Bookkeeping is the most direct and comprehensive method of documenting all your company’s financial processes and management. For medium and bigger businesses, it is a legal requirement but smaller companies would also behoove from having properly prepared and maintained books. A usual bookkeeping service is a three-tiered approach. In step one, an accounting software specialist creates your accounting data files according to specific requirements of your business, highlighting important segments, drawing out improvement areas, and focusing on growth potential within the company. Second step involves continuous tracking and management of a business’s transactions in real time and recorded in temporary books to be reconciled with main books on a pre-set regular time interval, for instance quarterly, bi-annual, or annual reports. This reconciliation is the final step of the bookkeeping process.
In a typical bookkeeping job description, management of payrolls, deposits handling, creating logs of payments and maintaining periodic reports may also be involved. As the company size grows, so does the tax requirements, which also somewhat comes under the skill set needed in a good bookkeeper – personnel or software. Some businesses still keep bookkeeping operations in-house, but with time most companies have started to realize the benefits associated with outsourcing them.
Now coming to outsourcing, it is the process whereby third party companies are hired by the business to take care of their specific business segments. Previously, outsourcing – or business process outsourcing (BPO) – was kept only for non-significant segments, like call centers or auditing. But since BPO companies provide specialized services, they can afford to have the best of technical and workforce capabilities and with economies of scale they also offer cost-effective packages, businesses have now begun to use outsourcing as frequently for core business activities as for non-core segments.
For this article, we will combine the two concepts explained above and discuss why bookkeeping is a significant segment for businesses and how outsourcing can help improve its efficiency and reduce costs at the same time.
One of the key reasons for the significance of bookkeeping is that if you wish to apply for a loan, have to answer an auditor’s legal questions or simply require preparing your next year’s investment budgets, you will need a bookkeeping department. In some cases, your clients may also need to see your financial statements as do your business partners or any new investors. This means that you not only need regular bookkeeping services but also need to put in place certain checks and balances to prevent any legal backlash which could end in fines or even jail time. Bookkeeping, therefore, is not only significant for its financial attributes but also because of legal requirements, smooth running of businesses, and hurdle free operations.
When all the above factors are considered, it also becomes apparent that a business will require a lot more than an individual bookkeeper. Proper state-of-the-art software is the next key requirement after a qualified professional, along with controller employees who make sure that the financial accountability checks are in place and functioning properly. An auditor will be needed to take a second look at the recorded transactions and prepared financial statements. Once you have all the required personnel and technology, you will also need office space and pay all the expenses that come with it. To go into nitty-gritty there will also be higher power bill, more employee benefits, and overhead expenses.
What if there was a way to avoid all these risks, gain access to all the advantages and requirements of bookkeeping, and do all of that at only a fraction of the cost? The interesting part is that there is actually such a way. It is hiring an outsourcing company to do your bookkeeping.
As explained earlier, outsourcing companies deal with operations like bookkeeping as their primary tasks. So for your company, it might be an auxiliary task, but for BPO companies it is a core activity. Therefore, they have the best available technology, a highly-skilled workforce, and complete familiarity with legal procedures and requirements. If that is not enough, there is a whole range of benefits your business stands to gain from outsourcing.
One such benefit is the privacy of your data. While you may think that keeping your accounts in-house is safer, the truth is that when your own employees are taking care of your books, there is a natural conflict of interest. Your competitors can also reach out to your employees and try to take a sneak peek into your confidential data. Secondly, outsourcing bookkeeping provides you with scalability. In times of slower business seasons, you will not need to continue to pay large sums of money to your in-house staff despite a much lower workload. Thirdly, you won’t have to train your employees or have another separate layer of management for the bookkeeping department. Fourthly, you will free resources for your other business segments, and not only in terms of money, but time and effort too. And finally, your financial details are always ready and on your fingertips, so you neither miss out on an excellent opportunity not make a commitment that your financials cannot easily fulfill.