How to Outsource Bookkeeping Services: Complete Guide

While you may have traditionally handled all the finances in your small business, one of the most common ways to support scaling your business is to outsource basic accounting bookkeeping services.

Imagine an external bookkeeper meticulously tracking your company's expenses so you can focus on nurturing your business’s growth.

That’s why we created this guide to help you understand the advantages of outsourcing your monthly bookkeeping because this is one job you want to get right the first time.

Let’s start!

Key Takeaways

• Learn about outsource bookkeeping, financial statements, and tax preparation for your business.
• Explore the difference between outsourcing bookkeeping and accounting for your business.
• Understand the reasons why businesses are beginning to embrace outsourcing bookkeeping through an online bookkeeping service.
• Discover the most popular and intuitive bookkeeping platforms to automate your bookkeeping tasks.
• Gain additional knowledge on the future trends of outsourced bookkeeping.

Understanding Outsourced Bookkeeping

For many businesses, especially start-ups and SMBs, having a bookkeeping department can be costly. This is where the best outsourced bookkeeping companies can help you out!

What does it mean to outsource bookkeeping?

Outsourcing bookkeeping is the process of hiring another company to do the meticulous bookkeeping job for you. Some people might refer to it as bookkeeping services. 

Regardless of the title, it all involves the same process: expert individuals - or modern applications - diligently record a business's financial transactions from a different external location.

This relieves the pressure of doing it internally, empowering you to prioritize more productive tasks to propel your business's growth. 

4 Services Offered by Outsourced Bookkeepers

Outsourced bookkeeping can streamline numerous fundamental finance in house bookkeeping tasks. 

Here are some standard bookkeeping outsourcing services that are offered:

Accounts Payable (AP) and Accounts Receivable (AR) Management

Bookkeepers automate invoice processing, ensuring timely payments to vendors while capturing early discounts whenever possible. Additionally, bookkeepers send out clear and timely invoices, minimizing late payments. They track outstanding accounts payable receivables and implement effective collection strategies to ensure a healthy cash flow.

Bank Reconciliations

Bank reconciliations are like constructing a link between your internal financial records and bank statements.

In this case, bookkeepers carefully examine and reconcile the information from these two sources. This keeps your various financial statements and data accurate, prevents errors, and gives you a clear picture of your financial standing.

Financial Reporting and Analysis

While numbers can tell a compelling story, you need the right interpreter to comprehend it. This is where bookkeepers can help you out.

They generate regular financial reports, translating raw data into actionable insights.

These reports track key performance indicators (KPIs) like revenue, expenses, and profitability, so you can:

• Monitor Financial Performance: You can effectively learn about your revenue streams, cost structures, and overall financial health.
• Identify Trends and Patterns: Regular reports reveal trends in your financial data, enabling you to predict future performance and make informed business decisions. This entails identifying a seasonal dip in sales and planning marketing campaigns accordingly
• Benchmark Against Competitors: You can compare your financial performance to industry benchmarks to identify areas for improvement and stay ahead of the competition. 

Payroll Processing

Getting an external source to conduct payroll more efficiently ensures workers are paid correctly on time without violating taxation rules.

Outsourcing payroll allows you to:

• Ensure Accurate and Timely Payments: Bookkeepers manage payroll calculations, deductions, and taxes, ensuring employees are paid accurately and on time, minimizing legal risks, and boosting employee morale.
• Reduce Administrative Burden: When payroll is handled by qualified experts, you free up time and resources to focus on your business's essentials.
• Stay Compliant with Tax Regulations: Bookkeepers ensure that your business adheres to ever-changing tax laws and regulations, reducing the likelihood of penalties and audits.

Bookkeeping vs Accounting: What’s the Difference?

Bookkeeping and accounting are frequently used interchangeably. However, the two are quite different from one another. 

Bookkeeping involves generating reports based on daily transaction records to ensure accuracy. On the other hand, accounting is all about analyzing financial data and recognizing patterns in this data to provide strategic financial advice. 

While bookkeeping often forms a firm's foundation, accounting is the strong and valuable structure on top of this foundation. A company’s financial viability relies equally on both.

5 Reasons Why Businesses Are Embracing Outsourced Bookkeeping Services

Statistics have indicated an increasing trend towards contracting out accounting services. 

Did you know that 37% of small businesses outsource accounting and IT services? Bookkeeping is a tedious task that requires diligence. 

Many businesses worldwide are slowly opting for digital platforms or external bookkeepers to take over the critical task.  

Here are a few reasons that have led to the popularity of this method across the world:

1. It's Cost-Effective

Employing one full-time internal bookkeeper can drain a small organization’s capital. This is because the expenses associated with hiring a full-time bookkeeper encompass salary, benefits for staff members, and the cost of providing a workspace for this skilled worker. 

Outsourcing at a comparatively lower cost allows companies to employ local bookkeepers at a fraction of the cost. It eliminates expenses that are required for hiring full timers.

2. Offers Scalability

Another feature of quality outsourced bookkeeping services is its capacity to expand with your company. Outsourcing aims to match a company's needs by letting them adapt their bookkeeping services to changing conditions without the constant costs of having internal staff.

Staff can readily scale up for additional transactions or modify services according to your accounting needs.

3. Improves Compliance

Tracking key tax dates, account reconciliations, and accurate record-keeping are essential to ensuring compliance with the law.

You don't want to land in legal hot waters!

Luckily, your outsourced accounting and bookkeeping service company adopts proactive steps to avoid these hazards, such as penalties and corporate audits.

4. Helps You Focus On Core Business

Another benefit of outsourcing is that it frees you and your staff from labor-intensive bookkeeping duties. This allows you to focus on issues that can optimize your company's growth, such as sales, marketing, customer service, and innovation—your business's value-added activities.

Subsequently, internal employees can better see business objectives and focus on the essential company operations that generate revenue and profitability.

5. Comes with Expert Knowledge and New Technology

Many companies are increasingly opting for outsourced bookkeeping software and applications.

These platforms, driven by AI, can seamlessly optimize finances, streamline repetitive tasks, and prevent errors to provide accurate outcome-driven results. 

Top Outsourced Bookkeeping Software For Your Business

Tired of searching for bookkeeping services everywhere? 

Luckily, we have curated a list of bookkeeping software that offer a plethora of features that can effectively streamline and outsource your accounting firm's bookkeeping process and improve collaboration:

1. Knit People

Knit People is not just software. It is an all-in-one suite that combines several user-friendly features to optimize tedious and repetitive HR administrative tasks.

With features like managing invoices, expenses, and cash flow, we streamline the bookkeeping process while ensuring your data is secure and private from competitors' prying eyes.

Our software keeps up with the ever-changing legal climate to ensure businesses follow industry rules and regulations. 

Our platform is one of the most popular payroll software designed for small businesses.

Try it for free today!

2. Xero

Xero is a renowned cloud-based service that is popular for its intuitive interface and seamless integration with numerous applications.

The app also offers diverse features such as expense tracking, invoicing, and financial reporting to cater to businesses of all sizes. 

3. QuickBooks Online

QuickBooks Online is another popular platform with a strong reputation for scalability and a diverse range of features. This software also caters to all sizes, from startups to large-sized enterprises.

Quickbooks offer many features, including bill pay, inventory management, invoicing, and reporting and analysis tools. 

4. FreshBooks

FreshBook is  cloud-based solution recognized for its ease of use and affordability.

This software is ideal for freelancers and small businesses seeking an intuitive platform offering expense tracking, invoicing, and project management features.  

5. Zoho Books

Zoho Books is an integrated suite that offers bookkeeping functionalities alongside other business management tools, such as CRM and inventory management.

It suits businesses looking for a comprehensive solution to manage all aspects of their operations.

How to Choose the Perfect Bookkeeping and Accounting Services?

Juggling invoices, tracking expenses, and generating reports can be time-consuming. Trying to sift through all the available options can be equally overwhelming.

Here are a few things you should know before investing in bookkeeping software:

1. Explore the Features and Functionalities

Take a moment to think about all the functionalities you require in bookkeeping software.

Do you need basic features like invoicing and expense tracking or advanced functionalities like inventory management and payroll processing?

Prioritize the ones your company requires to narrow down your options. 

Here’s some advice: when it comes to your business, always think long-term. Will your business need to evolve? Do you expect your team to grow in the future? What will be your adaptation strategies? 

These pressing questions can help you pick a platform that grows with your company. Additionally, it offers the flexibility required to accommodate future requirements.

2. Consider Ease of Use

You might not want to invest in software that’s just too complicated.

Ask yourself, how comfortable are you and your team with technology?

Choose software with an intuitive interface that can be easily learned, regardless of technical expertise. 

Some software suites will also come with an onboarding option for new team members.

3. Additional Integrations

Does your business utilize other software applications like CRM or project management tools?

Consider the integration capabilities of your shortlisted platforms. Seamless integration eliminates the need for manual data entry between different systems, saving you time and minimizing errors.

Look for software with robust APIs (application programming interfaces) or pre-built integrations with your existing tools.

For example Knit has direct integrations with popular accounting software like Xero and Quickbooks

4. Consider Your Budget

Bookkeeping software pricing structures will vary. Before selecting one, keep in mind your budget. For instance, companies starting small might not have a hefty budget for bookkeeping services. On the other hand, mid-sized ones can spend a significant amount based on the features needed. 

Hence, consider your budget and determine if a free model with limited features, a subscription-based plan with tiered functionalities, or a pay-as-you-go option best aligns with your financial resources.

5. Asses the Mobile Accessibility

The business world doesn't stop when you leave the office. 

Mobile accessibility allows you to stay connected to your financial data on the go. Check if the software offers a mobile app and assess its functionality. Can you view reports, approve invoices, or categorize expenses directly from your smartphone or tablet? Mobile accessibility allows you to make informed financial decisions anytime, anywhere.

The Future of Outsourced Bookkeeping

The future of outsourced bookkeeping work is brimming with exciting possibilities. As technology evolves, we expect even more significant advancements in this field!

Here are some intriguing trends shaping the future of how outsourced bookkeeping works will work:

Artificial Intelligence (AI) and Machine Learning (ML)

The integration of AI and ML will further streamline bookkeeping tasks. They can take over routine tasks such as data entry, transaction sorting, and fraud detection. This allows bookkeepers to dedicate more time to important financial planning and analysis.

Enhanced Cloud-Based Solutions

Cloud accounting software is changing the game, and it's just the beginning. With real-time data access, enhanced collaboration, and automated reporting, businesses can understand their finances better and make faster decisions based on data.

Focus on Strategic Financial Planning

As technology takes over everyday accounting firm bookkeeping tasks, outsourced bookkeeping services will likely focus less on full-service basic bookkeeping services and more on strategic financial planning and advice. 

They will work with business owners to make financial predictions, analyze trends, and discover growth opportunities.

Final Word 

Outsourcing bookkeeping services can streamline your finances, improve efficiency, and free up resources for growth. And with expert help, you can focus on your main business activities and plan for the future.

Not sure where to start?

Knit People is here to help you out!

Our intuitive and robust platforms allow you to automate HR administrative tasks and manage payroll while staying true to state and industry laws.

Start with a free trial today to discover the endless outsource bookkeeping possibilities!