Bookkeeping is a part of the accounting process for businesses and involves recording the business’s financial transactions daily. Accounting and bookkeeping are usually confused as the same, but they are different. Bookkeeping is a part of accounting and concerns itself primarily with accurately recording the daily business transactions. On the other hand, accounting summarizes and analyses the financial records maintained under bookkeeping to prepare financial reports. Bookkeeping cannot be used for the business decision-making process. In contrast, all the functions of accounting have the final goal of helping in the critical decision-making process of the business.
Bookkeeping is a process of documenting every transaction related to the operations and other events of the business. The transactions consist of sales, purchases, and payments made and received from clients and customers. Two methods are used in bookkeeping, i.e., single entry and the double-entry method.
What do bookkeeping services do?
The functions of bookkeeping differ from business to business. However, some basic bookkeeping functions are standard for every type of business. Bookkeeping can be done either by an in-house bookkeeper or by a bookkeeping services provider. Following are some essential tasks that both the bookkeeper and bookkeeping services provider have to do:
- Recording financial transactions
- Reconciling bank accounts
- Managing bank feeds
- Handling accounts receivables
- Handling account payables
- Working with the person preparing taxes
- Preparing financial statements
- Processing payroll
- Making recommendations regarding the technology and the process
Besides the tasks mentioned above, hiring bookkeeping services providers comes with some extra benefits. Outsourcing the bookkeeping services allows access to the best systems to manage the records and assign a team of experts specifically for a particular business/firm. Bookkeeping services providers also offer business advisory services based on their experience in the market. It helps in the correct decision-making based on the current market status.
What to consider before outsourcing bookkeeping services?
Once a business decides to outsource its bookkeeping services, it is vital to get the right one. A right outsourced service provider is one whose expertise matches the needs of the business. Numerous factors determine which bookkeeping service provider will best suit the business needs, such as:
- The service provider’s expertise:
One of the most important factors to consider before outsourcing accounting and bookkeeping services is the service provider’s expertise. A service provider with knowledge and experience in the same industry as the business operates in is an additional but essential factor. Therefore, make sure to do a background check about the bookkeeping service provider’s qualifications, experience, and reviews on their work. Also, check the team members of the outsourced service provider who will eventually handle the business’ books.
- Cost-effectiveness of the outsourced services:
Without a doubt, outsourcing the bookkeeping services is a cost-saving process. But the business owner must consider the funds available with the firm, i.e., the business’s budget for the same, before taking any steps. Estimate and compare the cost of outsourcing the bookkeeping services and hiring an in-house bookkeeper to analyse the expenses. Check the standard charge as per the market for the services provided and go through reviews on the bookkeeping services provider. It will help ensure that the services offered by the outsourced service provider match the cost incurred by the business for the same.
- Dependability of the service provider:
The business needs to take steps beforehand to ensure that the outsourced bookkeeping service provider that the business wants to hire is reliable. Check the previous clients of the service providers and their reviews on the services provided. Always go for a bookkeeping service provider with a good reputation in the market. Dependability of the service providers affects the quality of bookkeeping services provided and plays a crucial role in deciding whether the decision to outsource was correct or not.
- The technology used in the process:
Bookkeepers and accountants use accounting software these days to manage the books of businesses. Manual bookkeeping is tedious and now outdated. So, to ensure that the bookkeeping services provider hired is the best one, check the technical competence of the service provider. Business owners need to check and familiarise themselves with the bookkeeping and accounting software used by the service provider. Also, make sure that the team members that will work for the business are well-trained on the software. Choose the service providers who use popular software such as Xero accounting, QuickBooks, and Sage accounting software. It will help the business in keeping track of the entire process.
- Level of transparency:
Ensure a proper communication channel between the bookkeeping service provider team and the business owner. The bookkeeping service provider must have a system to bring every issue and critical decision to the notice of the business owner. The business owner needs to properly check the entire process to avoid any scams and discrepancies.
- Business data security:
One of the biggest challenges of outsourcing bookkeeping services is the risk of a data leak. The bookkeeping service providers have access to all the financial data of the business, and any breach can be dangerous for the business. Therefore, ensure that the outsourcing service provider follows all the international security practices and standards. Have the outsourced bookkeeping services providers sign a non-disclosure agreement. It will bind them against any unauthorised communications regarding business transactions.
- Service turnaround time:
Late completion of work by the bookkeeping services provider will hamper the smooth functioning of the business and will also delay the tax filing process. Late tax filing will result in penalties for the business. To prevent these, outsource the accounting and bookkeeping services to a service provider with a reasonable turnaround time. Check their working record with their previous clients and other businesses in the market.
The accounting and bookkeeping requirements vary from business to business based on their size, number of transactions, number of clients, etc. These requirements can be managed in two ways, either by hiring an in-house bookkeeper or by outsourcing it to some bookkeeping services provider. Both methods have advantages and disadvantages, but the most significant factors in deciding which one to use are cost and work quality. Outsourcing the accounting and bookkeeping services helps save time and resources for other business-related activities. An excellent outsourced bookkeeping service provider should help the business increase its profitability.
