"Ok Google, find bookkeeping services near me..."
Did your bookkeeping research start in a similar way? Well you're not alone.
Many business owners and entrepreneurs find it challenging to find the best bookkeeping solution for their company. Many don't even know where to start! Not only can it be very difficult to find an internal hire that's invested in your business as much as you are- but nowadays, it is even more challenging to find someone who's qualified at an affordable cost. Add to that, the concept of trust- you don't just want to hand every detail about your finances to anyone.
And while many entrepreneurs have embraced the idea of outsourcing other areas of their business, some are still wary of the idea that accounting and bookkeeping can take place outside of the office. As with any major business decision, it's important to ask yourself, whether you have the necessary skills and experience to hire and oversee your bookkeeping. If you didn't pursue an accounting degree alongside your primary career path, it might be worth digging into the basics of outsourced bookkeeping. So, how do these outsourced bookkeeping services work?
"If you deprive yourself of outsourcing and your competitors do not, you're putting yourself out of business." Lee Kuan Yew
To start, outsourced bookkeeping services are a relatively new solution to a relatively old problem: Small businesses are cash strapped and time poor. There’s not enough time or labor to handle every mechanism in the growing machine, leaving companies in a bind about how to maximize their resources.
In the past, companies had few strategies for approaching this balancing act, but outsourcing has opened the doors to world of new options. These days, outsourced services are the ideal way for a businesses to handle non-essential administrative tasks, with a special shout-out to one of the most important: Accounting and bookkeeping.
Bookkeeping is never high on any entrepreneur’s list of priorities. Yes, it’s a necessary by-product of business practice that needs to be handled, but few business owners have the experience or knowledge required to handle accounting tasks on their own. Basic bookkeeping is simple enough, but as a business grows, builds out its workforce, offers new services, and reports new types of revenue, things get complicated. The input and expertise of certified accountants will inevitably become necessary as a business scales.
Of course, businesses can hire in-house accountants to handle the work, but this isn’t feasible for every company—especially smaller businesses that don’t have the overhead to finance in-house experts.
This brings us back to our initial problem: How can business owners find the best possible accounting expertise without committing to expensive talent acquisition, recruitment, and onboarding? When companies must balance cost with expertise, outsourced bookkeeping services are the perfect middle ground.
Outsourced bookkeeping services are just as they sound: Business owners hand off their accounting, payroll, and administrative tasks to a managed service provider (MSP). This provider isn’t just any old accountant; outsourced accounting services are generally handled by teams of accounting experts and financial professionals with years of experience in the industry. By leveraging this third-party expertise alongside innovative payment models and cutting-edge technology, businesses of all sizes can benefit from an outsourced accounting partnership.
Despite the well-documented benefits of outsourcing, it’s natural to be wary of strategies that ask you to give up control of your critical business functions. Those type-A Business owners who need to have a hand in every single one of their business operations may even question whether outsourcing is really necessary. Why trust someone else when we can do it ourselves?
You might be surprised to hear this, but we’ll tell it to you straight. Outsourcing isn’t necessary. Not really. Most business owners are perfectly capable of finding ways to do their own books, as they did for hundreds of years before outsourcing entered the mainstream.
But let’s be clear: Outsourcing is unnecessary in the same way that technologies like Optical Character Recognition (OCR) are unnecessary. Can a CPA manually record each client’s receipts, documents, and files into Word? Of course. Would any self-respecting CPA choose to do this process by hand when a time-saving technology like OCR exists? No way.
Such as it is with business owners and outsourced bookkeeping services—a strategy that was once considered a luxury but is fast becoming an essential business function.
The question of whether outsourcing is right for your particular business comes down to your circumstances:
All of these questions boil down to the opportunity cost of outsourcing. What are you getting for what you’re giving? If you’re neglecting revenue-generating tasks in favor of accounting, then outsourcing is certainly necessary to maximize your business’s growth.
For example, if you’re a struggling small business owner who’s growing the business by day and doing the books by night, then outsourcing is absolutely necessary—for your business and for your sanity!
But even if you have an in-house team doing your books for you, you should consider how a well-selected MSP could expand your capabilities. Outsourcing lets you tap into a sustainable and scalable accounting operation for less than the cost of a basic in-house team of bookkeepers. The question of what’s “necessary” for your business is abstract. The value of outsourcing is real.
A survey by the National Small Business Association found that 38 percent of small businesses spend over 80 hours per year on federal taxes alone. 80 hours! That’s two full work weeks of time needed just to process your business’s annual taxes, never mind financial reporting, account reconciliation, payroll processing, and every other task that bookkeepers handle. For struggling small business owners trying to balance their own bookkeeping with business growth, this time investment is completely untenable. In situations like these, outsourced bookkeeping services come to the rescue.
Bookkeeping is the perfect task to outsource: It’s time-consuming, specialized, and when handled poorly, a serious liability for a small business. Let’s review the biggest benefits of outsourcing this task.
The primary benefit of outsourcing is time. This is obvious is you’re still doing your books on your own, but even when compared to in-house teams, outsourced experts offer a level of convenience second to none. As MSPs, outsourced bookkeepers have experience working with different systems and aligning their team’s skills with the needs of each client. As such, they’ll provide guidance on what you’ll need to provide to guarantee quick and seamless financial services.
Outsourcing minimizes risk for small business owners. The expertise of MSPs typically far outweighs that of in-house teams, meaning that businesses will reduce their liability and the ever-looming threat of audits.
And if that’s not enough, consider this: Outsourced service providers are contractually obligated to perform up to a certain standard. If they don’t, their business suffers as much as yours. With this partnership in mind, business owners can trust that their accounting MSP will perform at the highest level every time.
Small businesses with limited capital might shy away from the up-front costs of outsourcing, but in fact, outsourcing is often the cheaper option. The average bookkeeping salary is approximately 50% higher than an outsourced bookkeeping service like Botkeeper. Obviously, business owners will save on staffing expenses (payroll, insurance, taxes, and such), but they’ll also benefit from the flexible payment models that many MSPs offer. Many outsourced providers offer pay-as-you-go plans wherein businesses only pay for the services they use, while others offer with comprehensive plans that offer unlimited support for a flat monthly fee.
The problem with in-house accounting is that its costs skyrocket as your business grows. It’s difficult to find the perfect balance between staffing and demand; businesses almost always end up either paying more than they need to for excess labor, or paying less to keep staff low, leaving employees overworked.
Outsourced accounting lets businesses customize their service plans to meet the exact needs of the business at that point in its lifecycle. There’s no worry of overstaffing or understaffing during periods of transition—the available pool of talent will always be ready and waiting.
Outsourced accountants are more than just a way to hand off your books—they can be valuable partners for your business. Quality MSPs don’t just do what’s asked of them, they offer proactive support and identify potential problems before they arise. As they prepare your financial statements, budgets, and forecasts, they can raise red flags that could be problematic in the future. And while any in-house bookkeeper could offer this type of guidance, outsourced accounting services don’t involve just one or two individuals—they comprise a full team of accounting experts who provide multiple sets of eyes for every report.
Outsourced bookkeeping does come with a few drawbacks that business owners should be aware of.
By its nature, outsourcing means handing control to someone else. This can be a tough pill to swallow for entrepreneurs who have slaved to bring their business to life. It takes trust to give such an important business function to a third-party, and business owners who need to have a hand in every operation may struggle with the thought of losing this agency.
While it doesn’t compare to the extensive recruiting and onboarding process inherent to hiring in-house teams, outsourced bookkeepers will need to be on-boarded in an organization before work can begin. It’ll take some time for the MSP to understand the policies, procedures, and workflows you’ve established in your company.
A common complaint with outsourcing is that staff won’t be available when they’re needed. While this can be a concern, it’s a drawback that’s easily mitigated through communication early in the partnership. The expectations and responsibilities of both parties should be clear, including when services will be available, who will manage each account, and fallback options in times of emergency.
Alongside concerns of availability are concerns of distance—it’s quite a bit different to have your accountants work in another state rather than the second floor of your office. This complaint ties back in to availability and trust; while it’s true that business owners won’t have in-house teams of bookkeepers to fall back on, effective communication with the MSP can guarantee they’re never needed.
Today, smart business leaders lean towards outsourcing important administrative tasks in order to focus on what the business does best—provide a quality product or service to the consumer. Outsourcing business practices to reliable third-parties has become such an effective and popular practice that in 2017 the global outsourcing market amounted to almost $89 billion.
One critical-yet-complex administrative task that tops the list of those most outsourced is accounting and bookkeeping, and for good reason. The cost of not outsourcing your business’s bookkeeping is higher than just increased overhead and in-house expenses. Here’s why outsourcing accounting is less taxing on your sanity and your bottom line.
The alternative to outsourcing is establishing an in-house accounting department to handle bookkeeping responsibilities. Though it may sound simple enough on the surface, setting up and maintaining in-house accounting is much more involved than finding a new hire who likes to crunch numbers. Hiring, training, and managing a reliable accountant (or an accounting department) is a “full package” deal.
This means you’re really paying for:
The cost of hiring a new employee, especially one experienced enough to comfortably handle your accounting needs, adds up quickly. Additionally, no new hire starts running at full speed on their first day, and mid-level employees like accountants still need time before reaching a “break-even” point as far as resource investment is concerned. According to a survey of 610 CEOs conducted by the Harvard Business School, the break-even point even for mid-level managers is at least six months.
End-to-end outsourcing of finance and accounting services is replacing the notion and need for the in-house accounting team. Outsourcing your bookkeeping is less expensive, less time consuming, and less stressful than the in-house alternative.
One of the benefits of outsourcing finance and accounting is increased business efficiency and a reliable, consistent monthly financial commitment. Many third-party accounting options and platforms offer package deals to help meet and exceed your bookkeeping needs, and it’s up to you to determine which price point and service options are best for business. Streamlining everyday operations by trusting your bookkeeping intricacies to a professional firm, or better yet an automated accounting platform, frees up valuable in-house resources you can invest elsewhere.
On the flip side dedicating time and money to in-house accounting can be impractical and inefficient depending on the size of your business and the natural fluctuation within the industry. In-house bookkeeping might be cost effective when business is booming and your accounting department is always busy, but justifying the full-time expense is harder when things slow down during the year and bookkeeping tasks begin to thin out. It’s wise to understand and plan for your company’s accounting needs both now and in the future. Is the “full-package” investment for in-house finance management necessary, or is it smarter to outsource essential bookkeeping responsibilities?
Both efficient small business bookkeeping and intricate, accurate big business accounting rely on the expertise and experience of qualified professionals, whether those professionals are in-house or outsourced. That said, entrepreneurs and small businesses that outsource their accounting often find that they weren’t doing nearly as well on their own as they thought.
In order to establish and maintain a well-run company, your goal should be to simplify and standardize finance and accounting processes wherever possible. But remember, you get what you pay for. Taking shortcuts, investing in untested and ill-advised in-house solutions, or paying for inexperienced third-party accounting services can cause more stress and financial loss than you’re willing to risk as your business grows. Do your research, find a reliable partner at a reasonable price with whom you can trust your outsourced bookkeeping, and sleep easier knowing your numbers are in good hands.
SaaS companies face a unique set of challenges when compared to the average business. Unlike business models that allow accountants to recognize revenue as soon as a sale is made, SaaS arrangements typically involve recognizing revenue over contracted time periods. These determinations expose SaaS companies to numerous clerical and compliance risks, although as we’ll discuss, these risks can be eliminated through outsourced accounting services.
The primary benefit of outsourced accounting for SaaS companies is in revenue recognition compliance. As we touched on above, revenue recognition involves conditions and timetables for when an organization can record (or “recognize”) its revenue. It’s a simple enough concept on the surface, but as anyone in a SaaS enterprise can attest, it can be one of the most challenging aspects of SaaS accounting.
Revenue recognition rules vary depending on what services are being offered, the subscription terms of each contract, individual mandates in Service Level Agreements (SLAs), and more. To further complicate things, the Financial Accounting Standards Board (FASB) frequently updates its revenue recognition policies that require companies to produce more accurate and honest financial reports.
To accommodate these challenges, outsourced SaaS accounting begins with a thorough review of each company’s business model and the current revenue recognition standards. This is an essential first step towards actuarial health, even for business owners who believe they don’t need it.
According to research by the accounting experts at Bloomberg BNA, in 2013, U.S businesses received nearly $7 billion in IRS civil penalties due to inaccurate revenue recognition reporting. Outsourced bookkeeping services can guarantee that your business isn’t among these groups in future reports!
To further illustrate these benefits, let’s examine one of the most important financial metrics for SaaS companies: Monthly recurring revenue (MRR).
MRR involves how much revenue a company takes in from month-to-month based on the total value of the company’s active contracts. It’s a basic SaaS metric that all companies monitor, but the catch is that there are multiple ways to interpret the information.
MRR can be calculated per individual customer, by subscription type, by account, and more. Businesses also have to account for the details of each MRR determination, including how much of the income is new, how much revenue comes from expansion services, and how much revenue is lost from churn. Each of these determinations offers a different perspective on financial performance.
And while SaaS companies with in-house accounting teams are certainly capable of running these numbers, it takes a trained eye to analyze the data and factor each metric into the company’s overall performance. This is where outsourced accountants come in. Third-party bookkeepers won’t just run the metrics; they’ll apply the data to your organization and use the data as a foundation for strategy. This type of financial guidance is helpful for any organization, but is absolutely crucial for SaaS companies with varied and complicated revenue streams.
But beyond the metrics, outsourced accounting is the perfect way for SaaS companies to mitigate their reporting risk and guarantee that their books accurately represent the company’s financial profile. To accomplish this, MSPs analyze every aspect of the company’s business model to answer several key questions:
All of these questions influence how a SaaS company records its profits and thus, how the company is perceived by the public as a whole. This is a significant factor for companies that may eventually seek outside investment or their own IPO, as potential shareholders will need to be sure their investment has a spotless history of record-keeping before signing on.
But even SaaS companies without these long-term goals need to take agency over their accounts. As noted above, revenue recognition errors cost companies millions each year, and the increased complexity of SaaS revenue recognition puts SaaS companies in even greater danger.
To mitigate this risk and ensure efficient, accurate bookkeeping, business owners should consider whether they’re capable of handling their books on their own—or if a team of outsourced experts might be a better fit.
Software as a service companies that provide outsourced accounting and bookkeeping solutions instill trust in customers with both the up-front marketing pitch and the after-the-action analytics and reporting. The promise of efficient finance management by experienced professionals draws you in, but it’s the precision and presentation of the bookkeeping data that makes you stay with an outsourced accounting provider.
Whether you’re looking for information related to categorizing expenses, paying bills, invoicing customers, accruing revenue and expenses, reconciling accounts, or entering data into your own accounting software, the right automated bookkeeping software or platform can drastically influence on-the-job efficiency and out-of-office finance management. It’s the devil in the details that tells you just how well your business is doing in real-time and where you can focus to make effective improvements. That’s why it’s important to be able to trust your bookkeeping reporting and analytics, especially if you’ve chosen to outsource or automate.
At minimum, accounting analytics data and outsourced bookkeeping software should:
Reliable accounting software and services, either provided by or managed by an outsourced third-party, should offer a multi-faceted analytics dashboard through which you can customize real-time reporting and filter for desired data points or trackable benchmarks. Make sure you know what kind of detailed reporting will be available before you trust your numbers to an outsourced provider.
Many finance outsourcing businesses will pre-determine reporting criteria and areas of interest as part of their package offering, but it’s also important to establish your own techniques for financial statement analysis. Being able to interpret the reports presented to you is well and good, but having the foresight to learn how to set goals and track progress is necessary for continued success.
Here are three financial statement analysis techniques worth learning more about in order to better optimize important reporting and analytics information.
One of the simplest methods used to analyze financial statements, but also one of the most revealing if done thoroughly, trend analysis compiles data on a horizontal axis to compare and measure success over time. How do the numbers add up today compared to yesterday, last week, last quarter, or last year? Pay attention to spikes and dips and analyze how and why different data points influence revenue over a set period of time. Complete the circle by creating future goals informed by expected trends, and use the available data to visualize growth in real-time.
Comparing your company’s financial health to businesses within the industry is a financial statement analysis technique called benchmarking. Assessing your financial health as it compares to other companies can help you determine if you’re on track with expected industry growth and where you can improve to catch up. Important data points to consider are what you’re measuring, how the units will be classified, what information should and shouldn’t be included, and how comparison calculations will be made.
Measuring financial performance in one area of your business against another (income statements against balance sheets, for example) provides insight into how efficiently your assets are utilized. Ratio analysis is a slightly more complex financial statement analysis technique, but mastering its intricacies can prove invaluable when presented with outsourced bookkeeping reports and intricate analytical data. There are plenty of ratios worth investigating—growth rate, liquidity, sales revenue, etc.—and it’s up to you and your outsourced accounting provider to determine which figures are most important.
A need to prioritize big-picture business strategies outweighs spending finite in-house resources on high-volume, low-value-added tasks as your company continues to grow and diversify. Given the scope of technological influence on the financial services industry at any given time, it’s easy to understand why the evolution of crucial-yet-time-consuming finance management tasks is automation. Fortunately, innovators within the outsourced accounting industry are finding ways to automate these types of tasks in order to address common outsourced bookkeeping challenges like comprehensive real-time reporting and analytics.
Outsourced bookkeeping and accounting probably sounds like the goose that laid the golden egg. Less in-house stress and overhead resource drain, improved efficiency, and accurate reporting provided by experienced professionals. Win-win, right?
While it’s true that outsourcing your accounting and financial tasks to a responsible third-party can considerably influence the way you do business, there are challenges companies face when first setting sail on outsourced waters. Here are five common outsourcing challenges and how to overcome them.
The most beneficial outsourced partner, platform, or service is the one that meets and exceeds your needs on a regular basis. That means accuracy, dependability, and an ongoing commitment to mutual success. Unfortunately, you can’t tell an outsourced bookkeeper is going to be the perfect fit simply by looking at the label on the box. Finding the right outsourcing partner takes time.
Solution: Do your research. Too many businesses jump into outsourced relationships after a quick online search or because the price sounded like a steal at the time. You can’t understand what an outsourced accounting service can offer your company without conducting thorough research and speaking to representatives about your subjective needs.
Trusting your bookkeeping to an outside source comes pre-packaged with an expectation of complete data security, and rightly so. Company accounting can be the most closely guarded and reluctantly shared information, so trust between business and outsourced accounting service is essential.
Solution: Ask the important questions. What kind of physical (on-site) and digital (online) security is in place? How about encryption methods for login portals? File storage and cleanup once they’re done with your data? And lastly, what protocol and policies are in place in the event of a data breach?
While outsourced accounting takes the majority of bookkeeping busy work out-of-house, training and supervision still plays an important role in facilitating a healthy working relationship. It may take time to acquaint a new outsourced partner with the way you do business as well as the expectations you have in regard to accounting and reporting. Additionally, it’s hard to let go of your books without wanting to always peek over the shoulder of your accountant.
Solution: Trust the experts, and don’t micromanage. Outsourced accounting servicers worked their way to the top of the competition ladder by being the best at what they do and knowing how best to adapt their offerings to your expectations. Tamp down the urge to micromanage, and instead get acquainted with the software, dashboards, and representatives that will help shape your accounting landscape.
In “The Cost of Poor Communication” for The Holmes Report in 2011, David Grossman laid bare a few shocking results that stemmed from poor communication in the workplace. Four hundred companies with more than 100,000 employees were surveyed. The average cost per year due to miscommunication (“including actions or errors of omission by employees who have misunderstood or were misinformed about company policies, business processes, job function or a combination of the three”) was $62 million, or $37 billion in total for the companies surveyed. It’s safe to say miscommunication has a substantial dollar value attached to it these days.
Solution: Schedule dedicated, focused time for requesting and reviewing bookkeeping information and provide specific, detailed feedback. Your time is your money, so spend it wisely. Keep the line of communication open and goal-oriented.
One perceived benefit of hiring an in-house accountant is always having a bookkeeper at your beck and call so that any numbers problem or opportunity can be explained and addressed immediately. Outsourced accounting services, on the other hand, often offer package deals that bundle together different services available and the attached price points. Because of this, businesses are quick to assume outsourcing accounting means losing options.
Solution: Remember, communication is crucial. Be upfront about your needs and concerns. You’ll be surprised how willing and open to customized accounting plans, digital platforms, and even automated bookkeeping options most outsourced providers will be when they know how best they can help out.
Of course, all the benefits of outsourced bookkeeping are locked behind one decision: The MSP you choose. Every outsourced bookkeeper will rattle off the benefits of third-party accounting services, but how can you be sure they know their stuff? And what type of working relationship will you have when you partner with them? Let’s review some of the key considerations that business owners should keep in mind before choosing an outsourced bookkeeper.
Experience is one of the most important factors to check for before making your decision. There’s no standardized accreditation for outsourced bookkeeping services; just about anyone with a calculator can offer the service. Because of this, you need to make sure your outsourced team is prepared to handle the tasks your business will throw at them:
Keep each of these questions in mind as you review candidates. Your goal is to find a provider whose experience and cost matches the needs and budget of your business.
If there’s one aspect just as important as experience, it’s reliability. Can the outsourced team provide consistent, reliable reports as they’re needed? Do they communicate efficiently? Or does the way they operate give you pause?
Reliability boils down to trust. You should feel comfortable handing off your books to your MSP. Of course, this can be tricky to learn ahead of time; if possible, research previous clients on the provider’s social media page and learn about the MSP’s history of service. You’ll learn a lot about what to expect in your upcoming partnership.
Given that the MSP will be handling your sensitive financial data, security is a must. Don’t take their word for it, either—every MSP out there claims to maintain the highest standards of security. If you really want to understand the risks, you need to get the details.
A reputable MSP should be happy to share these details with you. If your MSP isn’t open about security, look elsewhere.
Depending on the size and needs of your organization, the MSP’s software and available tools can be an important factor.
Is the provider familiar with common accounting software platforms, such as QuickBooks Online? Do they have standardized ways for tracking and reporting billable time? Can they leverage their technology to identify opportunities for cost-saving improvements to your current bookkeeping system, such as account processing automation? While most small businesses won’t need extensive functionality, make sure your MSP has tools and training to do the job.
Naturally, cost is another factor to consider, but there’s a reason it’s so low on our list. Despite what bottom-line focused executives think, cost is one of the less important factors in your decision. This is because there is no correlation between the cost of an MSP’s service and the actual quality of the service. A high price tag offers no guarantee of a sustainable or effective working relationship. What’s more important to focus on is the other factors listed above—performing your own assessments of the provider’s performance will give you a much better idea of outsourcing success than the cost alone.
So, let’s recap.
Outsourced services are disrupting the traditional business world. And for certain tasks like accounting and bookkeeping, outsourcing is by far the best way to get things done. Letting a quality MSP handle your books gives you plenty of benefits:
These benefits are of particular value for SaaS organizations that bear the burden of complex compliance and revenue recognition rules. With a qualified accounting provider handling each task, creating customized reports, and updating you every step of the way, outsourcing offers a level of efficiency that in-house teams can’t match.
But of course, the MSP you choose is the gatekeeper to all these benefits. Take your time and do your research before committing to the process. Find information on MSPs as detailed above, create a shortlist of candidates, and contact each company for more details on what they can provide for your company.
And above all, remember why you’re doing this in the first place! You executives have more important things to do than worry about accounting, and the logistic costs of setting up an in-house team aren’t tenable for every business. If you’re tired of choosing between your company’s bottom line and keeping your sanity, you might want to give outsourcing a shot. Whether you’re a struggling entrepreneur, a small business owner interested in growth, or a SaaS company with complicated financials, outsourced bookkeeping just makes sense.
Interested in trying the outsourced approach?