This guest blog was written by Michael Ly, CEO and Founder of Reconciled It. Both NPI and Reconciled It share the view that outsourcing business functions to experts yields both financial and operational benefits.
No matter what type of business you have, efficiently and accurately managing your finances is critical to your success. In fact, over a quarter of small businesses that fail do so because of a cash flow problem.
And getting help with bookkeeping is one of the simplest ways to make sure you know what’s happening in your bank account.
As a small business owner myself and the founder of an online bookkeeping firm, I work with entrepreneurs and business owners every day to make sure their finances are moving in the direction of their goals.
I also help them understand when and how to outsource their bookkeeping. Sure, I want more clients, but I also understand that not everyone is ready to (or wants to) hire someone else to do their bookkeeping. I’ve put together a comprehensive list of the factors to consider if you’re making this decision.
When is it time to outsource?
For some businesses, the realization that it’s time to get bookkeeping help doesn’t come until they’ve made a costly mistake and are staring down a bill they don’t have the cash flow to pay.
Of course, everyone would prefer to identify the need for bookkeeping support before they’re in a dire situation. So, what are you looking for?
A few things can signal that it’s time to seek help:
- You’re ready to free up valuable time
How many hours a month do you spend managing your books? Could you be spending that time making money for your business instead?
One way to answer that question is to consider your billable hourly rate. For instance, if you bill $100 per hour, and you’re spending four hours a month doing bookkeeping, could you pay someone $400 or less to do that job so that you can spend those 4 hours performing billable work for a client?
- You have big plans for the future
If you’re a one-person operation and you don’t ever plan to grow (and you enjoy doing your books), then outsourcing to a bookkeeper might not be necessary. But if you’re hoping to build a scalable business, creating a bookkeeping system that can scale as your business does will have you thanking yourself later. As you continue to grow, bookkeeping will be an increasingly large part of the business tasks. Muddling through until then will cost you in the long run.
- You simply hate doing your own books
Some business owners constantly put off their bookkeeping tasks because they hate doing it. The truth is there’s no prize for doing everything yourself. In fact, businesses that focus on their core mission and outsource other tasks are more efficient and achieve greater success.
How do you choose a bookkeeping solution?
So if you’ve decided that outsourcing is the right option for you, your next step is to decide what type of bookkeeping solution is best for your business. You have a few options, each with their own pros and cons.
- Hire a part-time contractor or employer into your office
Bringing someone into your team allows you to see them on a regular basis, and you may be able to have them perform other non-bookkeeping tasks. However, you’ll be responsible for training and managing them, and you’ll be limited by their particular skills and abilities.
- Hire a CPA firm
Reaching out to the firm that handles your tax returns and audits can provide confidence that your books will be correct. But this will probably be your most expensive option, they’ll be difficult to reach during tax season, and they’ll focus on doing the books in a way that creates the easiest tax return rather than aiming to fully understand the way your business finances interact with your goals.
- Hire a local bookkeeper
An individual bookkeeper is often fairly affordable, but you may be impacted by their schedule. For instance, when they get sick or go on vacation, they likely will not have someone available to handle any questions you have while they’re away. You’ll also want to check references to make sure you’re getting someone who can deliver quality work.
- Hire an online bookkeeper
Engaging an online bookkeeping firm is the best way to get a scalable bookkeeping process at an affordable price. You’ll work with a bookkeeper that understands your business and will focus on providing the type of financial information that’s meaningful for your business goals—not just for tax purposes. Online firms also often provide proof of relevant certifications and have enough staff to cover your account if your particular bookkeeper is unavailable.
How do you choose a bookkeeper?
Once you’ve identified that you need to outsource, you’ll want to make sure you’re hiring an operation that will provide excellent, accurate bookkeeping. Consider the following:
- What security measures do they have in place?
Handing over your financial information is a big step. Find out who will have access to your information and how the firm manages things like shared passwords and email communications. Do they use platforms that meet bank grade encryption? If they collect your data, where and how will it be housed?
- How long have they been in business?
You may be able to get a good price from a bookkeeper that’s just starting out, but a bookkeeper—or a firm—with a long history will have more experience to share and will be better equipped to handle any potential problems.
- What’s the quality of their staff?
Your books will only be as good as your bookkeeper. If you go with an online firm, find out how their bookkeepers are certified, what kind of experience they have, and whether they’re based in the United States.
- What kind of customer service do they provide?
Online firms often have redundancies in place that ensure you’ll always be able to reach a bookkeeper. However, some may pass you around from person to person, depending on who’s available at that moment. Make sure there will be a dedicated bookkeeper for your account so that whoever is handling your books has the opportunity to really understand your business.
Whatever bookkeeping solution you choose, you should walk away with two things: (1) confidence that your books are being handled accurately and (2) new time and energy to focus on your core business tasks.
Learn more about whether you’re ready to outsource your bookkeeping.
About Reconciled It
Reconciled It is an online bookkeeping and accounting firm based in Burlington, Vermont. As a recognized “Firm of the Future” by Intuit Quickbooks, Reconciled It serves companies throughout Vermont and the USA.