How to Outsource Bookkeeping – A Guide

Since starting your business, you’ve likely filled multiple roles–from product and customer service to bookkeeping and sales–at some point. However, as your business has grown, you may have felt like you don’t want to spend your time doing some of those tasks.

For instance, you’ve probably asked yourself: Should I outsource bookkeeping?

Whether or not to outsource is a common question many small business owners face. Tasks like bookkeeping are ideal to hire outside help. Others like sales may be better to manage in-house. There are a few ways that you can hire a bookkeeper. Primarily, businesses choose virtual bookkeepers or local bookkeepers.

In this guide, we’ll dive into everything related to outsourced bookkeeping from what it costs to how to outsource it. You can click to go to a particular section below or scroll down to start from the top.

  • When should you outsource bookkeeping?
  • Why should you outsource your bookkeeping?
  • How do you outsource bookkeeping?
  • How much does outsourced bookkeeping cost?

When should I outsource my bookkeeping?

If your business is new and you don’t have significant revenue or budget to hire outside help, you’ll probably try DIY bookkeeping first.

However, most businesses prefer to outsource their bookkeeping, especially as they grow. These are some of the top signs that it is time to outsource your bookkeeping:

  • You’re spending several hours each week doing accounting and bookkeeping tasks yourself.
  • You plan to get funding through investors or business loans and need accurate financial statements.
  • Your books are behind, and you need to catch up.
  • You’re spending a lot of money hiring full-time, in-house bookkeepers or a local bookkeeper.
  • You aren’t sure about your current cash flow or financial health.
  • Tax season is coming up, and you don’t feel prepared to file your taxes.
  • You simply have no desire to learn bookkeeping or to do it yourself.

Why should I outsource my bookkeeping?

At first, you might be hesitant to trust an outside bookkeeper with your financial data. There are so many benefits to outsourcing your bookkeeping, as long as you choose a trustworthy CPA or bookkeeper. The top benefits of outsourcing your bookkeeping include:

Up-to-date books and more time for business

Small business owners are notorious for spending a large amount of time on administrative work, like employee scheduling, preparing payroll, and bookkeeping. It is estimated that small business owners spend 120 working days per year on administrative tasks like bookkeeping. Still, nearly 25% of businesses are behind on their books.

Hiring a bookkeeper allows you to free up more time. With the time saved, you can focus on the tasks that excite you most as a business owner. Although bookkeeping it’s extremely important to the health and success of a business, it is not necessarily a task that most entrepreneurs enjoy doing.

Cost-effective bookkeeping

If you’ve attempted to do small business bookkeeping on your own, you already know that it can take a lot of time and money. Even if you utilize programs like Quickbooks or Xero, you can’t automate all your bookkeeping needs.

If you’ve hired an hourly bookkeeper or accountant, the cost per hour adds up fast. Xendoo offers pricing plans with a flat-rate monthly fee, so you can easily budget for your bookkeeping each month.

Business loan and funding preparation

As your business grows, your bookkeeping and accounting needs grow too. If you want to take out a loan or open a line of credit, your lender will want accurate financial statements. It can take hours to do this on your own, and it might not be accurate.

Bookkeepers have experience doing this for multiple clients, so they can put financial statements together quickly in a way that’s presentable for your potential lender.

Experienced bookkeepers can also help you by:

  • Advising you on tax savings. You’ll have a better idea of what you can deduct and how to reduce your taxes.
  • Providing answers to your financial questions. Bookkeepers can help you learn about financial reports, cash flow, depreciation, and more.
  • Identifying opportunities to improve profitability. They’ll have a clear picture of where you improve your business finances.
  • Keeping you tax-compliant and secure. Bookkeepers are familiar with tax laws and other legal considerations, so you won’t miss deadlines or have noncompliance penalties.

How do you outsource bookkeeping?

There are two primary options to outsource bookkeeping–virtual bookkeepers or local bookkeepers.

Virtual bookkeepers

If you hire a bookkeeper online then that would be considered a virtual bookkeeper.  Xendoo, for example, is a virtual bookkeeping service. Our team of bookkeepers works with you virtually, no matter where you a located in the United States.

However, there are some differences between Xendoo’s bookkeeping services and other virtual bookkeepers. For instance, you might hire a freelance virtual bookkeeper that performs the same tasks that a regular bookkeeper would–they just do them online.

The drawback of hiring an individual freelance bookkeeper is that they tend to be more expensive. Like an in-person, local bookkeeper, freelancers usually charge an hourly rate vs a set monthly payment.

They also may not have as many resources as a bookkeeping firm or company. For instance, when you get a Xendoo plan you also get perks like access to accounting software like QuickBooks and Xero.

Another advantage of virtual bookkeepers is that because they work online, they tend to be familiar with different eCommerce platforms, payment processors, and other online financial services. Therefore, they can help you integrate your business banking account, expenses, and other financial data into a secure accounting system. With that, you can view your financial health, prepare for taxes, or plan for your business future at any time.

Local bookkeepers

If you hire a bookkeeper that has an office or business location near you, that would be considered a local bookkeeper. Local bookkeepers usually charge by the hour and it tends to be expensive.

For instance, it is not cost-effective if you need to book more than one or two hours a month. This might make sense if you are booking an hour for a bookkeeping consultation a month. However, in this case, you would still be responsible for doing your own books.

If a local bookkeeper is managing your books and you have a complex business with many employees and revenue streams, it’s probably going to take more than a few hours a month. Those hours can get expensive.

In most cases, you don’t need a local bookkeeper unless:

  • You want to meet with your bookkeeper in person on a regular basis.
  • You keep your financial information in physical records only.

Whether or not you use a local bookkeeper is based on your preference. Today, most accounting and bookkeeping tasks are performed online anyway. Therefore, the majority of businesses prefer online bookkeeping, because it’s more accurate, cost-effective, and easier.

How much does outsourced bookkeeping cost?

The size of your business and the number of monthly expenses you incur play a large role in the pricing for outsourced bookkeeping services. To get a better idea of how much outsourced bookkeeping costs, let’s compare it with some other bookkeeper options.

In-house bookkeeper cost

An in-house bookkeeper is usually considered a full-time employee, which means they would get a salary and benefits package. According to Salary.com, the cost to hire a full-time entry-level bookkeeper is $45,446. That is just the base salary and doesn’t include benefits or bonuses.

Of course, the cost rises in cities that have a high cost of living. It also increases when hiring bookkeepers with more years of experience. For example, in San Francisco, the living wage is higher. The average annual salary for business and finance professionals is $84,198, according to MIT.

Most small businesses don’t have enough bookkeeping needs to justify paying a bookkeeper year-round for their services. They may consider a freelance bookkeeper or an hourly bookkeeper, however, that might be just as costly.

Local or freelance bookkeeper cost

If you look at any freelance marketplace you’ll find that the cost for freelance bookkeepers ranges widely.

It’s not unusual for the hourly rate for freelance bookkeepers to range from $21 per hour to $60 per hour.  However, more experienced freelance bookkeepers will charge upwards of $75 or more per hour, especially if they are doing complex bookkeeping or accounting tasks.

If your business has a lot of bookkeeping needs, a local or freelance bookkeeper who charges by the hour usually is not cost-effective. When you only get an hour of their time, you probably won’t get all your bookkeeping questions or concerns answered.

Outsourced bookkeeper cost

Of all the bookkeeping options, outsourcing tends to be the most cost-effective for small businesses. This is because you’re not hiring a full-time staff member or being charged an hourly rate.

Outsourced bookkeeping services usually charge a set monthly fee. These are popular with small businesses because the bookkeeping services come in packages based on your needs.

It’s easier to budget for a monthly cost that’s the same each month. Plus, it costs half of what you could end up paying for an hourly bookkeeper. That’s why Xendoo offers this pricing structure with a variety of package options to fit your specific company’s needs.

How does outsourcing with Xendoo work?

If you choose to go the outsourced bookkeeping route, you’ll be paired with a dedicated bookkeeper. Plus, because we are a team of financial experts, you’ll also get access to a CPA and an accountant.

Your expert bookkeeper will set up a digital accounting system for you if you don’t already have one. This means that we’ll take your sales and revenue data, expenses, payroll, etc, and put it all together in one financial dashboard. You’ll be able to access it anytime–desktop or mobile–and get monthly reporting with balance sheets and profit-loss statements. If you’d like to learn more, you can schedule a consultation with our team here.

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