In-house bookkeepers, freelancers and outsourced partners all have pros and cons. The best choice depends on the level of service your business requires.
As a startup, you might be used to doing many different tasks on your own: contacting your suppliers, marketing your products, monitoring sales, answering inquiries and customer issues, etc. The majority of business owners want to do things on their own. A recent study shows they even work for more than 60 hours a day, almost double the average of 38.6 work hours.
You might even do bookkeeping on your own. Unfortunately, this can do more harm than good to your money management. Running out of cash is one of the main reasons small businesses fail. This is either caused by money mismanagement or disorganization of books of accounts.
Either an accountant or a bookkeeper can help you manage your day-to-day finances. They are both experts in monitoring cash flow from different accounts, bills, and invoices, and organize your books for better money management. However, there are differences between the two positions.
An accountant is more suitable for a higher level of financial analysis, such as financial forecasts and auditing. They are more likely the chief financial officer of a company that gives financial advice and insights to the business owner.
A bookkeeper, meanwhile, does more financial administrative tasks. They are the ones tasked to consolidate books of accounts, follow up past due payments and billing reminders, process payments for suppliers, and even process payroll. When it comes to basic financial tasks, a bookkeeper is more recommended than an accountant since the latter has a cheaper hourly rate for its services.
What are the pros and cons of hiring a bookkeeper?
A bookkeeper handles your finances more professionally than you. However, making other people handle your finances can expose it to different risks. Here are the advantages and disadvantages of hiring a bookkeeper for your business.
Pros of hiring a bookkeeper
Bookkepers are more experienced in handling records. Though bookkeeping can be done by nonprofessionals and even the inexperienced, this duty is best handled by a trained individual. This also avoids more errors in your record that can cost you penalties on filing documents in the future.
A new bookkeeper can offer a new perspective on running your business. Hiring a bookkeeper gives you an outside perspective on how you can manage your budget and run your business more efficiently. They can teach you different ways to cut costs, insights on spending, and other aspects.
Ultimately, hiring a bookkeeper will help you save on costs. Hiring a virtual bookkeeper helps you save more on potential penalties and labor costs. This is compared to hiring an in-house bookkeeper for your business accounts.
Hiring a bookkeeper gives you more time to focus on your business. You don’t have to worry about organizing your own books of accounts. Hiring a bookkeeper gives you more time to focus on the core activities of your business.
Cons of hiring a bookkeeper
Hiring an outside bookkeeper means a higher risk of exposing your data. Your bookkeeper has access to sensitive bank data such as account numbers and online banking passcodes. If not properly monitored, this might cause data breach which can affect your business.
A bookkeeper would mean you would lose sole control over your books. Since you hire a bookkeeper, you entrust the control of your books to them. This may also result in a loss of information when not monitored.
Their mistakes become your company's mistakes. Any errors your bookkeeper makes will still be accountable to your business. This goes the same with any missed payments and noncompliance that might occur in the future.
There are hidden costs to hiring a bookkeeper. Aside from their hourly rate, your bookkeeper might charge additional costs for their services. However, you won’t be sure about the quality of service they will give you.
What should a business owner look for when hiring a bookkeeper?
When hiring a bookkeeper, you need to determine your purpose of getting one. Are you losing track of your expenses? Do you need someone who can regularly file your compliances? This is so that you can determine the right bookkeeper for your business. You can hire them in different ways. Either you can hire an in-house employee, a freelancer or hire through business process outsourcing.
In-house staff bookeeper
Hiring an in-house bookkeeper is ideal if you have a medium-sized business and want to keep track of their day-to-day duties. However, you need to cover all the resources they need, including salaries and benefits, to do their work. [Are you interested in accounting software? Check out our reviews and best picks.]
When you have a small business and you only need to consolidate your accounts once a year, then a freelancer is suitable for this. You can hire a virtual assistant through freelance platforms to consolidate your books and let them file your annual tax documents. They usually charge an hourly rate of around $5 to $15, depending on their expertise.
Hiring a bookkeeper through an agency
Hiring an agency works like freelance hiring: through different platforms. However, their business is registered in their city or country. These agencies are usually hired by large enterprises for their income tax filing, but they also cater to small and midsize businesses. They usually charge depending on the service you need.
Outsourcing your bookkeeping
Lastly, your bookkeeping duties can be outsourced to BPO companies onshore or offshore. They will set up and train a dedicated team for you, then provide all the expenses needed for their work. These include desktops with accounting software, VoIPs for billing reminders, and the office space where they will work.
Online bookkeeping software
Different bookkeepers also have various online bookkeeping or accounting software they prefer to use. Upon hiring, they might ask if they have a preferred tool for doing their work. These are some common bookkeeping software programs:
QuickBooks Live Bookkeeping
QuickBooks Live offers basic bookkeeping services for small businesses. It will assign a team of virtual bookkeepers that consolidate all of your accounts and expenses in real-time. You can chat with them, have a video call or share screens. You can also track their progress through the platform's Live Bookkeeping Hub. It can also arrange your books in preparation for your tax filing. However, it can't file your tax documents.
One of the most popular for small businesses, FreshBooks offer a full range of services from invoicing, billing reminder, to generating financial reports. The platform has an easy-to-use interface, and it integrates with platforms such as PayPal, G Suite and Stripe. It also has a mobile app where you can update and track your books on the go.
With Zoho Books, you can organize your books and work collaborations in one platform. You can add your bookkeepers and accountant to work and monitor them through the platform. Aside from invoicing and billing reminders, it can also handle your bank accounts and payments to organize your expenses. It also allows you to have an inventory of your office supplies or product stocks so you’ll know when and how to replenish them easily. Reports are also generated based on the request of their clients, from profit and loss to tax summary.
Xero, meanwhile, is cloud accounting software that lets you handle all accounting and bookkeeping tasks in one platform. It allows you to check your product inventory, save contacts, and evaluate business performance through generated reports. It also has a sales tax feature where you can file your taxes and prepare sales tax returns with automatic calculations.
Last but not least, Kashoo has basic accounting and bookkeeping services suitable for very small businesses. It helps you keep track of your expenses and bills, create invoices, and generate basic reports such as income statements and balance sheets. The platform is simple and easy to use, but it doesn't offer full bookkeeping features such as product inventory and pre-invoice documents. You can access your account through a mobile app for on-the-go tracking.
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