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When running a business, keeping track of finances is key. While making money is the overall goal, if it isn’t monitored, how will businesses know what they are doing right, and what needs work? Additionally, businesses that don’t track their finances face issues if they are being vetted by investors or seeking business loans.
It all boils down to one thing – bookkeeping. According to IbisWorld, industry statistics show there are over 300,000 payroll and bookkeeping service businesses this year in the U.S. That’s a gain of 2% from 2020. That means quite a few business owners are taking the financial health and growth of their companies seriously. If you don’t know where the money is made, going, or how it’s spent, you won’t know if you will be able to handle additional volume or if your company is on the brink of disaster. Bookkeeping for businesses is a necessity that never goes out of style.
Bookkeeping is nothing new and dates back many centuries. Although the practice is common, there is some confusion between accounting and bookkeeping services. They are not the same. Consider accounting the machine and bookkeeping as parts of the machine that help it run smoothly. Making sure entries and other financial activities are recorded and monitored consistently will help keep things on track.
What are bookkeeping services?
Bookkeeping services are day-to-day tasks that help businesses determine their profits or losses. In essence, it handles the financial processes of the company. Bookkeeping services can include several things, such as:
• Accounts Payable
• Accounts Receivable
• Processing invoices
• Paying vendors and suppliers
• Recording receipts
• Payroll and reports
• Depreciation of assets
• Balance sheet reconciliation
• Monthly financial reports
• Expense reports
Bookkeepers use software to record, monitor and maintain transactions. When it comes to taxes, bookkeeping services help keep up with the paperwork and financial records to pay on time and stay in compliance. Many accountants work together with a bookkeeping service, especially if they are in-house. This makes things a little easier, giving the accountant time to work on larger projects.
What are the advantages of using software to handle financial transactions?
Accounting software makes things easier and more efficient because it negates the use of paper that can be misplaced, improves the accuracy of entries, is faster in calculations, reduces overhead costs, and is accessible when needed from almost anywhere if the files are in the cloud.
Bookkeeping services can be a lifesaver for a new company or larger company that needs additional manpower. For new businesses, this helps manage their resources better while filling a need. Most bookkeeping services also provide advice on different ways to save money or alert the owner when projections are off. Bookkeeping services are tailored to the industry. Although many have the same line items, niche areas have specific needs.
While it is not necessary to be licensed when providing bookkeeping services, it demonstrates a commitment to the craft. Certified bookkeepers must have two years or 4,000 hours of experience in bookkeeping or accounting, pass an exam, keep 24 CPE credits every year, follow the CPB Code of Professional Conduct, and apply for licensure. It is a rigorous process that takes time but is worth it when working in the industry. Bookkeepers also usually have QuickBooks Pro Advisors Certification or are a part of the AIPB.
Bookkeeping services have many different facets of expertise. Most bookkeeping services have an accounting specialist, a full-charge bookkeeper, and then a controller. These three roles work together to provide comprehensive information and insight monthly, quarterly, and yearly. The beauty of using a bookkeeping service is that it can be in your city, or everything can be done virtually.
While bookkeeping tasks sound simple, things can get complex if there are errors, or the transactions have not been recorded consistently. Bookkeeping services help businesses focus on enhancing their operations, complying with regulatory agencies, preparing and keeping up with taxes, invoicing clients to get you paid, and understand your financial position on a weekly, monthly, quarterly, and annual basis.
How are bookkeeping services packaged
Bookkeeping services are usually packaged based on tasks. For business owners, there are usually a few packages to choose from with the option of “adding on” services. For instance, a bookkeeping service may have the following packages:
These usually address the needs of new business owners who are just getting started. Services usually include monthly reconciliation of accounts and a subscription to accounting software. There are usually limited transactions; bank, and credit card accounts.
Growing businesses use these types of packages. They have more flexibility than a starter package but aren’t ready for the granular details of the premium. Transactions and accounts are usually unlimited, and reconciliation usually occurs weekly.
Premium packages are more detailed, utilizing the same services as an essential tier, but with more to offer, such as invoicing, receivables, payables, and bill pay.
Businesses that like to forecast where they are headed migrate to a package of this type. Everything in the premium is included, but more focused services are a priority, like budget preparation, forecasting of income and expenses, advanced financial reports, tracking inventory, and project management.
• Side Businesses
For individuals who have a side business but want to make sure they are being proactive in monitoring their financial movements, a package like this would be useful. These types of packages usually include account reconciliation on a quarterly basis, with limited transactions and accounts. Most people filing Schedule C get this package.
Even with comprehensive packages tailored for most client needs, some businesses may need one service and not the other. Most bookkeeping services also offer single options like accounts payable and bill pay; project management; or invoicing and receivables.
When searching for bookkeeping services, having some background knowledge of what should take place is key.
How much do bookkeeping services cost?
Bookkeeping services vary based on the level of expertise, package the client needs, and size of the firm. Businesses that use a service with one or two bookkeepers on staff may not pay as much as a company that contracts with a firm that has 10 or more bookkeepers and other staff. Clients who utilize virtual bookkeeping solution services may also pay less than someone with a local brick-and-mortar.
On average, bookkeeping services range from as little as $75 per month with just one account and little to no activity, to over $2,000 per month. The number of transactions and accounts plays a significant role in the amount being charged. Additional costs for tax returns, collections, payroll, and other services must be considered as well.
Many bookkeeping services will take an essential package as the base and work with clients to customize the package and pricing based on their needs, adding on services as the plan comes together.
What are the best online bookkeeping services?
Having a guide to use while searching for an online bookkeeping service is helpful. While there are several options, these were the ones that stood out the most and are highly recommended by small business advisors:
This service is recommended as a good overall service that can handle everything at reasonable prices. They integrate with Xero and QuickBooks accounting software and offer pay-as-you-go pricing as an option. For smaller businesses, this option starts at $19 per month. Larger businesses should expect to pay more due to the change in accounting style (accrual).
If your business is already using QuickBooks, this bookkeeping service may be the best option. With this service, clients are fully integrated into the online version of QuickBooks, they offer an onboarding month, and another bookkeeper can be requested if there is suspicion of error. The downside? They don’t do tax filings.
New business owners may benefit from using Bench. One of the downsides of this service is its incompatibility with leading programs like QuickBooks and Xero. Instead, they have a proprietary software that can make things difficult if the customer wants to move on. Some of the benefits of using this service are unlimited calls and in-app messaging with the company, and free LendingClub business checking account to certain plan users, and they have a free trial for one month.
Startups who are scaling fast may want to consider looking at Pilot. This service was designed for startups. They integrate with QuickBooks, Expensify, Gusto, and others. They also offer accrual-based accounting and have discounts for pre-revenue companies. The cost is a little expensive but may be worth it if searching for bookkeepers that work with niche companies.
For businesses on a budget, Merrill wins the gold. They have a $190 per month flat rate for services, they integrate with QuickBooks, and will work with your CPA when needed. Unfortunately, you get the packages they have with no additional add-ons.
Choosing the right bookkeeping service
Before making a choice, know what accounting method works best for your business. If your business deals with cash and the expenses are recorded when the money comes in or the payments go out, that is cash-based accounting.
If the company recognizes expenses when they are owed or revenue as soon as you earn it, that’s the accrual method of accounting. If forecasting and understanding how your business is doing financially, the accrual method may be best.
If you are already recording your transactions with certain software, partnering with a bookkeeping service that will be able to jump in from day one may be a good idea unless your software is proprietary. If you really like the software currently being used, find a service that can accommodate this request.
Your books may be a little behind, and chances are you will have to pay additional fees to get things back in order. Some bookkeeping services do not offer this service. If you have this problem, find one that will work with you to get things back to where they need to be.
It is vitally important that someone in your business knows what a bookkeeper should be doing. It is also important to be hands-on with them. Locating a service that will have an accessible person where you can speak to them regarding your accounts makes a difference.
All of these are components of a good working relationship with a bookkeeping service that can keep your operations steady. While they all have their place, the cost is the number one factor when making the final decision. Make a list of your wants and needs, then compare costs. Will you need add-on services? Will the bookkeeping service be able to handle volume if you scale quickly? How much will your costs increase in this scenario?
Having a test run with the bookkeeping service can help answer all the questions you may have. While some of them do not advertise this, it is quite possible to have a month of service to see if they are the right fit.
Determining whether your business needs a bookkeeping services solution shouldn’t be taken lightly. Being financially smart when starting out, or taking corrective steps to rectify any issues that can cause problems down the line helps create a sound financial position now and in the future.
Disclaimer: Please keep in mind that the content of this post is not intended as tax, accounting or legal advice. The information presented here is for informational and educational purposes only. Before engaging in any transaction, be sure to discuss these matters with a trained, licensed professional.