Running a business requires a constant juggling act of various roles within your company. One day you’re doing the work and generating revenue. Next, you’re hiring employees and acting as an HR manager. You spend time at the end of the month reconciling bank and credit card accounts and poring over financial data. Most business owners did not go to school for accounting or bookkeeping, so these tasks end up taking much longer than many others. Your time is valuable, and you need to spend more of it on hiring, sales, operations and less on time-intensive tasks that can be handled cheaper and more efficiently. Bookkeeping is one of the best responsibilities to outsource, and in this article, we will explain all of the benefits.
1. Save Money
This is the most obvious benefit of outsourcing your bookkeeping. The reality is that every single business, no matter how big or small, needs bookkeeping services. If you don’t outsource these services, you are stuck with either hiring an employee to take care of these tasks or simply doing it yourself.
Unfortunately, when you hire an employee, you generally cannot hire them on an “as needed” basis. They’ll expect regular hours and a pay rate. With bookkeeping, there are many tasks that take a varying amount of time each month and many that can be done in just a few hours. Hiring an employee to do these tasks is often more labor than is necessary to complete the job. This leaves you paying an employee to fill other voids in your business, which isn’t an efficient hire. On top of that, you’re responsible for payroll taxes, benefits, and paid time off for this employee, which can hurt your bottom line. Outsourcing this to a bookkeeping firm allows you to pay for the services as you need them and also pay them as a contractor. This saves money on wages, payroll taxes, and other costs associated with hiring.
If you choose to do the work yourself, there is a cost associated with that as well. As a business owner, the more time you can spend working on your business, the more money you can make. Any time taken away from the core revenue-generating activities of your business can mean wasted money.
2. Save Time
Most business owners do not have a bookkeeping background, meaning bookkeeping tasks will generally take more time than they would for a bookkeeping expert. These sorts of inefficiencies are not sustainable for any growing business, and outsourcing can fix that. A team of experts that complete bookkeeping tasks for many businesses across many industries have processes that make month-end closes a breeze. The man-hours that are required to complete bookkeeping tasks decrease significantly when you outsource them to a firm that only does bookkeeping. This allows you to put your time to use in your business, which is where it is most valuable.
3. Accurate Data You Can Rely On
Ever heard the term “garbage in, garbage out”? It’s a term that’s used in any data-driven process, and bookkeeping is one of them. Handling bookkeeping in-house can have poor results if you don’t put the right people in place. When mistakes are made during transaction entry or closing tasks, it can throw off your financial data significantly. This means that when you view your financial statements to analyze your operating results, you may be looking at numbers that are completely meaningless. This can result in business decisions being made based on bad information, which can lead to more mistakes down the road.
Outsourcing your bookkeeping to an experienced firm can help fix these types of errors. Outsourced bookkeepers know how to find mistakes and fix them before they show up on your financial statements. Accurate data is critical, especially when making operational decisions such as the following:
- Whether to acquire assets prior to year-end to save money in taxes
- Scaling one of your more profitable business segments and investing more marketing dollars
- Whether or not it’s time to hire another employee based on revenue growth targets
- Deciding when to pay down debt based on projected future cash-flows
4. Financial Insights You Didn’t Realize Were Possible
Many business owners don’t realize that bookkeeping does not have to be as simple as debits and credits, a profit and loss statement, and a balance sheet. With careful setup and expert outsourcing, there is much more you can get out of your financial data. For example, many professional bookkeepers can set up class tracking or transaction tagging within your accounting software. This allows you to segment your business into different categories. For example, a construction contractor may want to track income and expenses by residential vs. commercial. An outsourced bookkeeper can tag transactions as such, allowing the business owner to track profit and loss by class or segment. This can help a business owner determine where their time is most efficiently spent based on actual data and profitability.
Outsourced bookkeepers can also help you put together financial ratios each month to help you track things like liquidity, gross profit margins, net profit margins, cash burn rate, and many more. These insights go far beyond staring at a profit and loss statement and trying to figure out where the numbers came from. Outsourced bookkeepers can tailor these insights to your specific industry and even compare them with industry standards, allowing you to get much more out of your financial data.
5. Access to Financial Software and Apps
Many bookkeepers pay for software out of their own pockets and can charge clients directly for it. This can result in some discounted rates that you may not have access to by going directly to the software provider. In addition to potential cost savings, your bookkeeper can recommend many apps based on your industry and specific needs. This prevents you from having to trial different solutions yourself and allows you to get straight to the solution that works best for your business. Here are some common apps recommended by many modern bookkeeping firms:
- Quickbooks Online – Web-based accounting software that helps your business automate processes and work with your accountant/bookkeeper in real time
- Bill.com – Bill payment solution that allows bill entry and payment directly from the software. Built-in workflows that allow for bill entry, bill approval, and bill payment using multiple users. Sync directly with most accounting software in real time.
- Divvy Credit Card – Credit card company that allows owners to give multiple credit cards to employees. Owners can create budgets within the app and only allow members to spend only up to their budgeted funds. Members can then document their expenses and take pictures of receipts in real time. Syncs directly with accounting software in real time.
- Hubdoc – Stores all bills and receipts in an organized, web-based fashion. Software can pull bills and receipts directly from online accounts without having to log in to many different accounts. Syncs directly with accounting software in real time.
- Fathom – Creates unique financial insights based on data entered in accounting software. Great for predicting future outcomes and analyzing past data. Integrates with most accounting software in real time, eliminating duplicate entry.
6. Be Prepared for Tax Time
One of the main purposes of bookkeeping is to have access to the financial data that is necessary to file tax returns for your business. If you manage your bookkeeping in-house, there may be many adjustments necessary prior to filing your taxes that will need to be done by your tax accountant. This can significantly increase the cost of your tax preparation. It may also cause you to make tax-focused decisions before having a handle on your true profit for tax purposes.
Most outsourced bookkeepers are very used to working directly with your tax professional at year-end to make the tax preparation process simple. Some bookkeepers (like Casey Moss Tax & Accounting) even prepare taxes for you. This allows for a streamlined process at year-end that can help you avoid annoying extensions and late filing. It can also help significantly in the tax planning process, which can save you a lot of money in taxes each year.
7. Cloud-Based, Virtual Solutions
Since most bookkeepers (or at least the good ones) work remotely for your business, the majority of your data will be hosted in the cloud. This allows both you and your bookkeeper to access real-time data from anywhere in the world. Not only does this make the bookkeeping process more efficient, but it also keeps you connected to your business whenever you need to be.
Aside from connectivity, hosting data in the cloud is a much safer way to store data than most other options. It prevents you from having to back up files, deal with servers, or hire IT professionals to manage it for you. The days of data loss due to human error are behind us, and modern virtual bookkeepers can help guide you to solutions that will help you run your business more efficiently.