Managing cash flow through different financial tools and well-balanced budget programs is crucial to the success of every business. Recording transactions and keeping an accurate ledger can mean the difference between having a profitable fiscal year or a year of waste and unnecessary tax audits.
The abundance of cloud-based software that ultimately propelled the usage of cloud-hosted bookkeeping has made basic accounting and bookkeeping accessible to even the smallest businesses. Online bookkeeping services such as Quickbooks Online allow for many ways to high-tech accounting such as organizing all assets in one place, and also through various consoles such as computer, mobile phone or tablet. Technology made sure that there are many ways to accurately, safely and efficiently track every item that goes in and out of a business enterprise.
Nevertheless, outsourcing some of these important tasks to a professional bookkeeper helps businesses maintain accuracy and compliance standards. However, hiring or investing on a professional bookkeeper always spend more time innovating the core business model, as well as the whole system itself.
If you’re a starting businessman, or a rising medium-scale proprietor looking for a bookkeeping service for the first time, you have to understand the basics of hiring a third party for your bookkeeping. You have to first understand the definition of the types of bookkeeping services available, the criteria for comparing bookkeepers, and many more about finding the best bookkeeping service vendor.
The Fine Line Between Accounting and Bookkeeping
Before moving on to the specifics of bookkeeping services, it’s important to note the clear distinction between bookkeeping and accounting services. A good number of businessmen has made the rookie mistake of not defining the difference between the two.
Accounting serves in a consultative capacity, using financial data as a baseline. According to TechnologyAdvice.com, accounting typically involves advanced reporting and business analysis, in addition to the rigors of corporate tax management. “Many accountants also provide advisory services for debt and finance, mergers and acquisitions, and trust planning,” they added.
In other words, an accountant uses bookkeeping data to support higher-level accounting requirements such as preparing sales tax, reducing product costs, and setting financial benchmarks.
On the other hand, bookkeeping is similar, yet different. A bookkeeper is responsible for recording the data that accountants use to generate reports and make decisions. In that sense, the two disciplines have a symbiotic relationship. It’s often defined in a way that bookkeeping is designed to generate data about the activities of an organization, whereas accounting designed to turn data into understandable and identifiable information.
The Market Overview of Bookkeeping Services
The standard practice for businesses of every size is to hire an outside accountant. The thing about outsourced bookkeeping is that it tends to be most prevalent among small and medium-sized businesses (SMBs), because SMBs have the same data entry and budgeting needs, but with less employees and/or resources to support it financially.
When it comes to financial reporting, being stretched far too thin can mean costly errors and a budget that never lines up with actuals. This is again one of the beginner mistakes that businessmen make (or simply take for granted), along with not keeping their records up-to-date, and not understanding their tax obligations. Also, failing to reconcile ledgers with bank statements, not recording reimbursable expenses, and running an inaccurate payroll are simple mistakes that SMB proprietors usually commit.
Arguably, these sort of mistakes can slow down a business. Then again, it could easily be solved by outsourcing the bookkeeping requirements and putting their accounts in the hands of a trained professional. Business owners can focus more of their attention on bottom-line strategies like customer retention, product development, supply chain optimization, and expanding to new markets, at the cost of a little bit more capital.
Analyzing Bookkeeping Services
You may already have a specific bookkeeper or bookkeeping firm in mind, based on a referral or someone you’ve worked with in the past. Then again, the best way is to invest a little bit more time and effort to make the perfect business match.
The best way to invest it is through a personal interview with the bookkeeper. It’s important to compare and interview a few different candidates before you make the final decision. Here are some criteria to consider when screening your bookkeeping candidates.
Define the Scope of the Owner-Bookkeeper Relationship
First, define how involved you need or want your bookkeeper to be, and what the relationship will look like.
Many businesses start by hiring a contractor to come in a few hours a week, or even as infrequent as once a month. Some businesses offer a bookkeeping services price list for standard arrangements, too. Also, it is best if you ask for it ahead of time so you can perform a cost and benefit analysis for hiring a bookkeeper.
Ask about their Accounting Software Specialization
Whoever is not keeping up with the race of accounting software or cloud-computing provision is not worthy of being hired at all; the efficiency and flexibility of the technology on bookkeeping should be used as much as possible.
Bookkeepers now have a particular accounting software system they specialize in. Some are even certified with popular vendors like QuickBooks and Sage. This is very important to consider, especially when you’re already using a particular system to manage finances. Ideally, the bookkeeper you choose will know their way around the software and be able to get started right away.
Proven Track Record
In evaluating a bookkeeping candidate, always move past the resume and look for actual proof of success. Better yet, ask for some of their case studies from previous positions where the bookkeeping firm served a business similar to yours.
Furthermore, you can follow up for references, or ask other colleagues that have worked with the bookkeeper for their opinion. In this case, “success” might be defined as saving the business money through accurate record-keeping, increasing tax compliance, or streamlining financial reporting.
Some Examples of Bookkeeping Services
Although most bookkeepers share the same core competencies, they don’t all have the same experience or offer the same services. Here’s a breakdown of the four most common bookkepper categories:
Certified Bookkeeper: Aside from getting NACPB and AIPB certifications, bookkeepers may also get certifications for particular accounting software, certified to manage payroll, or certified in tax management. Generally, the more certifications a bookkeeper has, the more services and discretion they’ll be able to provide.
General Bookkeeper: A general bookkeeper offers basic services like data entry and account reconciliation. Think of it as a general physician in the field of medicine. As such, general bookkeepers tend to have lower rates and work lesser hours. They are usually uncertified, which meant that they have less on-the-job experience. A general bookkeeper can be a good choice if you have a limited personnel budget and do your own financial reporting and payroll.
Full-Charge Bookkeeper: A full-charge bookkeeper title denotes more advanced financial management and a closer relationship with company executives than that of a general bookkeeper. Full-charge bookkeepers usually manage payroll, fixed assets, invoices, and other financial statements, and some may even serve an accounting/advisory role. They could be certified bookkeepers, but usually full-charge bookkeepers have a one-size-fits-all approach to tend to most bookkeeping needs.
Virtual Bookkeeper: Virtual bookkeepers are the most uncommon of the four types. Virtual bookkeeping services are an attractive solution for smaller businesses and startups looking to outsource their financial records, but not ready to work with (or pay for) a dedicated contractor. Bookkeeping virtual assistants accept financial documents electronically, update your ledgers, accounts, payroll, etc., and send back copies of reports for your records. Since they are not as stable as the others, the risks you have when hiring these are indirectly proportional to the price you are paying them: Higher risk with lower salary and vice versa. Virtual services are convenient and cost-effective, but they can add to the challenge of maintaining a clear audit trail.