Bookkeeping is like going to the dentist: small business and startup owners hate it, but it has to be done. The reason they hate it is that, in many cases, they try to tackle this tedious chore by themselves.
But because they aren’t CPAs and don’t have any kind of formal education in accounting, they usually make mistakes. Bookkeeping mistakes are the worst kind to make.
They cause chaos and confusion at every level of your company and can even cost you thousands of dollars in lost sales or misplaced funds. So, what’s the solution?
You can always hire someone in-house and pay them a salary to oversee your bookkeeping for you. But not every small business owner can afford that.
For that reason, and many others, a better choice is to outsource your bookkeeping services to a third party.
What is outsourced bookkeeping?
Outsourced bookkeeping is when you hire a third-party company to keep your books and manage your accounts for you.
The main tasks they perform include tracking your business transactions, generating financial reports and keeping a record of all your financial dealings. They will also organize and prepare your files for audits, as well as make them easy for you to access should you ever want or need to see them yourself.
In addition, a virtual bookkeeping service may also provide extra services such as developing a financial strategy using planning and analysis, paying out your business expenses (rent, credit card bills etc.) and optimizing your accounts receivable entries and invoicing process.
What are the benefits of outsourcing bookkeeping services?
There are several benefits to outsourcing bookkeeping services instead of hiring someone in-house or doing it yourself. Let’s go over them now.
1. It provides high cost-savings
Outsourcing to a third party is far less costly than hiring someone in-house. Think about it: When you hire someone new on your staff, you have to spend money on job board posts, interviews, onboarding and training.
Then there’s their salary. The average base salary for a bookkeeper in the United States is around $42,000 per year.
And that doesn’t include holiday bonuses or account for raises. Finally, you have to provide health insurance and help them cover the premiums, as well as pay for their worker’s compensation.
By contrast, when you outsource, you don’t have to pay a yearly salary. There’s no need to provide any staff training, bonuses, raises or insurance; all of that is overseen by the third-party company.
Instead, the only thing you’re responsible for paying is a flat hourly or monthly rate. According to Milestone, the average virtual bookkeeping service charges a fee of $250-$2,000 per month.
Even at the high end, the annual cost of outsourcing is still significantly less than the average bookkeeper salary. But let’s say you weren’t planning to onboard a new staff member to keep your books for you.
Let’s say you were going to do it yourself. That may work — if you know what you’re doing. If you don’t, you’re setting yourself up to commit some expensive errors. In this way, outsourcing is still the most cost saving option.
2. It’s more efficient
Outsourcing bookkeeping increases the efficiency with which you’re able to run your business. That’s because, with a third party, you have access to not just one bookkeeper, but a team of people who provide services ranging from accounting to audit preparation to financial planning and analysis.
That’s like hiring two or three bookkeepers with a CPA and a CFO thrown in, to boot! With an entire virtual bookkeeping team on your side, you’ll be able to organize your finances and complete essential accounting tasks faster and more accurately.
This efficiency will trickle down into the rest of your departments, including warehouse, sales, marketing and R&D. The employees who work on these levels will be able to meet their deadlines without having to wait for a single bookkeeper to finish crunching numbers or processing invoices.
3. It offers more value
Virtual bookkeeping companies can offer much more value than a regular bookkeeper. Many companies, like Escalon, offer additional financial services like financial planning and analysis.
Our goal is to help you streamline and optimize your business finances, as well as organize and maintain them. A single person that you’ve hired in-house often can’t provide that many services, due to lack of manpower or skill.
4. It frees you to focus on producing revenue
One of the most important benefits of outsourcing your bookkeeping to another company is that it frees you up to focus on tasks that produce revenue.
Rather than getting bogged down in numbers and paperwork for hours on end, you’ll be able to go out and make sales, start a new marketing campaign, or whatever it is you need to do to grow your business.
How to outsource bookkeeping
The key to finding a great company to outsource your bookkeeping to is to find one that can provide the most value. Value distinguishes a mediocre virtual bookkeeping company from one that supports your entire business through their quality, efficiency and customer service.
Some great questions to ask to determine value are:
- What services can they offer in addition to basic bookkeeping?
- Can they provide a single dashboard where all your financial data is easily accessible?
- Can they maintain compliance as well as help you plan an effective financial strategy, process invoices, and manage your expenses?
With Escalon FinOps, you’ll find all these services and more!
Want more? Escalon’s Essential Business Services include FinOps (bookkeeping, accounting and CFO services), PeopleOps (HR, benefits, recruiting, payroll) and Risk (business insurance). Talk to an expert today.