Finance management is an important part of running a business, demanding your time, effort, and money.
Bookkeeping, a crucial piece of financial accounting, takes up most of your time, especially when the flux of data increases.
While it is understandable to handle business accounting yourself in the initial stages of your business, it is better if you consider outsourcing it.
Not only will it save you money, but it will also give you time to focus your energy on core business activities.
You would have the bandwidth to think about scaling your business.
It is only possible if you delegate administrative responsibilities to someone else and let them track and record your cash inflows and outflows.
Here’s a detailed analysis of how you can cut your costs by outsourcing your bookkeeping.
Key Takeaways
- 90% of businesses use technology to automate their bookkeeping and accounting to increase productivity.
- 70% of businesses don’t have an accountant on board.
- Bookkeeping is an important part of financial accounting, helping you track daily transactions for data consistencies and reconciliations.
- Outsource your bookkeeping to cut costs and use your resources well.
Understanding bookkeeping and its types
The role of bookkeeping is to monitor and record business transactions.
It requires meticulous attention to detail as even slight negligence can negatively reflect your books, leading to incorrect decisions.
Imagine tracking all cash inflows and outflows, like every business expense, vendor payments, profit and loss from sales, payroll, and taxes.
It consumes a major chunk of your day – something a business owner cannot afford in the long run.
However, someone has to do it because without it you’re literally working on guesswork, the ingredient to failure.
And yet, 70% of businesses don’t have an accountant.
This is probably the reason why their growth becomes stagnant.
64% of business owners handle their own bookkeeping and accounting tasks. This gives them limited time to think about scalability and growth.
About 90% of SMBs use technology to automate their bookkeeping, out of which 43% claim it has increased productivity.
It is important to know that there are two types of bookkeeping. Here’s the difference.
Single-entry bookkeeping
This is the traditional way of bookkeeping. It is straightforward and simply has a check and balance situation.
Double-entry bookkeeping
While this method has become more common now, it involves a double-check. You have debit and credit, so you get a more accurate view of your finances.
3 critical signs that you need to outsource your bookkeeping
21% of SMB owners don’t know enough about bookkeeping. And that is okay.
As a business owner, you must strategize and know about your product or service.
You don’t need to spend hours in front of spreadsheets, doing paperwork that drains you both mentally and physically.
An important part of running a business is knowing when to delegate responsibilities.
Let’s take a look at the 3 critical signs that you need to outsource your bookkeeping.
1. You are constantly overwhelmed
Are you constantly stressed about your finances?
Do you spend countless hours in front of spreadsheets, collecting and double-checking receipts, invoices, and reconciliations?
Time is money.
It is an asset that you have you must leverage as a business owner. Use it mindfully.
Imagine spending hours doing administrative duties when you could use this time building client relationships, developing new products, and strategizing their marketing.
Focus on why you started the business. Spend most of your time doing what you love to do.
If you’re overwhelmed, it’s time to outsource your bookkeeping.
2. You are falling behind
We live in the world of technology. And it is easy to feel left behind when you’re not utilizing technology to its true potential.
- Are you struggling to perform day-to-day operations?
- Are you constantly finding errors in your financial statements?
- Have you faced a penalty or experienced compliance issues?
It’s possible that you’re not leveraging technology.
Technology has helped automate most financial management processes, reducing manual input and chances of human error.
It has increased data consistency and data accuracy.
Thus, should you begin to feel left behind – a common feeling amongst business owners – it’s time to think about outsourcing.
3. You want to start scaling your business
Most businesses begin to feel the punches when their business starts growing.
This is when they notice mistakes in financial statements and inconsistencies in the data.
And this is also the time when their business either becomes stagnant or starts to decline.
Basically, they are not ready when the time comes for growth.
Thus, delegate responsibilities if you find more and more challenges due to the volume of transactions.
Think about scaling your business and let an accounting agency handle your daily bookkeeping.
5 steps to outsource your bookkeeping to cut costs
You should outsource your bookkeeping to reduce business expenses. Here’s a 5 step guide to outsource bookkeeping.
Step #1: Evaluate your needs
Hiring a dedicated bookkeeper is not that challenging once you know what your needs are.
Think about the following questions:
- Are you interested in using a particular accounting software?
- What is your monthly transactional rate? This is an important consideration as it determines the total monthly cost and time mandatory.
- What financial reports do you require and the frequency of them? Do you prefer viewing the income statements and balance sheets every month, quarterly, or annual?
- Are there any industry-specific needs?
For example, are you specifically looking for someone efficient in handling account payables and receivables?
Knowing what you want makes the rest of the search simple and quick.
Step #2: Find the right bookkeeper
The search for the right bookkeeper can become simpler by diving into two aspects.
First, you should know where to look for them.
For example, there are various online platforms, websites, and forums filled with a pool of professional bookkeepers.
You can also seek referrals and get peer recommendations.
Check out the local bookkeeping directories.
The right use of an online search engine can help you meet your desired bookkeeping needs.
The second aspect is the qualifications.
Ideally, you want someone with industry-specific experience.
It ensures support during tax season and access to industry-specific knowledge.
And if you are determined to use a specific accounting solution, make sure they also have proficiency in it.
Evaluate their professional certifications and see their communication skills.
They are the right fit, if they’re able to showcase a strong sense of professionalism and can clearly elaborate complex financial statements and other data.
Step #3: Request quotations
Now that you’ve discovered and shortlisted various potential candidates for the bookkeeping role, it is time to broaden your search and look into specifics.
Here is the list of important considerations.
Evaluate their pricing and fee structure.
Do they charge hourly fees or do they offer monthly plans? Some bookkeepers also charge on a project basis.
Get more clarity on the services they offer.
Ask them in detail about the services they provide and see if they match your needs.
Common services include bank statement reconciliation, tax preparation, financial reporting, account payables and receivables, etc.
Are they comfortable using your preferred accounting tools?
How frequently would they communicate with you? What device do they use for communication?
How often can you expect to receive updates? Would you have to constantly seek follow-ups?
Are they following all important security measures? Do they maintain financial data backups?
Can they provide client referrals?
By keeping your search for the ideal bookkeeper open and unbiased, you give yourself the room to find the most suitable person.
Don’t limit yourself and take as much time as you need.
Step #4: Begin onboarding
Opt for open communication to avoid misunderstandings. This is the key rule for the onboarding process.
Make sure the person or agency you choose for handling your bookkeeping has access to all financial information.
It requires you to provide access to confidential information, like receipts, bank statements, and invoices.
Be upfront about your needs and expectations.
See if you’re receiving timely responses.
You began the recruitment process by establishing and laying out your needs. Use them as your KPIs.
Evaluate the performance of the new system. Does it work in the favor of the business? Are there any complications that require your attention? Address them, don’t delay them.
Step #5: Monitor performance
Now you can’t just sit back and let the accounting agency handle your bookkeeping.
Yes, the major chunk of the responsibility is fulfilled. You have a dedicated bookkeeper looking after your financial management.
But you must continuously evaluate your financial performance.
Make a habit of reviewing monthly statements. Get involved in the process of financial reporting.
Analyze all the data and ensure accurate interpretation for the correct depiction of your financial health.
Key considerations for choosing the right accounting software for your business
Bookkeeping is unquestionably the most important part of financial management.
Using accounting software automates your processes, increasing efficiency and business productivity.
It also reduces manual errors and data inconsistencies.
The accounting solution you pick is a major decision that will ultimately support your bookkeeping.
Thus, think about all the accounting options available to you and select the one that aligns with your current needs and future goals.
Basic accounting software is useful for small businesses, but as you scale, you would require a cloud system.
Here’s a comparison chart for you.
Feature | Cloud-based accounting software | Basic accounting software |
---|---|---|
Accessibility | High accessibility You can access data from anywhere | Limited accessibility You can only get access through a desktop or when you’re working from the office |
Cost | Recurring subscription fees | One-time fees |
Internet Connection | It is mandatory | Not necessary |
Collaboration | You can easily collaborate with your coworkers | It becomes a hindrance, especially when you’re not on-premise. |
Updates and backups | Data backups and system updates are automated. | It is a user's responsibility. |
The bottom line
Financial management is a puzzle and bookkeeping is the piece that completes it.
It is the act of tracking and recording day-to-day business transactions, preparing financial reports for in-depth analysis and interpretation, and managing payroll.
There are various tasks that come under bookkeeping, consuming significant hours from your day – hours you can use on focusing core business activities.
Save time and business costs by outsourcing your bookkeeping to a reliable accounting agency, ensuring they offer the services you require.
Ledger Labs has 12+ years of experience in handling bookkeeping and accounting services for various businesses across industries and sizes.
Book a consultation appointment with us and get to know more about our services.