Bookkeeping is a comprehensive and extensive recording and classification of a business’s financial transactions. It is done on a regular basis, to ensure high accuracy and up-to-date data. Keeping track of, and recording all financial transactions is what constitutes bookkeeping. Keeping track of expenses, revenues, loans, asset management and creating a comprehensive financial report are the hallmarks of proper bookkeeping.
Inaccurate bookkeeping is the bane of any business looking to record significant growth. It is a misrepresentation of the company’s overall condition, a misrepresentation that is then relied on when making critical financial decisions. Poor bookkeeping also leaves you liable to sanctions and fines from regulatory bodies. Failing to properly record your business’s financial transactions is a breach of federal law, and a precursor to fraud and mismanagement of funds.
Businesses have two options when it comes to their bookkeeping needs, in-house bookkeeping or outsourcing bookkeeping needs. In-house bookkeeping entails either employing a bookkeeper or creating a department, dedicated to recording the organization’s financial transactions. Small business owners, at times, act as their business’s bookkeeper- recording on a daily basis, details of every transaction and financial activity of their enterprise.
Outsourcing bookkeeping means employing the services of a specialized bookkeeper, with no connections to the business, to keep track of the organization’s financial transactions. Bookkeeping companies are employed to take charge of keeping records of a business’s, accounts payable, accounts receivable, payroll and any other financial transaction the business is involved in.
Due to the many benefits of outsourcing bookkeeping, a significant majority of medium to large scale businesses have retained the service of an outsourced bookkeeper. Small businesses should also take advantage of outsourcing bookkeeping as it is timely, cost-effective investment in the long run.
Pros of Outsourced Bookkeeping
The following are just some of the benefits of outsourced bookkeeping.
1. Financial Savings
Although outsourcing your business’s bookkeeping needs to an external company may seem like a costly endeavor, it is a cost-effective investment in the long run. The following are some of the reasons why outsourced bookkeeping will help you cut costs-
Outscored bookkeepers are significantly less expensive than hiring a full-time employee or establishing a bookkeeping department for the same purpose. The cost of scouting, interviewing and hiring a new employee, along with the logistics involved with integrating a new department into your business is higher than using an outsourced bookkeeper.
You save money on infrastructure and employee benefits. Outsourced bookkeeping eliminates the need for incurring expenses like new furniture, computers and creating a new workspace for an internal bookkeeper. You also save costs that would have otherwise gone towards employee wages, insurance payments, bonuses, stipends and expenses incurred on vacations and official duty. The extent of your savings greatly supersedes the price of outsourcing your bookkeeping.
Outsourced bookkeepers can be hired on a flexible, ‘as needed’ basis. Perhaps you need them to help you streamline your annual reports or create a consolidated financial analysis. You can hire and dispense outsourced bookkeeping services as you need, an act that would be a violation of labor laws with a hired employee.
The funds you would have otherwise spent on an internal bookkeeper can then be channeled towards expanding your business, investing in core business ventures. Outsourcing pays both short-term and long-term financial dividends.
2. Time Efficient
Another benefit of outsourced bookkeeping is the fact that it frees up time spent worrying about finances. Business owners or managers can focus on growing their organizations and brands rather than spending valuable hours, weekly, poring over financial statements, tracking and recording accounts payable, accounts receivable, payroll and other time consuming financial details.
Hiring a specialized firm or company to manage all aspects of bookkeeping will help you channel those hours spent on finances on the more critical aspects of your business. You are able to channel more time towards creative and innovative thinking, boosting your business’s portfolio and resulting in a more profitable enterprise.
Research has shown that business owners spend equivalents of weeks, annually, trying to keep the financial books in order. The time that could have been spent networking and building viable business connections is spent on the nonproductive task of bookkeeping. Outsourced bookkeeping boosts your company’s productivity by a significant amount, freeing you up to connect and position your business in a productive manner.
3. Expertise and High-Quality Service
Hiring an outsourced bookkeeper for your business allows you to utilize the services of financial experts and specialists. Rather than leave the task of preparing your business’s financial reports to an inexperienced employee, hire an external bookkeeping company with invaluable experience dealing with the intricacies of financial reporting and analysis.
Outsourced bookkeeping services are usually manned with highly trained staff, experienced and knowledgeable in dealing with financial transactions of small to large-scale enterprises. Using an outsourced bookkeeper with certifications of high quality, ensure you of a high standard of service, as they strive to maintain their impeccable reputation. Certifications are usually awarded after a comprehensive and thorough check is conducted on the efficiency and quality of services rendered.
An outsourced bookkeeper greatly reduces the risks of inaccurate bookkeeping, which results in a string of catastrophic business decisions and outcomes. Bookkeeping and accounting firms engage in a number of protocols to ensure of figures recorded in your financial reports.
4. Security and Privacy of Data
While worrying about exposing your business’s sensitive financial information to an unknown 3rd party is a legitimate concern, hiring a reputable external bookkeeper eliminates fears of leaks or data breaches.
Competent bookkeeping companies employ the most stringent privacy and security protocols to secure the data and sensitive financial information of their clients. They carry out routine checks to ensure their database is highly secure and impenetrable.
Most bookkeeping services operate using a cloud-based database, eliminating the risks of leakage a paper trail has. Their cloud networks also operate under strict guidelines and security protocols to prevent malware from stealing critical data.
Reputable bookkeeping and accounting firms conduct extensive and comprehensive background checks on their employees to reduce the chances of data theft or corporate espionage. Only verified individuals are cleared to work in the critical sections of a reputable bookkeeping firm to prevent privacy breaches.
The focus of a competent business owner is employing a reputable, secure bookkeeping service. One that employs state-of-the-art technological security installations to provide top-notch security for client’s confidential information.
5. Professional Insights and Consultation
Outsourced bookkeepers are capable of providing a professional and detailed consultation service for businesses. With their experience with financial transactions and analysis, outsourced bookkeepers are able to present a comprehensive report on the financial health or otherwise of your business. The skilled bookkeepers are able to analyze and predict cash flow, allowing you make adjustments as needed.
Bookkeeping services can also identify business failings and mismanagement that may be missed by untrained employees. They are capable of identifying abnormal financial spending and trends, allowing you investigate into the source of such activity.
Utilizing the services of an expert also allows your company make informed financial investments, based on the comprehensive reports prepared by your external bookkeepers. Outsourced bookkeepers provide an unbiased analysis of your business’s financial condition, highlighting areas that need adjustments and leading to slower financial growth.
6. Reduces Fraud and Mismanagement
The majority of all businesses, small, medium or large scale, will experience fraud by employees at some point in their existence. Outsourcing a company’s bookkeeping needs to an external service helps reduce the incidence of fraud. There is no conflict of interest, which may occur if a fraudulent employee is also in charge of bookkeeping.
Having a single employee act as a business’s bookkeeper leaves the company susceptible to unhindered fraudulent acts. There is a greater risk of doctoring and manipulating financial statements, expense reports and invoices in order to cover up embezzlement and mismanagement of company’s funds. An outsourced bookkeeper removes the risk of internal cover-ups of fraud and employee mismanagement.
Abnormal trends and figures that may indicate mismanagement and fraudulent practices may be missed by an untrained employee acting as a bookkeeper. Expert bookkeeping services are able to flag such abnormalities and advice an internal audit of such discrepancies. Their experience with managing multiple accounts has allowed them to develop a system for identifying and flagging frauds almost instantaneously.
Preventing fraud and financial mismanagement helps your business retain its resources that would have otherwise been squandered and mismanaged. Companies are also able to identify departments or employees that engage in such dishonest practices.
7. Regulatory Compliance
Utilizing an external bookkeeper allows your business effective meet up with all regulatory requirements and guidelines that pertain to finances. Commissioning an outsourced bookkeeper to keep track of financial transactions will prevent discrepancies in bookkeeping records that necessitate a government audit.
Businesses that use untrained bookkeepers are usually liable to incur the wrath of the IRS or equivalent regulatory body in their countries. Their inexperience allows certain oversights like ignoring taxation requirements, improper payroll and many more critical errors that an experienced bookkeeper would not make.
Poor bookkeeping results in a breach of your tax obligations, this is a result improper recording of earnings and payroll. A breach of your business’s tax obligations leads to audits from the tax agency, resulting in hours lost dealing with an audit and even worse, a huge fine for tax evasion. Outsourcing your bookkeeping needs puts your finances in the hands of experienced personnel, capable of complying with the various regulations in place.
8. Ease of Operation
Outsourced bookkeepers will relieve you of strenuous duties relating to your business’s finances. The outsourced bookkeeper’s responsibilities include the following:
· Accounts receivable
· Accounts payable
· Filling ledgers and company journals
· Bank reconciliations
· Creating up-to-date financial reports
· Tracking and predicting cash flow
· Issuing company invoices
· Settling company’s expenses
· Payroll administration
· Storing all financial documents, no matter how inconsequential
· Preparing tax returns
These tasks would normally occupy the mind of a business owner but with outsourced bookkeeping, these tasks become the duty of a professional, expert service.
9. Customer Service
In-house bookkeepers can at times become lax due to the guarantee of job security, with outsourced bookkeepers, you can expect topnotch service all through the period of engagement. Outsourced bookkeeping services are continuously providing excellent feedback and updates in order to retain your services as a client. This commitment is sometimes nonexistent with internally employed bookkeepers.
10. Consistent, Perpetual Service
Accidents and other unforeseen circumstances can incapacitate your in-house bookkeeper, rendering your company’s financial transactions unrecorded during the period of incapacitation. With an outsourced bookkeeper, there is no vacuum in the bookkeeping process, there are contingency plans and systems in place, in case of emergencies.
Cons of Outsourcing Bookkeeping
Outsourcing bookkeeping can have a lot of benefits to your business but there are certain considerations and potential disadvantages it carries.
1. Distance and Time Constraints
The distance of your outsourced bookkeeping service can lead to a lot of logistical restraints. Business owners may prefer to have their financial experts in close proximity and available on site for ease of operation. The distance and time constraints can lead to some measure of operational efficiency getting lost when maneuvering these logistical problems.
Distance can lead to a lot of missed appointments and deadlines. The ability to have near instantaneous correspondence with an in-house bookkeeper can make the prospect of dealing with an off-site bookkeeper.
Communication may also be greatly hindered due to differences in time zones. Outsourced bookkeeping to a company overseas or in a significantly different time zone can make effective communication a hassle. At times, timely correspondence can be required to perform certain critical business operations.
Business managers must strive to outsource bookkeeping to companies that have a clearly established channel of communication and timely correspondence.
2. Loss of Operational Control
A business manager who seeks to manage and oversee all aspects of their business operation may not be disposed to outsourcing their bookkeeping needs. The need to control all operational processes is subverted with the hiring of an external bookkeeper. The bookkeeping company has its established systems which may run contrary to your requirements.
This can be remedied with a request for regular briefings and correspondence with regards to their services. This grants you a measure of relief as you are regularly given a breakdown of the scope of their operations.
Outsourced bookkeeping can result in certain communication challenges. The mere fact that the bookkeepers are off-site makes communicating your intentions and instructions more complicated, compared to dealing with an in-house bookkeeper.
Outsourcing bookkeeping to a foreign company can cause a rift in communication due to the language barrier. Important information has a risk of getting lost in translation due to a difference in culture and language. This leads to potentially catastrophic financial outcomes if intentions are not communicated accurately.
Dealing with outsourced bookkeepers may be restricted by poor communication channels. Emails may get stuck in spam folders, or other communication shortcomings. In-house bookkeepers can be instructed using memos or even direct communication of intentions or instructions.
Ensure you employ a competent bookkeeping service, establish an open channel of communication and correspondence. Communication between your company and the outsourced bookkeeping service is vital to your company’s financial prospects. Accurate communication must be ensured, employ a reputable bookkeeping company.
4. Confidential and Data Breach
Outsourcing your company’s bookkeeping needs entails divulging sensitive, confidential details of your business to an external party. Incompetent bookkeeping services are liable to breaches and leakage of sensitive data to mischievous parties. Ensure proper checks before outsourcing your business to an external company.
Comprehensive and extensive background research into your potential outsourced bookkeepers, to the extent of their security and privacy protocols. You must ensure that they have installed adequate security protocols at their physical storage facilities or on their online database. You should inquire from the company on the extent of their contingency plans in case of breaches or compromised data.
Outsource bookkeeping to only companies that carry out extensive background checks on their employees. This gives you an assurance on the safety of your data and eases your privacy concerns.
You should also ensure that you enter into a confidentiality agreement, a binding agreement that leaves the bookkeeper liable in case of data breaches. This confidentiality agreement is legally enforceable and ensures your outsourced bookkeeper keeps your financial information secure and confidential.
5. Unexpected Costs
The cost of outsourcing is usually lower than that of employing in-house bookkeepers, however, you must consider the hidden costs and miscellaneous expenses. Business owners fail to consider the full cost of outsourcing. Outsourcing over state or national boundaries may incur additional costs, which may not have been considered during initial considerations.
6. Lack of Priority
Bookkeepers that are employed to cater to a business’s financial needs are usually under the employ of different companies. These outsourcing companies handle multiple clients and accounts at a time, your business has no priority to such companies. It may be difficult to effectively communicate your desires, or even get quick responses due to their workload. Some bookkeepers simply consider each new client as a file or folder in a cabinet. Ensure you outsource bookkeeping to a company that prioritizes customer service and experience.
7. Conflict of Interest
Your bookkeepers are not mandated to disclose whether or not they also been outsourced by a competing business. This can lead to a dangerous conflict f interest, where your financial information could fall into the hands of your competition. The risks of this confidentiality breach discourage businesses from outsourcing their operational processes to an external party.
The fear that a company’s sensitive financial information is leaked to your competition without your knowledge is enough to put most business owners off outsourcing their vital processes. There is a need to employ only reputable services that value confidentiality and privacy.
Major risk businesses take by outsourcing their bookkeeping process is the risk of uncertainty surrounding the company. The outsourced bookkeeper may unexpectedly shut down services for a number of reasons, leaving businesses in a precarious financial situation. The company may declare bankruptcy, get liquidated, or suffer from a natural disaster. All of these uncertainties, especially with a bookkeeper in another state or country can lead to doubts before hiring.
Business owners and managers should ensure bookkeeping is outsourced to a company with viable contingency plans in case of eventualities. There must be data recovery protocols and backups of important documents in preparation for accidents and other mishaps.
The benefits of outsourcing bookkeeping far outweigh the drawbacks that may be encountered by such an endeavor. It is a cost-effective and time-saving method for streamlining your company’s operations and making your financial transactions efficiently tracked and monitored. Outsourcing bookkeeping is recommended for businesses seeking to expand their brands but has no expertise in tracking the financial aspects.
Business Cents is the premier bookkeeping and accounting outsourcing service in Spokane Wa. Bookkeeping, payroll administration, accounting, software training, are among the services offered by Washington’s best bookkeeping company. The team is comprised of experienced and technically skilled financial analysts, committed to helping your business maximize profits.
Companies looking to outsource bookkeeping in Washington should contact Business Cents for professional, confidential and prioritized service. My Business Cents is the service of choice for Spokane Wa bookkeeping needs, channeling years of expertise towards maximizing your company’s financial portfolio. We offer full 100% confidentiality of all financial data we encounter during our services. Save time costs with our streamlined and time conscious services, geared towards making your business operation efficient and optimized to make significant profits.
We are certified bookkeepers with years of experience keeping records of the financial transactions of multiple high-level organizations within and outside Washington. Outsourcing bookkeeping can be the first step towards expanding your company’s reach and brand, so be sure to employ only the best outsourcing service available.