As a business owner, you know that the IRS likes financial reports to be tidy, accurate, and up to date. You also understand that preparing financial records for tax filing doesn't happen on its own, accounting software doesn't input financial data by itself, cash flow is always important to monitor, and that you should be using business bank accounts. However, running a small business is more interesting when it's possible to ignore all those pesky financial concerns and focus on the products or services you're passionate about. Nevertheless, your books still need a professional touch. Enter the world of bookkeeping services.
What Are Bookkeeping Services?
Let's start with what a bookkeeper does. A bookkeeper records the financial transactions of a business. They create and maintain financial statements, including the balance sheet, income statement, and cash flow statement, as well as accounts payable and accounts receivable. They may also have other duties, such as:
- Reconciling bank accounts and credit card accounts
- Making and sending invoices to customers
- Paying bills
- Data entry
- Preparing for audits, usually by assisting Chief Financial Officers (CFOs)
- Handling payroll services
- Waste and inventory management
Small business owners wanting to ensure compliance with their tax preparation will only need basic bookkeeping. But as businesses grow and operations become more complex, professional bookkeeping needs will size up accordingly. Simple compliance is no longer sufficient if a company moves from cash basis accounting to accrual basis accounting.
What Are My Bookkeeping Options?
Accurate bookkeeping is an essential part of running a business; that much is certain. There is a wide range of possible methods to ensure compliant business accounting and proper tax planning which we outline here:
Do It Yourself
If you're a small business owner who is the entirety of your small business, you probably don't need a bookkeeper or bookkeeping service.
You could purchase the lowest tier of Quickbooks Online to track revenue and document bank statements, as well as rely on a CPA for your tax prep come tax season if that's even necessary. Filling out a 1040 for personal income taxes is done by individuals every year with little to no help.
If your business is a small startup that's trying to minimize monthly expenses, but you have bigger aspirations, you may want the help of a part-time bookkeeper rather than a full-time in-house bookkeeper.
Of course, the cost per hour of a part-time bookkeeper depends on the market size. You may pay as little as $20 per hour in a small town but easily triple that in a large city.
Part-time bookkeepers are an excellent option if you take care of some of your own accounting services or employ a dedicated accountant. They can supplement at busy times, such as when you're tabulating year-end business taxes or if you have a few days set aside for monthly bookkeeping.
Hiring a professional, even for short periods, is preferable to handing the responsibility to existing staff with no bookkeeping training. Not only will the duties distract them from their regular job, but they are also more prone to errors.
If you want your tax returns to be above board in the eyes of the IRS, hire the professional. Because this is their specialty, they'll be able to make intuitive decisions that would require a day of research for untrained employees.
As businesses grow, they may find hiring a dedicated bookkeeper to be a necessary step. This approach is, of course, a more expensive option, with in-house bookkeeper salaries ranging from $35,000 in a low population, rural town to $70,000 and beyond in a place like New York City.
Day-to-day paperwork and documentation should be sufficiently high to merit the need for a dedicated bookkeeper. They'll create a chart of accounts and maintain it, handle timesheets and payroll, and process monthly financial statements.
The bookkeeper will also manage quarterly taxes and withholding, providing a level of tax services necessary to prevent (or assist in) an audit.
Not every business needs bookkeeping done on-premises. Many choose to outsource to an online bookkeeping service. This approach could be taken as a stopgap measure while a company seeks to hire a full-time bookkeeper or as a permanent solution.
The benefit of online or virtual bookkeeping services is that businesses can get custom pricing or add-on services depending on their requirements.
One benefit of online bookkeeping is that pricing is not location-dependent, unlike hiring a bookkeeper to work at your location. Outsourced bookkeeping monthly fees can range anywhere from about $500 to nearly $3,000. The cost is related to the complexity of your needs and the number of your transactions.
Advantages of Outsourced Bookkeeping
Full-service virtual bookkeeping has its advantages over in-house bookkeepers, even if it seems strange that they wouldn't be in the company's building.
No Onboarding: You, as the small business owner, don't have to handle onboarding a new employee.
Automatic Financial Document Importing: All your bank and credit card statements, invoices and receipts, payroll, and other financial information is automatically placed into your accounting software and sorted.
Bill and Income Tracking: Handling of accounts payable and accounts receivable is covered, as well as ensuring proper documentation of both.
Month and Year-End Financial Statements: Following and optimizing cash flow, balance sheet, and income statement is taken care of.
Increased Communication: Because you're relying on service with a team rather than an individual, you will have wider support and assistance outside of normal business hours.
Location and Time: Where you are in the world is no longer important. Your team can connect with your accounting software remotely and handle problems at any time.
Custom Pricing: If you don't need all of the services a provider offers, you can scale down to a more affordable package that just provides the basics.
What Impacts the Price of Outsourced Bookkeeping?
We briefly touched on some price factors, but let's dig into them a little deeper. The cost of outsourcing your bookkeeping to a virtual or online bookkeeping service is dependent upon:
- How much of the service is human, AI, or both
- Volume of transactions
- Financial report frequency
- Cash vs. accrual basis accounting
- Add-on services such as inventory management
- How many financial accounts you use
- Whether you need round-the-clock real-time support
Your outsourced bookkeeper may also provide the option of a mobile app to cover basic needs as well as allow document scanning and importing.
Which Type of Bookkeeping Does My Company Need?
This determination can be a tough decision, but the biggest factors are:
- Your budget
- How complicated your documentation needs to be
- If you have any pre-existing issues that need solving
- The robustness of your IT infrastructure
Budget is always a concern but is particularly crucial for a startup or small business with limited capital. Keep in mind that if you're concerned about the expense, the cost of an IRS audit or penalty could be far worse. You may need basic bookkeeping services to at least remain compliant.
If your transactions, documentation, and tax preparation are sufficiently complex, you will need higher levels of bookkeeping service. You want to avoid overwhelming your bookkeeping service or staff because that's a quick way to find your company's financial documents in disarray.
You may need a bookkeeper to sort out the financial statements and other documents that you haven't been recording properly or that were mismanaged by a previous bookkeeper. In this case, having a bookkeeper on the premises at least initially may be wise.
The Top Outsourced Bookkeeping Services
If you're going to outsource your bookkeeping, there are plenty of options with excellent reputations. This summary is not a comprehensive list, but any of the following is at least a solid starting point as you compare prices and services.
Merritt Bookkeeping is one of the most affordable Quickbooks professional bookkeepers. They issue 1099s, do automatic bank statement retrieval, and have fixed pricing at $190 per month.
They also provide their own user interface in case you or your team have difficulty navigating Quickbooks. Merritt prides itself on its high ratings on Google and Yelp, as well.
If you want to go right to the source, Quickbooks also offers bookkeeping services with Quickbooks Live. They pair you with a bookkeeper and offer plenty of human and software support. You can collaborate with your bookkeeper via video calls when needed, and of course, everything is done in Quickbooks, which is the industry standard.
If you're looking for flexibility with your services, this is one of the selling points of Bookkeeper 360. They handle cash basis or accrual basis accounting and work weekly, monthly, or on whatever timetable you set.
You can select add-on services like tax prep, payroll, and even HR. Their mobile app can run real-time metrics and provide cash management. If you're a Xero user instead of Quickbooks, Bookkeeper 360 is a great option.
If you need tax services and CFO services in addition to bookkeeping, Bookkeeper.com offers them at no cost with your bookkeeping package. They use Quickbooks and offer cash and accrual basis accounting. Should you need it, Bookkeeper.com also has financial planning and investment services.
If you're looking for a service that focuses on the tech side, Bench may be for you. Their apps work on most major devices and are compatible with both Apple and Android products. They also offer a free trial and scalable plans for large and small businesses.
Focusing on startups and small businesses, inDinero customizes its plans to fit just about any budget. Their CFO services can help you formulate a solid business strategy, as well. The mobile app allows users to review and approve transactions remotely. They'll provide an account manager to work with you directly, and they work through Quickbooks.
Another excellent choice for Xero users, Pilot provides Xero migration and full support. You can choose CFO, accounts receivable, and accounts payable services, and discounts are available. Pilot can accommodate businesses of just about any size, so if you're a larger company, they may work perfectly for you.
Will I Need Business Advisory Services, Too?
While your bookkeeper is concerned largely with the present, a business advisor (who could double as a bookkeeper) is concerned with the future. As your business grows more complex, so will your bookkeeping needs and revenue scaling.
You'll need expert forecasting, growth strategies, market assessment, coaching, and analysis. A business advisor can create a roadmap for you to follow as your small business startup finds its footing.
The business advisor can also identify problem areas with your bookkeeping. They may make changes to your documentation procedures and data storage and could restructure your IT infrastructure to improve the functionality of accounting software.
Do I Need a Quickbooks Pro Advisor?
If you're just starting a business and purchased Quickbooks, it can be confusing to navigate. Having a Quickbooks Pro Advisor can help make sense of this complicated program. If you end up using an outsourced bookkeeper but still need to go into Quickbooks yourself, it makes sense to have someone in person show you the ins and outs.
A Quickbooks Pro Advisor is usually a CPA who took the appropriate course and completed the test to become certified in using Quickbooks. Certifications exist for different versions of the software, including Quickbooks Enterprise, Quickbooks Accountant, etc.
Quickbook Pro Advisors can assist you in choosing the appropriate software settings for your company and setting up the documentation process.
If you want to learn Quickbooks, it's a good idea to hire a Quickbooks Pro Advisor. The software has a steep learning curve, and rather than feel your way through it, it's preferable to get an expert to guide you. Quickbooks is a powerful tool as long as you know how to use it.
Do I Need CFO Services?
A bookkeeper and a CFO are usually not the same person. The CFO oversees the bookkeeping staff, whether you hire an on-site CFO or outsource to a CFO service.
While the bookkeeper is responsible for the day-to-day documentation and preparation, the CFO is more like a director, creating the conditions whereby the bookkeeper can do their job effectively.
When you have a CFO on board, they'll ensure your accounting software is up to date and compatible with the rest of your system. They'll also make sure your accounting software is the right one for your business.
CFO duties somewhat overlap with business advisory services because they'll help you create a budget by developing financial projections and strategies. They create the financial package that reflects a true picture of the health of your company.
You may find you need CFO services, or you may find that they're unnecessary, but another benefit of the CFO is that you don't have to have as much hands-on oversight regarding your bookkeepers. If relieving yourself of that burden is appealing, you may want to consider CFO services.
Can't Bookkeeping Be Done Entirely By Software?
No. There still needs to be some human element. Even if you do your bookkeeping on your own with Xero or Quickbooks, it's a lot of work making sure every document is in its place and ready for tax prep or an audit. There's a reason that bookkeeping is done by dedicated bookkeepers, whether part-time, full-time, or online.
Even the most sophisticated accounting software is only a useful tool in the hands of a skilled professional. Your financial documents and statements still need to be prepared, and invoices and receipts scanned and stored. As automated as modern software is, you need a professional to set up any automated features
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