Outsourced Bookkeeping: ROI & When To Do It

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As a small business owner, you spend the majority of your time managing the day-to-day operations of your organization. You undoubtedly take satisfaction in doing the majority of tasks on your own, including accounting.

However, at the end of a long day, analyzing the financial data for the firm may be the last thing on your mind. Along with everyday accounting responsibilities, monthly bank reconciliations and reports must be completed. 

When you combine these tasks with approaching tax filing deadlines, it is easy to get overwhelmed. When this occurs, it is necessary to seek a new accounting solution.

What Is Outsourced Bookkeeping

What Is Outsourced Bookkeeping?

Outsourcing is the process of hiring a third-party service provider to undertake one or more distinct business functions to keep the organization running smoothly. While multiple processes and services are available for outsourcing today, one of the most prevalent is accounting. 

This is because both the US and a worldwide standard are utilized to report and process all financial statements and cash ledgers, making it simple to hire an expert specialist to do the work.

Outsourced bookkeeping is becoming more popular among small- and medium-sized organizations that want to save costs without sacrificing productivity. If you are beginning your own company or studying accounting for the first time, it is critical to understand the difference between outsourced and in-house accounting. Although both accounting approaches perform the same basic functions, they are organized differently.

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When And Why Should You Outsource Your Accounting

When And Why Should You Outsource Your Accounting?

Outsourcing bookkeeping helps you to cut down on unnecessary expenditures. You can then spend those savings on growth plans for your organization. Additionally, your recruiting team can use the freed-up resources to fill positions that enhance your competencies and bring value to your organization. 

Outsourcing lets you manage your accounting demands more efficiently and affords you the potential to increase company profitability.

All firms should have sound, robust accounting systems, with appropriate checks and balances. Failure to include these checkpoints could result in severe repercussions and financial errors with a detrimental effect on your organization. 

Outsourced bookkeeping helps you maintain effective internal controls by establishing the best system of checks and balances for assisting you in reducing internal fraud possibilities and ensuring the correctness of your financial statements. 

By outsourcing, you can ensure that policies and processes maintain an adequate degree of internal control.

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What Companies Outsource Bookkeeping

What Companies Outsource Bookkeeping?

Let us take a closer look at the companies that often outsource accounting tasks:

1. Real Estate

In this competitive economy, the real estate business is one of the fastest expanding industries. Real estate enterprises frequently include substantial transactions and legal papers, making bookkeeping difficult.

Real estate owners sometimes neglect their accounting duties in favor of other critical tasks, such as client management, property document management, and other more immediate tasks.

A bookkeeper is a tremendous asset to real-estate owners. Outsourced accounting services help real estate companies maintain a laser-like concentration on their primary company operations while simultaneously accelerating their total business development.

2. Insurance

Insurance is a customer-centric, sophisticated sector that requires large amounts of documentation and effective client management. As a risk-reducing industry for individuals, insurers need to pay special attention to their financial well-being while also handling other important aspects of the business.

Any disregard for monetary affairs is detrimental to not only the financial success of the organization but also staff morale resulting in lower sales. 

Outsourced accounting services streamline the payroll process via correct transactions. Additionally, they assist insurers throughout the hectic tax season by ensuring that their job is stress-free and error-free.

3. Manufacturing

The manufacturing industry’s accounting environment is quite distinct from that of other industries. Manufacturers are mainly concerned with three factors: the cost of products, the cost of labor, and the cost of raw materials. 

And calculating these expenditures is not a simple task; it needs knowledge and a significant amount of effort.

Manufacturers, on the other hand, are more focused on their manufacturing department, which makes focusing on accounting tasks difficult.

This is when outsourced bookkeeping comes in handy! These service providers are specialists in their field and are capable of maintaining correct inventory and raw material records, as well as giving reliable financial reports. As a result, manufacturers explore outsourcing services to save money and time.

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4. Wholesale And Retail

Inventory management is critical to retail accounting because it ensures the availability of products and their monetary worth. Inventory costs have a significant impact on the overall profitability of a retail or wholesale firm.

Additionally, inventory on hand is treated as an asset for taxes and company assessment purposes. However, merchants often see accounting as one of the most difficult operations available. Outsourced accounting services are the optimal response to this issue.

Bookkeeping professionals at outsourcing organizations efficiently handle inventory, allowing retailers and wholesalers to concentrate on their core competencies.

5. Healthcare

Accounting for a healthcare firm may be a challenging task. Medical practitioners are mainly concerned with the health of their patients. As a result, professionals can miss aspects of account management, which ultimately becomes a hurdle during tax season.

To protect themselves and remain in compliance with the latest standards fo reporting, healthcare professionals outsource their accounting services so they can focus on remaining ahead of the competition and delivering superior client service.

Managing day-to-day transactions becomes a breeze with the correct virtual team of healthcare bookkeepers in place. Healthcare bookkeepers have industry experience and knowledge, which helps them to adhere closely to accounting regulations.

6. Restaurants

Restaurants are part of the most chaotic of industries, with constant rush and bustle. Although customer happiness is paramount for restaurateurs, financial stability is also critical. Owners often spend much time and effort on the decor and ambiance, the tablecloth and arrangement of the furniture, and, most importantly, on offering delectable meals.

However, the fundamental part, accounting, can lag. Managing everyday expenses such as groceries, client bills, and a variety of other items gets overwhelming for restaurateurs.

In these instances, a bookkeeper may be a lifesaver! A bookkeeper is responsible for managing all income, expenses, and maintenance of accurate records. This saves time, lets you maintain focus on providing delectable, fresh cuisine to your consumers.

7. Law Firms

The legal sector is daunting since one mistake by an attorney might lead them to lose their market reputation. However, legal businesses are also customer-focused, since managing cases is their bread and butter.  

This is why law firms often disregard their accounting tasks, which are critical to any business’s financial progress.

By outsourcing accounting services, firms can concentrate on practicing law rather than on non-revenue-generating responsibilities like bookkeeping.

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Why Do Other Accountants Outsource Bookkeeping

Why Do Other Accountants Outsource Bookkeeping?

Finances may be quite complicated owing to the number of moving parts in your company. When you opt to outsource your accounting, you are entrusting your financial records to a team of experienced accountants. This is critical since correct accounting might take a significant amount of time. 

One bookkeeper will not be sufficient to investigate every possible option that might help your business. When you outsource, you get a team of professionals that collaborate to guarantee that your organization receives the finest services available.

Additionally, you are delegating your business’s responsibilities to operate efficiently. When your many company activities operate efficiently, they work in unison to create a stronger, more cohesive organization.

Outsourcing also enables businesses to recruit qualified accountants to do a variety of accounting activities. Outsourced accountants are often less expensive than in-house professionals. Due to the abundance of talent accessible internationally, you may get work of the same or higher quality. This assists you in resolving your labor scarcity difficulties.

How Much Do Outsourced Bookkeepers Charge

How Much Do Outsourced Bookkeepers Charge?

The cost of accounting for a small company or charitable organization is quite varied. The size and lifespan of the business, the volume of monthly transactions, the number of workers and how payroll is handled, the number of expense accounts, credit cards, invoices to send out, bills to pay, and the number of balance sheets to reconcile, are just a few examples. 

Apart from these fundamental bookkeeping duties, the way your accounting systems, rules and processes, and reporting requirements are set up and operated will affect your expenses.

The first step is to ascertain your business’s requirements. Almost every small company needs some type of accounting to get started. During the earliest stages of starting your firm, you will be mostly concerned with minor tasks such as transaction logging and bill payment.

As your firm expands, you will need to place a greater emphasis on thorough financial reporting and compliance with applicable state and federal standards. This will need a more determined effort and close supervision by a skilled specialist. 

You will need the services of an experienced accountant to assist you in compiling the financial knowledge necessary to make great company choices.

Before hiring a full-time professional to manage your books, you should determine the kind of duties that need to be addressed. A full-time accountant is preferable to a part-time bookkeeper, as they require less oversight and offer a broader range of expertise.

As you might expect, the salary requirements for an experienced accountant are typically higher. However, investing in a great accountant is a cost-effective way to grow your business because they can assist you in increasing your company’s profitability through their ability to provide insights through financial analysis and reporting.

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How Much Should I Charge For Bookkeeping Services

How Much Should I Charge For Bookkeeping Services?

Many newly started businesses choose to perform their accounting in the early stages, which is a cost-effective move. However, your company will eventually need more of your time, and accounting will need to be outsourced. 

The cost of accounting varies according to a variety of variables, including the following:

  • The bookkeeper’s degree of experience
  • Service type (part-time employee, full-time employee, or an outsourced accounting service)
  • The quantity of labor necessary (daily/monthly hours)
  • The nature of the obligations that are assumed daily
  • The capacity of your business to support this service

You can engage a full-time or part-time bookkeeper, depending on the amount of labor needed. A firm that does not generate a high number of transactions and is cash-strapped may opt to employ a part-time bookkeeper, but an established business that processes hundreds (or thousands) of transactions daily may need a full-time bookkeeper to keep up with the workload.

Bookkeeping – Part-Time

Part-time bookkeepers often do minor chores such as entering receipts and monitoring employee timesheets. Often, businesses will teach a current employee or office manager to take on the additional tasks associated with a part-time bookkeeper. While this may seem to be a profitable alternative on paper, any overlook or inaccuracy in the numbers will be at the price of your business.

The primary advantage for businesses is the lower cost of a part-time bookkeeper (in comparison to full-time staff). A part-time bookkeeper’s hourly rate is often more than that of a full-time bookkeeper, but the overall monthly cost is lower. Part-time bookkeeping hourly rates vary according to location, length, and daily tasks.

Consider the following example to demonstrate the cost-effectiveness of a part-time bookkeeper:

  • Hiring a part-time bookkeeper for 20 hours per week at a rate of $17 per hour (the upper end of the average hourly rate indicated above) results in a weekly cost of $340.
  • Hiring a full-time bookkeeper for 40 hours per week at a rate of $14 per hour (the low end of the average hourly rate indicated above) results in a weekly cost of $560.

One of the primary downsides of employing a part-time bookkeeper is that they give only limited assistance in an area of the company that demands a great deal of attention to detail. 

You will need to devote part of your time to auditing their work continuously, and you can still be expected to do certain high-level accounting tasks, such as forecasting and reporting. This is an additional responsibility for any business owner who is also accountable for several other critical aspects of the firm.

Additionally to the above, a company owner may be hesitant to entrust a part-time bookkeeper with some of their most crucial financial records and customer and/or client information. Such intricacies may wreak havoc on the employer’s and their company’s division of labor and trust.

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Bookkeeping – Full-Time

A full-time bookkeeper is often required to manage daily accounts, maintain order in account books, and do a variety of minor and major jobs (invoicing, timesheets, generating reports, etc). If your business has a large number of workers, a high volume of daily transactions, or complicated financial systems, a full-time bookkeeper is a must, not a choice.

While you may sometimes need to audit a full-time bookkeeper’s work, having them in the office daily gives you better access to them and enables them to understand your procedures and systems more effectively. 

Additionally, full-time workers are more invested in the firm for which they work, and you should reap better long-term benefits from collaborating with someone well familiar with your industry.

As is the case with any full-time employee, the primary disadvantage of having a full-time in-house bookkeeper is the related expense. Salary alone may easily reach $50,000 per year for an experienced bookkeeper, and this is before benefits and other overhead costs, which can add another 20% to the overall cost of a single person.

Outsourced Bookkeeping Services

Perhaps the most cost-effective alternative for small businesses seeking accounting assistance is to hire a third-party agency that specializes in outsourced bookkeeping services. Outsourcing your accounting has a variety of significant advantages, including lower expenses, more value for each dollar spent, and other real business-related benefits.

One of the most significant benefits of outsourcing your accounting is cost savings. An accounting business would typically charge between $300 and $2,000 per month, depending on the volume and complexity of work.

Employing outside organizations to conduct your accounting is comparable to employing an in-house bookkeeper for basic financial duties but without the extra overhead expense of wages. This is very advantageous for businesses starting a growth phase since it eliminates the need for extra office space or compensation perks.

Another significant advantage of contracting bookkeeping services to a competent CPA business is the degree of knowledge obtained. Small and medium-sized enterprises, as well as mid-sized firms, do not necessarily engage the finest expertise to manage their daily and monthly accounting obligations. 

Without extensive previous experience in accounting, it is hard for a company owner to assess an in-house bookkeeper’s knowledge and qualifications.

This is why accounting and bookkeeping organizations are very beneficial to businesses globally. They understand how to employ the greatest staff and maintain an internal system of checks and balances to ensure customers get the best service possible. This avoids the necessity for recruiting and taking a risk on an employee who may be unprepared to manage critical finance-related tasks at a business.

Additionally, firms that provide outsourced accounting services are often adaptable to ensure that their solutions meet your unique requirements. Because these organizations focus only on bookkeeping and accounting, their professionals are likely to be more experienced and knowledgeable than in-house bookkeepers.

The most often claimed drawbacks of outsourcing accounting are a loss of direct connection to the person managing the accounts, a lack of instant insight into daily operations, and a difficulty to integrate bookkeeping with other departments smoothly (such as sales, operations, etc). 

These are often the key reasons bigger businesses use in-house accounting staff. Outsourced bookkeeping, on the other hand, remains an excellent choice for cost-conscious individuals and/or small businesses concerned about the expense of hiring an in-house bookkeeper.

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What Do Bookkeeping Services Include

What Do Bookkeeping Services Include?

A bookkeeper’s role is to ensure that financial data is correct and up to date so that accountants can compile yearly financial reports and tax filings for your organization.

These accounting reports are utilized by you, the company owner, as well as other stakeholders such as managers, to aid in the decision-making process.

Consider the following basic and secondary accounting services that a bookkeeper may provide your business:

Data Entry

Data entry is simply the process of recording financial transactions, that is, keeping track of what comes into and leaves your firm. It is the bedrock of bookkeeping and accounting services since precise financial data is required for financial statement preparation. 

This is because precise financial records enable you, as a company owner, and other stakeholders, to get an accurate and fair picture of your organization’s performance.

Bank Reconciliation 

Bank reconciliation is the process of comparing the financial transactions recorded in your books of accounts to those recorded on your bank statements. The purpose of bank reconciliation is to ensure that the financial transactions recorded in your books of accounts match those on your bank statements. 

Bank reconciliation is critical for your organization since it assists in identifying and rectifying data entry mistakes or missed transactions.

Payroll, Accounts Receivable, and Accounts Payable

A bookkeeper ensures that invoices are sent to clients and that payments are collected on time. Additionally, he ensures that any unpaid invoices to suppliers are settled promptly and without running out of funds. He ensures that invoices are paid on time to prevent delays in delivery or supplier credit from being withheld.

Along with accounting for payables and receivables, a bookkeeper also performs payroll services. This includes calculating employee pay, adjusting deductions, and ensuring that workers get their net salaries on time. Paying salary on time will guarantee that your staff is satisfied. Additionally, appropriate payroll is critical for compliance purposes.

Monthly Financial Statements 

Each month, a bookkeeper is required to prepare a variety of financial reports to monitor your business’s success. Several of these financial reports contain the following:

  • Balance sheet – a statement that summarizes your firm’s current financial situation profit and loss statement – a statement that tracks your business’s revenue and spending and indicates whether your business is profitable or not
  • monetary flow statement — a statement that summarizes all cash transactions and displays the business’s cash on hand.
  • Accounts receivable — a statement that details the debtors or the amount owed to customers, as well as the dates on which such receivables are due.
  • Accounts payable – a statement that details the creditors or the amount owed to suppliers, as well as the due dates for such payments.

These reports reveal whether or not your firm is successful and if it has enough cash on hand to cover day-to-day expenses. If the bookkeeper does not record these reports correctly, it might affect your company estimates, client payment terms, and business expenditures.

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Summary - outsourced bookkeeping services

Bottom line

Not every firm has the same accounting requirements as another, and those requirements are likely to change as the organization grows. While part-time bookkeepers and outsourced bookkeeping services are viable options for young businesses, full-time bookkeepers often assist more established enterprises. It is up to the business’s decision-makers to pick the most suitable approach for maximizing profitability and ensuring growth.

Outsourced bookkeeping and accounting enable small and medium-sized enterprises to access a full-service bookkeeping and accounting department at an affordable price. Possessing a piece of an outsourced bookkeeping and accounting department is comparable to owning a timeshare. 

You have access to and benefit from the department to the extent that you need and can use, without incurring the complete expense and risk associated with a full investment.

With the proper outsourced bookkeeping partner, you will have access to a whole team committed to improving your business’s systems and procedures to boost productivity, save costs, and raise profits. 

You can maximize the effectiveness of your present personnel while also gaining access to financial specialists that can help you with management accounting and strategic planning to promote development.

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