that require your attention. You will have more time to improve customer service, monitor processes and improve overall operations.
3. Access a Cloud-Based Bookkeeping System
The prominent outsourcing companies work on a completely online interface. It helps them to streamline processes and manage the work effectively. Since all your operations are handled on a cloud-based system, you can access your data from anywhere.
Since it is based in the cloud, you, along with your bookkeeping company, can assess records at any given time. This collaboration means the company can instantly input your income and monthly expenses. It gives you a clear view of your finances and new transactions.
4. Reduce Errors
Errors in bookkeeping or accounting services can have several causes. An inexperienced bookkeeper is more vulnerable to making mistakes. Even if you hire an experienced in-house bookkeeper, you accept them to make some errors in their initial period. Before the numbers are error-free, bookkeepers need a specific period.
You will already have a team with much-needed expertise when you outsource your bookkeeping work. The team will use automated bookkeeping software to track your finances and use their knowledge to resolve any issues.
5. Get Detailed Financial Reportings
A primary benefit of outsourcing bookkeeping is the detailed financial insights that come along with it. You can review your balance sheets, cash flow, and incurred profits and losses. You can assess your clients’ financial data with a click for better-informed decisions.
Bookkeepers have an organized way of recording information. Therefore, extracting information from the report is easy. This information can be shared with stakeholders, employees, and financial advisors. Insights like this might prove essential at any given stage of your business.
6. Helps in Tax Seasons
Several companies find it challenging to get all their records intact for tax preparation. Even others with an accounting system often find out it does not follow tax rules.
Outsourced bookkeeping companies have tax experts on staff that ensure your processes are tax compliant. These companies guarantee to complete the bookkeeping tasks before the tax season arrives. Experts will help you to file tax returns conveniently and accurately.
7. Remove Unneeded Services
Companies have different accounting requirements at different stages. They can add, remove or alter their services when needed. As these companies change over time, it may not be easy to analyze which bookkeeping staff is required.
Outsourcing bookkeeping makes it easy for you to add or remove services that are not needed. When your company expands, you can choose to add new services or discontinue services that are not required.
What are the things to look for before outsourcing bookkeeping?
Outsourcing accounting services to a reputable company is your best decision. However, it would help if you considered a few things to ensure that your outsourcing firm is the best fit for your business:
1. Evaluate the Expertise of the Business Company
You can conduct a background check on the outsourcing firm. It would surely help if you verified that the company possesses the required level of experience it claims. Examine the portfolios of past clients and check team composition for better evaluation.
These steps will assist you in getting a better picture of the outsourcing firm’s proficiency. It would help if you chose a firm where Certified Public Accountants (CPAs) administer the workforce.
2. Maintain a level of Transparency
A level of Transparency during the process of outsourced bookkeeping is essential. You do not want any scam or fraudulent activity to damage your business. Owners must check the method of communication with clients implemented at any firm.
Even if issues arise during outsourced bookkeeping service tenure, transparent communication must happen. You do not want to come across an outsourcing firm that hides facts and does not provide relevant work updates.
3. Comply with Security Standards
Any data or privacy breach could prove disastrous for your business. You should only hire an outsourcing firm if it complies with the security standards. Thereby, the firm must sign a Non-Disclosure Agreement (NDA). This prevents the company from disclosing any business information without authorization.
The Bottom Line
Outsourcing your bookkeeping streamlines your business operations. It helps you to reduce costs, save time and scale your business. Having financial insight will have a positive impact on your business growth.
You must choose a bookkeeping firm with the required knowledge and expertise when you outsource. Zarmoney is one such firm that makes outsourcing bookkeeping work more efficient and productive.
1. What is Accounting outsourcing?
Outsourced accounting is when an organization hires a third party to accomplish its finance and accounting services.
2. When You Should Consider Outsourcing Your Accounting And Bookkeeping?
If your business does not need a full-time accountant for 40 hours a week, you might want to consider outsourcing your bookkeeping work. In this way, you can get only the required work done and reduce costs.
If your business needs a full time accounting team but can not afford one, you might need to consider outsourcing your work. Outsourcing your accounting work will get you the required expertise at a lower cost and flexible schedule.
When your business has grown to a point where there is excessive bookkeeping work, you probably need to outsource. Outsourcing the accounting work will help you to save a lot of time, allowing you to focus on the essential parts of your business.
3. What are the advantages & disadvantages of outsourcing bookkeeping? (listicle)
1- Reduce costs : When you outsource bookkeeping work, you only pay for the services you need. This can help to reduce costs as compared to hiring a full time in-house accountant.
2- Reduce Fraud: With outsourced accounting services, you have a team of experts watching your transactions and accounting work. Therefore, a committed team can easily find any anomalies or errors in your accounting work.
3- Access Information Remotely : Outsourced companies use cloud-based and online technology to manage your accounting work. Therefore you can access your bookkeeping data wherever you are.
1- Hidden Costs : Many fraudulent outsourcing companies will set a low initial cost initially to allure the customers. The customers are unaware of the costs that follow and will consequently pay additional charges.
2- Accessibility constraints: With an outsourced company, the physical distance may be constraining. The responses from the outsourced company may not be immediate, causing delays in your accounting work.
3- Security Risks: When you rely on an outsourced company, you are completely trusting an outsider with your financial information. Thereby, your data is always at risk.