Unlock Business Success with Bookkeeping Outsourcing Service

According to Deloitte, business process outsourcing spending is forecast at $212 billion in 2023 — a 19% increase over 2019. Bookkeeping outsourcing services constitute a major chunk of this estimate. Having originated as a strategic response to the evolving demands of modern businesses in the late 20th century, it is today, one of the most strategic approaches for lean and efficient business operations.

This blog will highlight the genesis of outsourcing bookkeeping services, trace its trajectory over the years, and elaborate on its continuing benefits. Alongside, it will also address the concerns that arise against outsourcing of such a critical function.

What is bookkeeping outsourcing services?

It the practice of contracting out a company's bookkeeping and accounting tasks to a third-party service provider. Most often than not, these third-party providers, also referred to as business process outsourcing (BPO) service providers, are located in a different geographical location. Outsourcing bookkeeping services allows businesses to assign the responsibility of maintaining financial records, managing transactions, and preparing financial statements to external experts.

What are the services of bookkeeping?

Key components of bookkeeping outsourcing include:

• Financial record keeping: The core function of bookkeeping involves the accurate recording and organization of financial transactions, such as sales, expenses, payroll, and asset purchases. Outsourcing providers maintain detailed ledgers and journals to track these transactions
• Accurate data entry: Bookkeepers enter financial data into accounting software, spreadsheets, or other financial management systems. This includes inputting invoices, receipts, bills, and other financial documents
• Timely preparation of bank reconciliations: Outsourced bookkeepers ensure that bank statements match the company's financial records. This involves comparing transactions in the bank statement with those in the company's books to identify any discrepancies
• Manage Accounts Payable: It involves tracking and processing payments to suppliers, vendors, and creditors. Outsourcing providers oversee this process, ensuring that bills are paid on time while optimizing cash flow
• Manage Accounts Receivable: This involves tracking and managing customer payments and outstanding invoices. Outsourced bookkeepers may also be responsible for sending invoices and following up on overdue payments
• Timely and accurate financial reporting: Bookkeeping services outsourcing providers generate financial reports, such as income statements, balance sheets, and cash flow statements. These reports help businesses understand their financial performance and make informed decisions
• Aid in tax preparations: Some bookkeeping outsourcing services extend to tax-related tasks, such as calculating and preparing tax returns, ensuring compliance with tax regulations, and coordinating with tax authorities
• Regular payroll processing: Those who outsource bookkeeping services often include payroll services, which involve calculating employee salaries, withholding taxes, and managing payroll tax filings
• Periodic audit support: In the event of an audit, bookkeeping outsourcing providers assist by providing organized financial records and supporting documentation
• Offer financial analysis: While not always included in the basic bookkeeping services, these days, it is not uncommon to have providers offer financial analysis and insights to help businesses make informed financial decisions
• Ensure data security: Ensuring the security and confidentiality of financial data is a critical component. Outsourcing providers mandatorily implement robust data protection measures to safeguard sensitive information
• Committed compliance with laws and regulations: Outsourced bookkeepers bring the value of being updated with accounting standards, tax laws, and financial regulations in order to ensure complete compliance

What are the benefits of outsourcing bookkeeping services?

• Cost savings through reduced labor and operational expenses
• Access to expert bookkeepers and accountants
• Enhanced focus on core business activities
• Scalability to adapt to changing business needs
• Improved accuracy, compliance, and efficiency
• Utilization of advanced accounting technology
• Reduced fraud risk and enhanced data security
• Audit support and well-organized financial records
• Consistency in bookkeeping processes
• International expertise for global businesses
• Predictable pricing simplifies budgeting
• Time savings on hiring and staff management
• Optimized cash flow management

Common concerns against long-term outsourcing

Data security and privacy has long been a worry for businesses resulting in hesitation against outsourcing bookkeeping services. Businesses worry about the potential exposure of sensitive financial information, including payroll data, tax records, and proprietary financial strategies, to external service providers. Ensuring the security of financial data and compliance with relevant regulations is paramount, and companies may be hesitant to relinquish control over such critical information for extended periods.

Careful selection of reputable outsourcing partners and comprehensive data protection measures are crucial to alleviate these concerns and maintain trust in long-term bookkeeping outsourcing relationships.

How to choose the right outsourcing partner for your bookkeeping services?

Choosing the right outsourcing partner for your bookkeeping services is a critical decision that can significantly impact your business's financial health and operations. Here's a step-by-step guide on how to make this strategic decision:

• Begin by clearly defining your bookkeeping needs, including the specific tasks you want to outsource, the frequency of updates, and any unique requirements. Understanding your needs will help you evaluate potential partners more effectively
• Determine your budget for outsourcing bookkeeping services. Be realistic about the costs involved and consider the potential return on investment in terms of time and money saved
• Survey reputable bookkeeping outsourcing firms who have a track record of providing the bookkeeping services you require. Consider factors such as the provider's experience, industry expertise, and the size and diversity of their client portfolio
• Ask for capability assurances, credentials and qualifications to shortlist the right firm
• Inquire about their data security measures and privacy policies to protect your sensitive financial information. Confirm that they comply with relevant data protection regulations, such as GDPR or HIPAA, depending on your location and industry
• Define SLAs outlining the scope of services, response times, quality standards, and dispute resolution procedures. Ensure that the SLAs align with your business needs and expectations
• Assess the technology and software tools of the bookkeeping outsourcing partner. Compatibility with your existing systems and the ability to provide real-time access to
• Consider your business's future growth and inquire about the outsourcing partner's ability to scale their services to meet changing needs. Agree on possible surges in workload or additional services
• Define governance and communication structures for the success of the outsourcing relationship
• Make personal visit to the outsourcing partner's location for an understanding of their operations, work culture, and infrastructure
• Consider starting with a short-term contract or trial period to safeguard against failures
• Have legally binding agreements with clearly outlined terms, responsibilities, and dispute A. Summarize the key takeaways regarding the ongoing value of bookkeeping outsourcing

Through a methodical assessment and alignment with your specific needs, you can forge a resilient, lasting partnership that not only bolsters your financial management but will also allow you to capitalize on the advantages of bookkeeping outsourcing.