Clients come to us and wonder how to compare various bookkeeping providers. What makes one more costly than the other? Let’s dig into bookkeeping service differences!
Hope you have a cup of coffee – bookkeeping puts a lot of us to sleep!
Month End Bookkeeping
The most basic service is once a month the bookkeeper updates the company’s books. This means, the client has submitted the bank statements, the invoices, and any other statements from the previous month.
Once all the information is provided for that month, the bookkeeper enters all the transactions. Will double check with the account balances and ensure everything is in balance. Once balanced and transactions are all confirmed, then he financial specialist will prepare the monthly reports.
Normally these reports are the P&L (profit and loss statement) and the balance sheet. It gives the owners and company directors a clear idea of how the business has been performing that month.
This service is the lowest cost as it isn’t real time and the bookkeeper can do it once they have time at the beginning of the next month.
More “Real Time” Bookkeeping
Some companies want to ensure the books are being entered on a more active basis. This means that even daily, or weekly the transactions are entered into the accounting books.
Why would someone want this? Maybe their business has a high volume of transactions, and wants to more actively keep an eye on the business. Waiting one month to see the company is losing money on a business activity is costly. So by investing in having a bookkeeper actively checking the transactions, entering them, and communicating to the client is cheaper than the potential loss in the business process.
Because this requires more time and communication between the bookkeeper and the client, the cost will reflect that. Discuss with your bookkeeper if they will be checking the transactions on regular basis, how often, and how the communication flow will go.
Outsourced CFO (Chief Financial Officer)
This is the most premium service. This is where the bookkeeper is much more than entering transactions and running reports. The bookkeeper is actively creating invoices, purchase orders, expenses, etc as the business is happening.
To give you an example, a salesman makes a new sale. The client will want an invoice to make the payment on. Who does that? If you have this outsourced CFO, you can email them, or CC them on the email with the client to confirm the deal, and then the CFO role will reply to the email with an invoice to make everything confirmed. The client will then pay the invoice and the CFO / bookkeeper will balance that in the books.
Other activities include watching for outstanding invoices. Maybe a client hasn’t yet paid the bill, who is on top of it? Who is checking the aging A/R (accounts receivable) and chasing up with those clients to get the money in the bank.
These are roles that you could outsource to an accountant or bookkeeper. Because this is a much more active role, they are really an extension of your company, they will have to spend a lot of time. It is time sensitive too, as the client will want the CFO to email the invoice rather quickly so that the client pays that bill.
Because of all these reasons, this will almost be like an employee inside your company. There will need to be training and updating of the CFO role and they will need to be paid properly for that.
Once you have this person trained and running, you will be happy as your business is running smooth and you can rest assured the transactions are being entered correctly.
What Accounting Software Is Being Used?
Another factor in cost of the bookkeeping service is what is the software the bookkeeper is using? Many accountants are a bit slow to embrace new technology and may still be using Excel and manually emailing attachments!
Hopefully your bookkeeper is a bit more tech savvy! Or, maybe they are resisting the software because it reduces their workload and they are afraid to lose their job! Such online “cloud” accounting software services like Quickbooks and Xero make the cost of entering the transactions lower. It also saves a ton of manual emailing of attachments, excel entries, and balancing efforts so that the bookkeeper can save time.
And last point is the reporting! Once the transactions are entered, no need for a complicated Excel Macro to run the reports by taking multiple sheets together into a chart. These online software tools generate it with a click of a button.
So ask your bookkeeper what software they are using. And if they say Excel, that is a red flag they are wasting a lot of time on manual entries.
Getting Started Is The Biggest Investment
When discussing with your bookkeeper prices, a strategy could be paying them a bit more upfront. Why? It sounds counter intuitive, but you need to understand – the hardest part is getting the system in place and balancing the books.
Especially if you have been in business for some time – going back through old statements and possibly re-classifying old transactions is a nightmare! So pay them for it, and ask that once that initial project is done, to get a lower price per month.
Time, Expertise, Software
So now you should have a more clear idea of different bookkeeping services. Which one is most important to you? Really it comes down to how fast it is done, and how much you communicate with the bookkeeper.
If you’re on a tight budget and don’t need to have the transactions entered right away, month end bookkeeping is the way to go. And a plug for us, we focus on month end bookkeeping and would love it if you can consider our service
Whether you work with us or someone else, we wish you the best in your business. Especially happy you are concerned and learning about keeping your books in order that is the key to a successful operation!
To our mutual business success