A typical day for an SMB leader might go something like this: “I start my day answering 30 to 40 emails. Then I put out fires and prioritize tasks for myself and my employees before moving on to customer appointments. After lunch, I spend the afternoon fulfilling orders, dealing with issues and, if I’m lucky, I have time to bid for new business or learn about new tools we might want to consider using.”
If you’re not already using outsourced bookkeeping services, when would invoicing happen in this timeframe? What about reconciliation, let alone marketing or strategy?
For businesses with under $10 million in revenue, leaders are the operating engine of the organization. That means the financials can only move as fast as they can. And with a schedule like the one above, leaders can quickly become their own glass ceiling, limiting the business’s ability to grow.
That’s when it’s time to shift—to create and optimize processes and systems that enable you to become more efficient while growing the top line.
The easiest process to start with is bookkeeping outsourcing. An outsourced bookkeeper is not only a convenience but also a strategic rite of passage for businesses aiming to grow efficiently. But how does outsourced bookkeeping work in terms of cost, trust and simplifying the day to day?
The Strategic Benefits of Outsourced Bookkeeping
You’re adept at Excel and you know how to budget—why outsource your bookkeeping in the first place? There are several long-term advantages to using a third party early in the growth cycle.
It’s cost-effective.
In addition to saving you salary, benefits, training and remote enablement, an outsourced bookkeeper tracks transactions to monitor spend, fraud and compliance, helping you save costs and avoid penalties. Then there are the time savings: A professional bookkeeper can do in a few hours what a non-expert would take days to research, compute and double check.
It drives growth.
Fewer than 1% of businesses make it to $10 million in revenue, and cash flow is a big reason why. An outsourced bookkeeper provides accurate, unbiased numbers with greater specificity to help you:
- Understand your cash flow.
- Forecast and set better goals.
- Invest wisely and increase your funding potential (as in the case of the nonprofit CLUE).
Bookkeepers also free up leaders to focus on growth-centric activities such as strategy, marketing and new business.
It’s scalable.
Unlike a full-time bookkeeper, outsourced bookkeeping services can scale up or down based on timing and complexity as you expand for busy times or pull back during slow periods.
How to Outsource Bookkeeping, Step by Step
Understanding the process of bookkeeping outsourcing is crucial to making the most of your bookkeeper. The following steps may seem rudimentary, but they’re effective in cultivating peace of mind in the near term and success in the long term.
Grant deliberate and trustworthy access to financial information.
WHY: Acting as a conduit between your finances and bookkeeper not only presents a security risk but also requires a great deal of time and hassle. Granting bookkeepers access to your information is more accurate and efficient because they can fetch the numbers they need at will.
HOW: First, open separate bank accounts for your business and start using cloud storage instead of storing records on your computer and emailing them to the bookkeeper. Cloud storage provides automatic backup, version control and easy file management to save you time and stress.
- Accounting, payment, banking and credit card platforms: Most financial institutions and platforms like QuickBooks and Shopify allow you to easily add users and specify permissions like “View Only” so they can’t access your funds.
- Payroll and tax information: Provide your bookkeeper access to your payroll provider and prior-year tax documents using Form 8821.
- Receipts: Whether you’re keeping your receipts in a box or in an online tool like Expensify, you must share these as well.
ASK: Ask your bookkeeping prospect about their process for starting an engagement and the security protocols they recommend.
Transition to digital with someone who’s done it before.
WHY: Much of step one relies on digitizing processes like invoicing and expense tracking. Many medium-sized businesses make the mistake of relying solely on cloud accounting software to do it for them. Going digital will enhance efficiency, compliance and security with a digital paper trail, but an experienced bookkeeper can help you tailor digital transformation to your needs and limitations.
HOW: Look to your outsourced bookkeeper for recommendations on the right tools and apps, but be wary of freelancers who lack transformation experience—companies often overspend on digital transformation, so a good expert should help you avoid waste.
ASK: Ask the bookkeeper if they’ve been part of other digital transformations and examine their résumé for mastery of digital tools and platforms such as QuickBooks, Shopify and Xero.
Set expectations and define your process.
WHY: As with any employee or client, setting expectations saves you time and misunderstanding by eliminating guesswork down the line. Be transparent about your style of management and what you’re looking to achieve by outsourcing.
Additionally, keep your own expectations realistic. Your business might need a great deal of financial cleanup before you can pursue more aspirational goals, as was the case for the Territorial Bank of American Samoa. Paro’s bookkeeper instantly jumped in to bring the day-to-day financials, reconciliations and accounts payable up to speed, earning the bank’s first-ever unqualified audit—a jumping-off point for a period of sustainable strategic growth. That kind of strategic repositioning is not something that cloud accounting software alone can help you do.
HOW:
| CAPABILITY | CADENCE | COLLABORATION |
| State what you want from your bookkeeper. Do you need cleanup, budgeting or both? Will you need someone who can flex from basic tracking and reconciliation to issuing controls and insights? | Define the updates you want and how often you want them. Weekly or monthly cash flow updates? Balance sheets? What kind of availability do you require based on your management style? | Establish how you’ll interface with your bookkeeper. Video? Email? Slack? When, if at all, will other stakeholders like the C-suite be present? What report formats do you prefer? |
Keep communication ongoing.
WHY: Understanding how outsourced bookkeeping works depends on the relationship with your bookkeeper. “Set and forget” is a key benefit of using outsourced bookkeeping services, but when you communicate openly and regularly, you gain clarity and control while giving them enough of a runway to pivot or scale to maintain business continuity. This is another advantage that outsourcing has against bookkeeping software.
HOW: Stay in touch to ensure your bookkeeper is working the way you want them to and to raise the issues that are most important to the strategic goals of the business.
ASK: If you’re talking to freelancers, ask what their client roster composition is like and how that affects their schedule throughout the year. Does it sound like they’ll be looking for ways to expand the relationship based on your goals, or are they in it to do the bare minimum?
How Does Outsourced Bookkeeping Work for Your Particular Business?
By following these steps on how to outsource bookkeeping properly, business leaders can start to transition from operational to growth engines of the business.
Wondering how outsourced bookkeeping could work for your business model? Explore Paro’s array of outsourced bookkeeping options and download a cheat sheet about bookkeeping for small business. Book a consultation with Paro today, and we’ll break it down step by step for you.
