How to outsource bookkeeping for your small business

When you outsource bookkeeping for your small business, you get expert financial management at a fraction of the cost, making it a highly effective solution. This blog explains the types of bookkeeping services and guides business owners on how to outsource bookkeeping for their small businesses.

Congratulations on finally taking the leap and starting your small business!

As excited as you are, it’s easy to feel overwhelmed when you get stuck in the day-to-day tasks to keep your financials in order — tracking expenses, processing payrolls, managing cash flow, etc. — instead of focusing on your core responsibilities as a founder. 

You’re not the only one with these big feelings, though. 64% of business owners in the US do their own bookkeeping^[1] and go through exactly what you’re experiencing. A founder gotta do what a founder gotta do, after all, right?

Wrong.

While navigating the ins and outs of small business finances can be daunting, and you may start feeling like Quickbooks alone isn’t sufficient, there’s a solution that can lighten your load and light up your path to small business success: outsourcing your bookkeeping.

What exactly is outsourced bookkeeping?

When you outsource bookkeeping, it’s like delegating your business’s financial chores to a specialized team outside your company. This team, which could be an individual expert or a dedicated bookkeeping firm, takes over the meticulous task of recording every financial transaction, ensuring your balance sheets, cash flow statements, and profit and loss statements are in impeccable order.

With a staggering 83% of small businesses^[2] planning to maintain or boost their investment in outsourced services, it’s clear that handing over the financial reins is not just a trend but a strategic move for many.

But how do you navigate this decision? How exactly do you outsource bookkeeping, and why should you do it in the first place? When is the right time to do it? Should you outsource your bookkeeping locally, to a freelancer, or a virtual bookkeeping firm? And is it possible that sophisticated bookkeeping software alone could suffice?

Dive in as we explore outsourced bookkeeping inside out, helping you figure out if it’s the right move for your company.

Bookkeeping vs Accounting — what’s the difference?

You’re probably also wondering about the difference between accounting and bookkeeping at this point, which is great because you need to weigh all options before reaching a decision about outsourcing your bookkeeping.

Bookkeeping is the basic act of recording and categorizing every financial transaction in your business, ensuring the ledger is accurate, up-to-date, and comprehensive. It’s the daily or weekly discipline of tracking sales, purchases, payments, and receipts, a meticulous process that keeps the financial pulse of your business steady and reliable.

Accounting, on the other hand, takes this compiled data to the next level, analyzing, interpreting, and ensuring the bookkeeping is done accurately.

Types of outsourced bookkeeping services

When it comes to outsourcing your bookkeeping, you’ll typically encounter two main options: hiring a local bookkeeper or a virtual bookkeeper.

To assist you in making the right choice, let’s break down the advantages and disadvantages of each.

Hiring a local bookkeeper

A local bookkeeper is an individual or team located near your business premises. 

This option might be ideal if:

• You prefer in-person interactions with your bookkeeper.
• Your business heavily relies on physical records, and you don’t extensively use online banking or payment platforms.
• Your bookkeeper needs to be on-site to understand your business operations and the details of each process.

How does local bookkeeping work?

In general, there are two approaches to outsourcing your bookkeeping to a local professional: working with a freelance bookkeeper or engaging a bookkeeping firm.

A freelance bookkeeper works independently and collaborates with you directly to manage your books. They might offer remote services, visit your business in person, or provide a combination of both. Freelancers vary in their skill levels and experience.

Alternatively, you can opt for a bookkeeping firm. While firms typically charge higher rates compared to freelance bookkeepers, they often provide certain assurances that solo practitioners cannot.

For instance, their bookkeepers hold professional certifications. Moreover, in situations where the individual handling your books is unavailable, another bookkeeper from the firm can step in seamlessly, ensuring continuity of service.

Whether you choose a freelance bookkeeper or a firm, they operate as external entities to your business—they’re not your employees. Look for a service provider that grants you secure, immediate access to your financial reports through an accounting software you’re comfortable with.

Before making a decision, understand that security is paramount. Ensure that you trust the person or entity you hire to handle your business’s financial data, including bank and credit card details, invoices, and critical documents.

Additionally, it’s crucial to retain sole control over treasury functions such as investment management, check signing, and online payments or wire transfers.

Hiring a virtual bookkeeper

In today’s digital era, virtual bookkeeping is a widely accepted and effective means of managing finances remotely, offering convenience and efficiency without relying on physical presence and/or paper-based systems.

This option is particularly beneficial if you:

• use online banking for business transactions
• are tech-savvy and are comfortable with online processes
• prefer a fixed monthly fee instead of hourly rates that may fluctuate
• desire convenient online access to your financial data through a mobile application.
• feel more comfortable communicating via online messaging or phone calls rather than face-to-face interactions

How does virtual bookkeeping work?

Virtual bookkeeping entails entrusting someone to handle your books online, without requiring in-person interactions. This approach blends the convenience of tech-driven bookkeeping software with the human expertise of bookkeepers. 

When you hire a virtual bookkeeping service, you benefit from professionals who oversee your books alongside software that facilitates financial monitoring. An outsourced bookkeeping service typically automates the retrieval of your expenses directly from online banking platforms and merchant processors, eliminating the need for you to submit receipts manually.

During tax season, an online bookkeeping service may provide you with a comprehensive year-end financial package containing all the necessary financial statements your accountant requires for filing your small business tax return.

For instance, when you partner with CoCountant, you’re paired with a dedicated professional bookkeeper who diligently compiles your data and transforms it into tax-ready financial statements on a monthly basis.

Why should I outsource my bookkeeping?

Let’s be real—nobody starts a business because they’re excited to do their own bookkeeping. In fact, data suggests that bookkeeping and tax preparation are the worst parts of running a business, as confirmed by 40% of small business owners^[3].

With outsourced bookkeeping services, your small business gains access to a team of skilled bookkeepers. This delegation of day-to-day bookkeeping tasks, which might have previously consumed a substantial amount of your time, allows you to redirect your focus toward your core business operations.

Plus, having a professional handle your bookkeeping makes tax time way easier. You’ll have all the numbers you need to fill out your forms quickly and accurately, with reports that meet IRS standards.

When should I outsource my bookkeeping?

There are a few clear signs that you can look for to know when it’s time to stop DIYing your bookkeeping and bring in a pro.

Consider outsourcing your bookkeeping if:

• Doing it yourself is consuming more time than you can afford
• Dealing with estimated taxes is a pain
• You’re missing out on potential tax breaks
• Your books are always behind
• You’re having trouble staying on top of accounts receivable and payable
• Keeping track of your cash flow is a struggle

Don’t see your situation here? That’s okay—there are plenty of signs that it’s time to hire a bookkeeper, and you’ll know when it’s right for you.

For most business owners, sooner is better than later. Even if your business isn’t making money yet, keeping good records is key as you start to grow.

How do I get started with outsourced bookkeeping?

The process varies depending on which option you choose to outsource your bookkeeping. A freelance bookkeeper may work differently than a local bookkeeping firm. If you opt for a professional bookkeeping service like CoCountant, for instance, our simple and efficient onboarding process is as easy as 1, 2, 3!

Here’s how you can get started with outsourced bookkeeping at CoCountant:

Step 1: Get started for $160/month

• Kick things off with our controller-led team by signing up. We’ll schedule an initial discovery call with your Finance Manager to understand your business needs.

Step 2: Get set up on our client hub

• We’ll onboard you to our client hub platform and ensure everything is organized for a smooth start.

Step 3: Start working with your dedicated team

• After analyzing the results, we’ll create a plan on how to take over your books, establish our working protocols, gather the necessary financial documents, and set things in motion to manage your books effectively.

Start at $160/month — Let’s go!

The bottom line

When you outsource bookkeeping to a reliable company like CoCountant, you save time and ensure accuracy in your financial records. Moreover, you can securely store your data in the cloud, granting you the flexibility to access your financial information whenever you want.

With our transparent, fixed-priced monthly plans and dedicated bookkeepers, you can say goodbye to hourly rate worries and ensure reliable service with quality support. 

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