Running a business means needing to juggle multiple jobs. You deal with customers, employees, sales, operations, marketing, suppliers, and countless daily decisions. But if dealing with bookkeeping is taking hours away from your responsibilities, it is time to find a solution.
So, how do you know when it’s time to outsource your bookkeeping?
It’s not just about the revenue or the number of transactions your business makes. Outsourcing is often a good idea when bookkeeping is too time-consuming, too complicated, too prone to errors or has become too important to handle on your own.
Badly maintained books can cause cashflow surprises, financial reporting inaccuracies, tax deductions that are missed, compliance issues and complex business decisions. Conversely, if you have the right bookkeeping software that’s up to date, you can get a clear financial picture, which will help you know where your business is going and where it’s at.
If you’re spending your evenings making sense of transactions, you’re having trouble making sense of your accounts, you haven’t caught up with your financial record or you are consistently questioning if your numbers are correct, outsourcing your bookkeeping might be a wiser business move.
In this guide, we’ll explain the biggest signs it’s time to outsource bookkeeping, the benefits of hiring a professional bookkeeper for outsourced bookkeeping services, what they encompass and how to decide if it makes financial sense for your company.
What Does It Mean to Outsource Your Bookkeeping?
Bookkeeping outsourcing involves delegating bookkeeping duties to an outsider or bookkeeping company to take care of a portion or all of your business financial recordkeeping.
You don’t have to process each transaction and financial report manually, but rather deal with a bookkeeping specialist who takes care of your books and supplies the financial information that you require.
The services of outsourced bookkeeping could encompass:
- Recording and categorizing transactions
- Bank and credit card reconciliations
- Accounts payable management
- Accounts receivable tracking
- Invoice and payment tracking
- Expense management
- Financial statement preparation
- Monthly bookkeeping
- Payroll coordination
- Cash-flow reporting
- Accounts receivable and payable reports
- Cleanup of outdated or inaccurate books
- Year-end bookkeeping support
- Communication with your CPA or tax professional
Outsourcing can be totally remote, which makes virtual bookkeeping services a good choice for contemporary enterprises.
10 Signs it’s Time to Outsource Your Bookkeeping
Being aware of signs to look out for can help you determine if your books are costing you more than it would cost your business to outsource them.
1. Bookkeeping Takes Too Much of Your Time
If financial management is taking up hours, that’s a definite indicator to hire someone to do your bookkeeping.
You probably are spending several weekends transcribing transactions. You frequently may work overtime to close certain accounts or to reconstruct receipts.
Ask yourself:
Am I in the position to use this time in generating more revenue for the business, fulfilling customer’s needs, managing the staff team, or growing the business?
Your time has a cost.
If you are a business owner wasting the time on repetitive bookkeeping works instead of performing high-value functions, outsourcing may be a viable solution.
The real cost of DIY bookkeeping
The cost is not just the subscription to the software or accounting software that you use.
You also need to consider:
- Your time
- Lost revenue opportunities
- Delayed financial decisions
- Bookkeeping errors
- Stress
- Training and software costs
- Potential tax and compliance issues
Sometimes, “do it yourself” is not necessarily the most cost-effective way to go.
2. Your Books Are Frequently Behind
The best bookkeeping is a consistent bookkeeping.
If you are several weeks or months behind on your financial records, you might not be aware of your business’s true financial situation.
That can make answering many important questions a challenge, such as:
- How much cash do we really have?
- Are our sales increasing or declining?
- Which expenses are growing fastest?
- Which customers still owe us money?
- Are we profitable?
- Can we afford to hire another employee?
- Can we make a major purchase?
- Are we prepared for upcoming tax payments?
If you’re always behind with your books, you’re making business decisions on an outdated basis.
Companies using outsourced bookkeeping services can put into place a repeatable routine for maintaining up-to-date financial records.
3. Your Business Is Growing Quickly
There’s growth and there’s the resulting financial complexity.
A business that has only a few transactions per month can be fairly easy to maintain. However, as your business expands you may have:
- More customers
- More invoices
- More vendors
- More employees
- Multiple bank accounts
- Higher transaction volume
- Inventory
- Multiple locations
- Credit-card processing
- Recurring subscriptions
- New sales channels
The bookkeeping system which worked for you back when you were small might not work for you now when you are larger.
When your business is booming, it’s a great time to turn to outsourcing bookkeeping.
Don’t let your books become unmanageable, make some best practices in bookkeeping before it is an issue.
4. You Keep Making Bookkeeping Mistakes
Everyone makes mistakes. But if you are making the same bookkeeping mistakes again and again, you’re going to cost yourself some money.
Common problems include:
- Transactions categorized incorrectly
- Duplicate entries
- Missing transactions
- Incorrect account reconciliations
- Unpaid invoices not being followed up
- Expenses recorded in the wrong accounts
- Personal and business transactions being mixed
- Incorrect financial reports
Small errors can compound over time.
Good bookkeeping is not only the clean book, it is accurate. Your financial reports help you make decisions on budgets, forecasting, taxes, hiring, pricing and business strategy.
When you’re not sure your numbers are correct, it may be time to hire a professional.
You Don’t Understand Your Financial Reports
It’s not essential to be an accountant to run a successful business.
But it’s important to know what the numbers are saying in your financial reports.
Bookkeeping assistance can be a huge help if you don’t know what profit and loss statement, balance sheet, cash-flow statement, accounts receivable, or accounts payable are.
A good bookkeeper isn’t just a number cruncher.
They help to maintain your financial records in a way that allows you and your accountant to make informed decisions.
Your books should help you answer questions and not generate more questions.
6. Tax Season Becomes a Yearly Crisis
If your bookkeeping involves running around looking for receipts, downloading bank statements, fixing months of transactions and trying to recreate financial records, it’s time to pay attention to your bookkeeping process.
Your tax professional can only use financial data that’s available.
If the bookkeeping is not done properly, it can lead to:
- Delayed tax preparation
- Additional accounting fees
- Difficulty identifying deductible expenses
- Incorrect financial information
- Increased stress
- Potential compliance issues
It is much easier to account for the year if bookkeeping is done consistently throughout the year.
Don’t think of bookkeeping as a one-off process, but as an activity that is an ongoing part of financial management.
7. You’re Mixing Business and Personal Finances
Many small business people face the challenge of mixing business with pleasure, particularly, as they are just starting their business.
As your business expands, however, it becomes essential to differentiate your money-making activities.
A professional bookkeeper can assist in setting up better systems for:
- Business expense tracking
- Owner draws
- Reimbursements
- Business credit cards
- Bank accounts
- Expense categorization
It is also easy to understand your financial statements if you separate your business and personal money.
8. Your Accounts Receivable Is Getting Out of Control
Making sales doesn’t necessarily mean you’ve collected the money.
Even if it appears as though your company is profitable, there may be problems with cash flow if you find that customers are paying late on a regular basis.
Accurate bookkeeping support can assist you in keeping accurate records of:
- Outstanding invoices
- Customer balances
- Payment status
- Aging receivables
- Expected cash collections
If you have greater visibility into your accounts receivable you can better see that there may be a problem with cash flow earlier.
9. You’re Hiring Employees or Expanding Operations
There are extra financial demands on the business when you hire staff.
Your business may need to manage:
- Payroll
- Employee reimbursements
- Benefits
- Contractor payments
- Payroll-related records
- Additional expenses
- New financial accounts
Bookkeeping can be more difficult as your businesses gets more complex.
This is a good opportunity to consider if the bookkeeping system used is able to accommodate the extra workload.
10. You’re Spending More Time Fixing Books Than Growing the Business
This is likely the tell-tale sign.
If you repeatedly think:
This weekend I will read the books that I missed.
If your bookkeeping process is consuming too much of your time and that weekend never seems to arrive, you may be outgrowing your time!
Your business needs your attention.
In case bookkeeping is keeping you away from the sales, customers, strategies, leadership, or growth aspect of your business then outsourcing it to a person who is specializes in keeping the financial records would be a good idea.
DIY Bookkeeping vs. Outsourced Bookkeeping
These are two strategies that may be applicable, depending on what size and type of business you are.
|
DIY Bookkeeping |
Outsourced Bookkeeping |
| You handle financial records yourself | A professional handles your bookkeeping |
| Lower direct service cost | Predictable professional service cost |
| Requires significant time | Frees up owner/employee time |
| You need to learn bookkeeping processes | You benefit from bookkeeping expertise |
| Errors may go unnoticed | Professional review can improve accuracy |
| Can become difficult as you grow | Can scale with your business |
| Financial reporting may be delayed | Regular reporting can improve visibility |
It will depend on the volume of your transactions, the complexity of your finances, your internal skills, your time and your plans for growth.
What Are the Benefits of Outsourcing Bookkeeping?
Outsourcing isn’t just about getting bookkeeping tasks off your to-do list.
It can offer a number of more general business advantages.
Save Valuable Time
Business owners should invest their time in activities that help to propel the company forward.
Delegating basic bookkeeping tasks might save you time to concentrate on income-generating and strategic tasks.
Improve Financial Accuracy
Professional bookkeeping procedures can decrease typical bookkeeping mistakes and assist to maintain financial records arranged.
Get Better Financial Visibility
Current financial statements provide insight into your revenue and expenses, profitability and cash position.
Reduce Administrative Stress
When you know your books are being handled properly, it’s a great way to save administrative headaches.
Support Better Business Decisions
This accurate financial information provides you with a better base to make decisions on:
- Hiring
- Pricing
- Marketing
- Expansion
- Equipment purchases
- Cash management
- Budgeting
Make Tax Preparation Easier
Properly kept books all year long can help your accountant or tax professional prepare your tax returns.
Scale More Easily
As businesses grow, and more transactions are made, a professional bookkeeping system can be simpler to expand.
When Is the Best Time to Outsource Bookkeeping?
When it comes to deciding whether to outsource bookkeeping, there is no set revenue number which automatically makes that a decision.
Instead, consider these five factors:
1. Transaction Volume
How many transactions do you make per month?
2. Business Complexity
Have inventory, workers, multiple stores, loans, subscriptions or multiple revenue streams?
3. Your Available Time
How many hours do you personally spend on bookkeeping?
4. Your Expertise
Have a sound knowledge of book keeping and financial reporting procedures?
5. The Cost of Your Time
What would you achieve if you put the time spent by bookkeepers into sales, strategy, customers, and growth?
If you have a number of these reasons that you are considering outsourcing, you should look at professional bookkeeping services.
How Much Does Outsourced Bookkeeping Cost?
Outsourced bookkeeping services can range in pricing from one business to another.
A price may vary according to:
- Number of monthly transactions
- Number of bank and credit-card accounts
- Payroll requirements
- Accounts payable and receivable
- Inventory
- Business structure
- Reporting requirements
- Cleanup work required
- Frequency of bookkeeping
- Level of financial support
Don’t select an option based on the price alone, weigh the value and range of the service.
A lower price service, which provides less complete or accurate books, can end up costing more than a professional service that maintains the books in an organized and reliable manner.
When looking around for service providers, you must always ask yourself what exactly comes with the monthly charge.
What Should You Look for in an Outsourced Bookkeeping Service?
Just as crucial as making the decision to outsource bookkeeping services is choosing the right partner.
Check for the following features:
Relevant Experience
They should know the kinds of businesses they are working with and be aware of the bookkeeping issues that are common to your industry.
Clear Communication
You should know who handles your books, how often you’ll receive reports, and how to contact the team when questions arise.
Transparent Pricing
Don’t have anything that is not clearly defined in pricing. Inquire about set-up, clean-up and monthly charges and extra services.
Reliable Processes
Question about how they do their reconciliations, categorize their transactions, prepare financial statements, and carry out the quality control measures.
Technology Compatibility
If your business has accounting software, payment systems, payroll systems, or other financial applications, ensure the software provider is compatible with your technology.
Security and Confidentiality
Bookkeeping deals with important monetary data. Inquire about data security measures and financial account access controls among others.
Scalability
Select a partner who is able to support your business as it expands.
Common Mistakes to Avoid When Outsourcing Bookkeeping
Outsourcing can be very advantageous, but be careful of these common pitfalls.
Choosing Based Only on Price
Not all the cheapest one is the best.
Failing to Define the Scope of Work
Always be aware of what you are paying for!
Not Checking References or Reviews
Check for reliability, professionalism and experience.
Assuming the Bookkeeper Replaces Your CPA
There are differences between the roles of bookkeepers and accountants. There may still be other specialized services, such as tax planning, tax returns, tax audits that require a qualified tax professional or accountant for your business.
Not Reviewing Reports
Whether your bookkeeping is outsourced or not, you need to know how your business is doing financially.
Waiting Until Your Books Are a Disaster
If you are not up to date with your records, it can be easier and cheaper to get them to a new company if you do it early on.
Is Outsourcing Bookkeeping Worth It?
Yes, for many businesses, especially if the owner or employees are spending significant time on keeping financial records.
The key question isn’t simply:
“What’s the price of bookkeeping outsourcing?”
Instead, ask:
“What is my self-bookkeeping costing me?”
Let’s say bookkeeping requires 10 hours a month, and this time could be used for generating more revenue, helping clients, improving the business process, or making it better.
Benefits may come from the bookkeeping accuracy, transparency, and the ability to make decisions in a timely manner.
Conclusion: Don’t Let Bookkeeping Become a Business Bottleneck
Bookkeeping is more than administrative paperwork.
Your books tell the story of your business.
They will tell you how much you’re making, where your money is going, who you’re owed money by, if your business is profitable, and whether you have the finances to go for your next opportunity.
If bookkeeping is constantly distracting you from your main job duties, you’re always running late, it’s causing stress, or you don’t have a solid grasp of your numbers, it may be time to hire a bookkeeper.
No need to wait until your business is on the verge of being overwhelmed.
The right bookkeeping partner can set up a strong financial process, keep you accurate, enhance your financial visibility and allow you to concentrate on what you’re great at – running and growing your business.
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FAQs About Outsourcing Bookkeeping
1. When should a small business outsource bookkeeping?
When keeping records takes more time than required, and the owner lacks experience to complete this process accurately, small companies should outsource to accountants.
There is no uniform revenue limit. More often than not, the complexity of the business and the worth of time become important factors.
2. Is it cheaper to outsource bookkeeping or hire an employee?
It will depend on your business’s requirements. There is more to an employee than a salary: payroll taxes, benefits, employee training, software, equipment, and management time. With outsourcing, there is a way to acquire professional skills and knowledge without the need of hiring a full-time bookkeeper.
3. Can I outsource bookkeeping if my business is very small?
Yes. Outsourced bookkeeping services can be utilized by small companies, freelancers, and startups, as well as entrepreneurs. The question is, does the service offer adequate benefit in proportion to the amount of bookkeeping work and business requirements you have?
4. Can an outsourced bookkeeper work with my accountant?
Yes. In many instances, a bookkeeper and accountant can be cooperative. The bookkeeper is generally responsible for keeping the financial records and for preparing reports, while the accountant might be the one to prepare taxes, perform tax planning, financial analysis or other specialized services.
5. What is virtual bookkeeping?
Virtual bookkeeping involves bookkeeping carried out remotely with the use of cloud bookkeeping software and digital means of communication. This allows businesses to collaborate with accountants regardless of their location.
6. How often should bookkeeping be done?
The right frequency depends on the volume of transactions and complexity of your business. Often, bookkeeping is done monthly; however, for companies that have a lot of transactions or cash flow requirements, more frequent bookkeeping might be beneficial.
7. What happens if my books are already behind?
There are many different bookkeeping providers that provide cleanup bookkeeping or catch up bookkeeping. The first thing that is typically done is identification of missing transactions, account reconciliation, correcting any account categories problems, and getting current books to the correct numbers.