Choosing the right bookkeeping service for your business is more important than simply finding someone who can record income and expenses. With proper bookkeeping, you’ll have a good idea of your financial well-being, get ready for tax day, make better business decisions, and spend more time growing your business than dealing with spreadsheets and receipts.
But with so many bookkeeping services, virtual bookkeepers, accounting firms, and outsourced bookkeeping companies out there, how will you know which one is perfect for your business?
The lowest priced isn’t necessarily the best. What works seamlessly for a freelancer can be a total disaster for a thriving eCommerce business, construction company, professional practice or multi-location business.
A bookkeeping service that is right for you would depend on various factors such as the size of your business, industry, accounting software, nature of transactions, reporting needs, budget, and future plans.
In this guide, you’ll learn how to choose a bookkeeping service, what bookkeeping services to expect, how much bookkeeping usually costs, and what questions to ask prior to hiring a bookkeeper, common pitfalls when it comes to bookkeeping, and if you should consider hiring a bookkeeper.
With a thoughtful selection, a professional bookkeeping service can be more than merely a monthly cost, it can be a valuable financial asset to your business.
What Is a Bookkeeping Service?
Bookkeeping is a profession providing business financial information management and record keeping.
The bookkeeping system should maintain record of business income and expenses.
- Recording business income and expenses
- Categorizing financial transactions
- Reconciling bank and credit card accounts
- Managing accounts payable
- Managing accounts receivable
- Tracking invoices and payments
- Preparing financial statements
- Maintaining the general ledger
- Recording payroll-related transactions
- Monitoring cash flow
- Managing sales tax records
- Cleaning up historical bookkeeping errors
- Supporting tax preparation
- Preparing monthly or quarterly financial reports
- Integrating accounting software and financial tools
The bookkeeping companies have various packages that can be availed for basic transaction recording, or for a complete outsourced bookkeeping package that also includes financial reports and bookkeeping support.
Knowing exactly what a provider can provide is one of the initial steps to picking the best bookkeeping solution for your company.
Why Choosing the Right Bookkeeping Service Matters
Bookkeeping has a big impact on your business, in almost every aspect.
If financial records are incomplete, incorrect or missing, you might find it hard to answer the following basic questions:
- How much money is the business actually making?
- Which products or services generate the most profit?
- How much cash is available?
- Which customers still owe money?
- What expenses are increasing?
- Are operating costs under control?
- How much should be reserved for taxes?
- Can the business afford to hire another employee?
- Is it time to expand?
- Which areas of the company are underperforming?
The important thing about reliable bookkeeping is that you have a set of financial information that you can use to make informed decisions.
1. Better financial visibility
Accurate books provide you with knowledge of your income, your spending, your profits and losses, your liabilities and your cash flow.
2. Easier tax preparation
Good financial records will help to make tax filing easier and less likely to overlook transactions or deductions.
3. More time for business growth
Outsourcing bookkeeping can remove repetitive administrative work from your schedule.
4. Improved cash-flow management
Existing books can help you discover excellent invoices, regular spending and any anticipated financial commitments.
5. Better business decisions
Financial reports provide information on which to base pricing, hiring, investments, marketing costs, and expansion strategies.
6. Greater financial accuracy
Manual data entry, lack of reconciliation, and incorrect classification can be minimized with professional bookkeeping processes.
10 Steps to Choose the Right Bookkeeping Service for Your Business
There are no one-size-fits-all bookkeeping services for all businesses. Engage in systematic evaluation of providers using the following steps:
1. Determine Your Bookkeeping Needs
Make sure you know what you need assistance with prior to contacting bookkeeping companies.
Take a look at how you’re currently doing your bookkeeping.
Ask yourself:
- Who currently handles the books?
- How often are transactions recorded?
- Are your accounts reconciled regularly?
- Are your books up to date?
- Do you need monthly financial statements?
- Do you need accounts payable support?
- Do you need accounts receivable management?
- Do you need payroll bookkeeping?
- Are your books prepared for tax filing?
- Do you need historical bookkeeping cleanup?
- Are you planning to grow or expand?
- Do you need industry-specific reporting?
For instance, an individual consultant who’s handling 50 transactions each month could require a rather easy bookkeeping package.
If you have a growing business with employees, inventory, several bank accounts, credit cards, loans, and hundreds of transactions a month, you will need a much more robust solution.
The more you know about your needs, the simpler the comparison process will be when it comes to bookkeeping companies.
2. Look for Experience in Your Industry
The knowledge gained from industry may be very useful.
There are several bookkeeping challenges that different businesses face.
For example:
Retail businesses
Retail companies might need assistance with:
- Inventory
- Sales tax
- Point-of-sale systems
- Returns and refunds
- Cost of goods sold
- Multiple payment processors
Construction companies
Construction companies can experience:
- Job costing
- Project profitability
- Contractor payments
- Progress billing
- Retainage
- Multiple projects
Professional services
Professional-service industries such as consultants, agencies, lawyers, designers, and others may require:
- Time tracking
- Client billing
- Accounts receivable
- Project profitability
- Contractor management
eCommerce businesses
Online businesses could need to integrate with:
- eCommerce platforms
- Payment processors
- Inventory systems
- Bank accounts
- Accounting software
- Sales-tax systems
Restaurants
To track is an important function for restaurants:
- Food costs
- Labor costs
- Inventory
- Sales
- Tips
- Payroll
- Vendor payments
Inquire with potential bookkeeping companies if they have experience with companies like yours.
While having industry knowledge is not a good thing, it can make it easier to learn and better financial reporting.
3. Check Their Accounting Software Expertise
Your bookkeeping service should be familiar with the accounting software that your business uses.
Common accounting platforms include:
- QuickBooks
- Xero
- FreshBooks
- Zoho Books
- Sage
- Wave
- Industry-specific accounting systems
If you are currently able to use accounting software, ask:
Have you worked on this platform before and will you be working within our current account?
You should also ask whether the provider can integrate your accounting system with other business tools.
Potential integrations include:
- Payroll software
- Banking platforms
- Expense management tools
- Payment processors
- CRM systems
- Inventory platforms
- eCommerce platforms
- Point-of-sale systems
- Invoicing applications
The knowledge of software can enhance the efficiency of bookkeeping and eliminate unnecessary manual work.
4. Decide Between Local, Virtual, and Outsourced Bookkeeping
In the modern world, there are a number of options for bookkeeping models that businesses can select from.
Local Bookkeeper
A local bookkeeper works within your geographic area and may meet with you in person.
Advantages
- Face-to-face communication
- Local business knowledge
- Easier in-person meetings
- Potentially stronger local relationships
Disadvantages
- Geographic limitations
- Potentially higher costs
- Smaller talent pool
Virtual Bookkeeper
A virtual bookkeeper works remotely and communicates through email, video meetings, messaging platforms, and cloud-based accounting software.
Advantages
- Flexible communication
- Access to a wider talent pool
- Convenient remote collaboration
- Often scalable
Disadvantages
- Less face-to-face interaction
- Communication processes need to be clearly defined
- Quality varies between providers
Outsourced Bookkeeping Company
A “bookkeeping company” that performs the bookkeeping service from the outside instead of having an employee in the company.
Advantages
- Access to a team rather than one individual
- Easier scalability
- Potentially broader expertise
- Less employee-management responsibility
- Reduced overhead compared with some in-house arrangements
Disadvantages
- Quality can vary
- Communication may involve multiple team members
- Some companies may use standardized processes that don’t fit every business
It’s dependent on the needs, budget, size, and preferred working relationship of your company.
5. Evaluate the Services Included
Don’t compare bookkeeping service providers by their monthly rates.
Two companies can be offering dramatically different service, but have similar prices.
When signing a contract, clarify all its terms.
A bookkeeping package might include:
- Monthly transaction categorization
- Bank reconciliation
- Credit card reconciliation
- Financial statements
- General ledger maintenance
- Accounts payable
- Accounts receivable
- Invoicing
- Expense tracking
- Payroll bookkeeping
- Sales tax support
- Financial reporting
- Bookkeeping cleanup
Also inquire about any additional fees.
A provider may quote a cheap per month bookkeeping fee but ask you to pay extra for these services:
- Catch-up bookkeeping
- Historical cleanup
- Additional bank accounts
- Additional entities
- Payroll support
- Tax preparation
- Year-end closing
- Special reports
- High transaction volume
Knowing the entire pricing will help you understand what you are getting into and prevent surprises.
6. Ask About Pricing and Billing Structure
Bookkeeping cost can differ significantly based on your business’s complexity.
Providers may charge:
- A fixed monthly fee
- An hourly rate
- A tiered monthly package
- A per-transaction fee
- A customized retainer
- A combination of fixed and variable fees
Your bookkeeping costs may depend on factors such as:
- Number of monthly transactions
- Number of bank accounts
- Number of credit cards
- Number of business entities
- Payroll complexity
- Inventory
- Accounts payable volume
- Accounts receivable volume
- Required reporting
- Bookkeeping frequency
- Historical cleanup requirements
Don’t go for the lowest priced bookkeeper.
Rather, consider value for money.
For a little more money, you can get more useful financial analysis, better controls, communication and reporting.
It is not the purpose to get the cheapest deal.
The objective is to discover a bookkeeping remedy that will offer dependable monetary control at an acceptable price. ‘
- Verify Qualifications and Experience
Not all those who provide bookkeeping services are similarly trained and experienced.
When checking out a provider, inquire about:
- Professional experience
- Education or accounting training
- Certifications
- Software certifications
- Industry experience
- Continuing education
- Client experience
- Professional references
Another thing that you should consider is the difference between a bookkeeper, an accountant and a CPA.
A bookkeeper usually specializes on the organization and recording of the financial transactions.
A more sophisticated financial analysis and accountant assistance, reporting, and tax help may be provided by an accountant.
A CPA is a licensed accounting professional who passes an exam that has specific requirements in the jurisdiction where s/he practices.
You can hire a bookkeeper on a day-to-day basis if you need financial records kept on a regular basis and consult an accountant or tax specialist for more complex accounting and tax issues.
8. Ask How They Protect Your Financial Data
Bookkeeping carries very critical information about business.
Your provider may have access to:
- Bank information
- Credit card transactions
- Payroll data
- Vendor information
- Customer information
- Financial statements
- Tax-related documents
- Business revenue information
Security should therefore be a major part of your evaluation.
Ask prospective providers:
- How is financial data stored?
- How is information transmitted?
- Who has access to my books?
- Do you use secure cloud platforms?
- Do you use multi-factor authentication?
- How are passwords managed?
- What happens when an employee leaves?
- Do you maintain backups?
- How do you handle security incidents?
A reliable bookkeeping service must see to the security of the data they deal with and have in place procedures for managing and controlling access to confidential data.
9. Evaluate Communication and Responsiveness
Technical bookkeeping skills are essential, but so is communication.
Think you find a hole in your budget or expenses that you can’t explain, and then you wait several days for a response.
Prior to getting a bookkeeping service, make sure to discuss:
- Who will be your primary contact?
- How quickly do they respond?
- What communication channels do they use?
- How often will you receive updates?
- Will you have regular financial review meetings?
- Who handles urgent questions?
- Will the same person manage your account?
A successful bookkeeping relationship is well-structured and routine.
Set communication guidelines before the relationship starts.
10. Request References or Reviews
Before making a final decision, look for evidence that the provider has successfully served businesses like yours.
Consider:
- Client testimonials
- Online reviews
- Professional references
- Case studies
- Industry experience
- Length of time in business
- Examples of reporting they provide
When requesting references ask clients questions regarding:
- Accuracy
- Communication
- Reliability
- Responsiveness
- Pricing transparency
- Technical expertise
- Problem-solving
- Overall experience
Be careful not to just take their word for it. Use them as a component of your overall assessment.
What Services Should a Good Bookkeeping Company Provide?
The most suitable bookkeeping service will depend on your company, but a well-rounded service will include some of the following services:
Bank Reconciliation
Bank reconciliation is a process that involves comparing the bank statements with your accounting records to account for any discrepancies and verify the transactions.
Properly reconciling is a key element in keeping good financial records.
Expense Tracking
Regularly and appropriately classify business costs in your bookkeeping.
This will enable you to gain a better understanding of where funds are going and make financial reporting easier.
Accounts Receivable
You can use accounts receivable services to keep track of:
- Customer invoices
- Outstanding balances
- Payment status
- Aging reports
- Collections workflows
Accounts Payable
Accounts payable management enables businesses to keep tabs on their bills and vendor commitments.
Depending on the service, this may include:
- Recording bills
- Categorizing expenses
- Scheduling payments
- Monitoring outstanding obligations
Financial Statements
A bookkeeping firm can create one of the following reports:
- Profit and loss statement
- Balance sheet
- Cash-flow statement
- Accounts receivable aging
- Accounts payable aging
- Expense reports
These reports are useful to learn the financial performance and position of your company.
Bookkeeping Cleanup
If your books are several months or even years late, you might require a bookkeeping clean up service prior to starting monthly bookkeeping.
Cleanup may involve:
- Correcting transaction classifications
- Reconciling accounts
- Identifying duplicate transactions
- Fixing opening balances
- Reviewing historical entries
- Resolving discrepancies
Inquire if the cleanup is part of the monthly rental or added to the bill.
How Much Does a Bookkeeping Service Cost?
Bookkeeping services come in a wide range of prices.
However, a small business with straightforward accounts and finances might have a much lower cost than a company with high transaction volume and more complicated accounts, or one that has inventory, payroll, multiple entities, etc.
Considerations for bookkeeping expenses are:
Transaction volume
As the number of transactions rises, so does the amount of bookkeeping task.
Number of accounts
Additional reconciliation may be necessary for business that has multiple bank and credit card accounts.
Business complexity
This can be complicated by inventory, multiple locations, multiple entities and international transactions.
Payroll
Bookkeeping tasks related to payroll can be an added burden.
Reporting requirements
There may be added expenses involved with custom financial and management reporting beyond the basic monthly bookkeeping.
Cleanup
Bookkeeping can be costly if you are doing a lot of cleanup work, and if your books are behind or have errors, it may be a lot more expensive than regular bookkeeping.
Frequency
There are companies that need bookkeeping done on a monthly basis and others that might need it once a week, even daily.
Instead of asking only:
“How much does bookkeeping cost?”
Ask:
What does your monthly bookkeeping fee cover and what might other fees be?
That will provide you with a much more valuable comparison.
Questions to Ask Before Hiring a Bookkeeping Service
Before signing an agreement, ask potential providers these questions.
Experience
- How long have you provided bookkeeping services?
- Are you involved in working with companies in my line of work?
- What is the number of clients you have now?
- Can you provide references?
Services
- What bookkeeping services are offered?
- Do you reconcile bank and credit cards?
- Do you prepare monthly financial statements?
- Do you assign the accounts payable and receivable?
- Are you able to do some cleaning up of my old books?
- Do you support payroll bookkeeping?
Technology
- Which accounting software do you specialize in?
- Can you work with my existing accounting system?
- Can you integrate my banking and payment systems?
Communication
- Who will be the manager of my account?
- How quickly do you reply to questions?
- How do we review reports of my finances?
Pricing
- What is the monthly fee?
- Is there an onboarding fee?
- Is historical cleanup included?
- What services cost extra?
- Can the monthly fee increase as transaction volume grows?
Security
- How do you protect financial information?
- Who has access to my financial records?
- Do you use multi-factor authentication?
- What happens to my data if we end the relationship?
The responses will give you an insight into the professionalism, transparency, and appropriateness of a provider for your company.
Red Flags to Watch for When Hiring a Bookkeeper
While searching for the right bookkeeping service, be cautious if a provider:
Promises unrealistic results
Avoid dealing with anyone who guarantees a guaranteed tax savings, guaranteed financial results, or guaranteed business growth.
Gives vague pricing
If the provider doesn’t know what your monthly fee includes, you could have to pay more money than you expect in the future.
Has poor communication
A lack of timely feedback and miscommunication can pose significant issues.
Doesn’t ask questions about your business
The best bookkeeper will want to know your business model, transactions, systems, and financial requirements.
Lacks security procedures
Any financial information should never be treated lightly.
Refuses to explain their processes
You need to have an understanding of how your books will be maintained, reviewed and delivered.
Has no clear onboarding process
A professional service should have a defined workflow for information capture, cross referencing, access and initiating work.
Should You Hire a Bookkeeper or Do It Yourself?
Numerous small business owners do their own bookkeeping to begin with.
When it makes sense to do your own bookkeeping:
- Your business is very small
- Transaction volume is low
- Your finances are straightforward
- You understand basic bookkeeping principles
- You have enough time to maintain accurate records
As your business expands, however, DIY bookkeeping can start to be a problem.
Professional bookkeeping could be useful if:
- Your transaction volume is increasing
- Your books are falling behind
- You don’t understand your financial reports
- You have multiple accounts
- You have employees
- You’re spending too much time on bookkeeping
- Your business is growing rapidly
- You need better financial reporting
- You’re preparing for financing or investment
- You’re making important expansion decisions
The software or tools is not necessarily one of the biggest expenses in DIY bookkeeping.
It’s the opportunity cost of your time.
The significance of outsourcing bookkeeping is huge when a reasonable amount of time can be devoted to gaining clients, improving processes, designing products, or overseeing employees
When Should You Outsource Bookkeeping?
Companies do not have a magic figure regarding the outsourcing of bookkeeping.
What you need to consider is the level of complexity and workload you have.
Outsourcing bookkeeping can be beneficial when bookkeeping starts to hinder normal operations.
For example, if you work nights reconciling accounts, pursuing invoices, fixing errors in spreadsheets, or struggling with understanding financial reports, then professional bookkeeping may be a good consideration for you.
If your business requires financial information that you are unable to provide due to lack of time or expertise, outsourcing can be an option.
How to Compare Bookkeeping Services
When comparing providers, create a simple evaluation scorecard.
| Factor | Questions to Consider |
| Experience | Do they understand my industry? |
| Services | Do they provide everything I need? |
| Software | Are they proficient with my accounting platform? |
| Pricing | Is pricing transparent? |
| Communication | Are they responsive? |
| Security | How is my financial data protected? |
| Reporting | Will I receive useful financial reports? |
| Scalability | Can they support future growth? |
| References | Do existing clients recommend them? |
| Fit | Do their processes match my business? |
Don’t choose a bookkeeping service based on one factor.
Look at the complete picture.
Why Scalability Matters When Choosing a Bookkeeper
Your bookkeeping requirements today probably won’t be the same 6 months or 2 years from now.
Your business may eventually:
- Hire employees
- Add locations
- Launch new products
- Enter new markets
- Increase sales volume
- Add new payment processors
- Acquire another business
- Create another legal entity
- Need more sophisticated financial reporting
A bookkeeping service should be capable of expanding with you.
Ask:
What would you do if your number of transactions doubled?
And:
Would you be able to accommodate more sites or entities in the future?
The responses will reveal if you are selecting a short or long term partner.
The Importance of Accurate Monthly Bookkeeping
Bookkeeping isn’t only about maintaining a tidy record.
It provides you with a periodic financial overview.
If your books are accurate on a monthly basis, you can track:
- Revenue
- Gross profit
- Operating expenses
- Net profit
- Cash position
- Accounts receivable
- Accounts payable
- Business liabilities
- Financial trends
You can find trends year round, rather than waiting until tax time.
This will make your finances more valuable to make decisions.
Bookkeeping vs. Accounting: What’s the Difference?
While accounting and bookkeeping share similarities, they are distinguishable concepts.
The main task of bookkeeping consists of capturing and organizing financial transactions.
Accountants carry out tasks such as analyzing financial data, producing more advanced reports, evaluating financial results, and advising clients with respect to financial and tax affairs.
A business may use both.
For example:
Bookkeeper → maintains accurate financial records
Accountant → analyzes financial information and handles higher-level accounting needs
Tax professional/CPA → handles applicable tax planning and preparation
How the responsibility is divided depends on the business and the provider.
When choosing a bookkeeping service, you should know what is offered—and what is not.
How to Make the Bookkeeping Relationship Successful
Choosing the best bookkeeper is just the first step.
You also require an efficient process.
Keep business and personal finances separate
Use dedicated business accounts if possible.
Provide documents promptly
Your bookkeeper will be unable to keep good records when they don’t have the information.
Establish deadlines
Set deadlines for documents, reports and reconciliations.
Review reports regularly
Don’t take on financial statements, don’t read them and forget about them.
Examine them to know what is going on in your business.
Ask questions
When you’re not familiar with a financial report, seek clarification.
The very best bookkeeping relationship should make you more financially educated.
Conclusion: How to Choose the Right Bookkeeping Service
Selecting the ideal bookkeeping service should go beyond the idea of merely having someone enter numbers in the accounting system.
Finding a solid financial partner who can keep your books accurate, provide helpful information, communicate effectively, keep your financial information safe, and help your business achieve its goals is needed.
In order to find the right bookkeeping firm for your business, you should figure out the nature of your business, the number of employees you have, the transactional volumes you deal with, the kind of technologies you use, the reporting requirements, the financial budget available, and your business goals over a long period of time.
Thus, you should take your time for the selection of providers, compare their services, ask questions, figure out what is included in the price, check their reviews, and make sure that the company you choose has enough experience to help you.
Above all, avoid service providers that are the cheapest because they cannot provide the best services.
Select the provider that will make you feel confident that all financial information is accurate, readily accessible, safe and helpful with making decisions which will make your business better.
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FAQs
1. How do I choose the right bookkeeping service for my business?
When selecting a bookkeeping service, important factors to consider are your industry, size of business, volume of transactions, accounting software used, requirements for reports, range of budgeting options, and growth strategy moving forward. Check out various companies based on the services offered, pricing structure and consistency, level of experience in the field, reviews by other customers, communication, and data security.
2. How much does a bookkeeping service cost?
Depending on your volume of transactions, the number of accounts maintained, your payroll needs, inventory, the complexity of your business, your reporting needs, and the amount of cleanup you need, bookkeeping costs can differ. Providers can have a flat fee, hourly fee, tiered package, per transaction fee or custom retainer. Be sure to ask what is covered in the monthly charge and what services are charged extra.
3. What services should a professional bookkeeping company provide?
A professional bookkeeping service provider will help you with recording transactions, reconciliation of bank and credit card accounts, bookkeeping for accounts receivable and accounts payable, invoice tracking, categorization of expenses, payroll bookkeeping, financial statements, cash-flow reporting, sales tax services and general ledger maintenance.
4. Is it better to hire a local or virtual bookkeeper?
There is no single method that always works better depending on the needs of your business and your style of work. Local bookkeeping services are preferable if you need regular meetings and personal communication. A virtual bookkeeping company offers more flexibility and access to more professionals. Both options work as long as the communication process is organized well, the security is ensured and the obligations are divided between the parties.
5. Should I outsource my bookkeeping?
Bookkeeping outsourcing can be the right solution for those who have too many other issues apart from bookkeeping, need to manage transaction volumes growing rapidly, have late documents or they need more trustworthy financial reports. It allows companies to devote more time to customers and operational processes.
6. What should I look for in a bookkeeping service?
Make sure to find someone with relevant domain experience, knowledge of certain software, clear pricing, services offered, communication level, data security measures, timely reports, and good references from satisfied clients.
7. Does a bookkeeper need to be certified?
Even though most bookkeeping services do not need to be certified for their services to be valid, it is helpful to have knowledge and skills as well as certifications and referrals available. Look for examples of getting experience in firms similar to yours or certifications when you assess a provider.
8. What is the difference between a bookkeeper, accountant, and CPA?
A bookkeeper is responsible for recording, arranging, and balancing a business’s financial transactions. An accountant usually performs an advanced level of financial reporting and analysis, and gives accounting advice. A CPA is a certified accountant who complies with certain requirements in the state where he/she works. Moreover, depending on a particular situation there may be need to employ one or several of the mentioned accounting specialists.
9. Can a bookkeeping service work with QuickBooks or other accounting software?
Many bookkeeping companies work with such accounting systems as QuickBooks, Xero, FreshBooks, Zoho Books, Sage or Wave. Before choosing accounting provider verify whether this company is experienced in this accounting package and can connect it to the banking system, payroll system, points of sales system, inventory system, and accounting payment processor.
10. What questions should I ask a bookkeeping service before hiring them?
Ask about accounting experience, accounting knowledge and skills, services offered, accounting software used, pricing policy, terms of communication and handling with clients, turnaround times, data protection, references, and the way of conducting accounting services. It is also important to get to know who will be responsible for handling you.