Bookkeeping is just as important as the business itself. Along with providing an accurate picture of a business’s performance, bookkeeping also helps ensure compliance and allows owners to make informed, data-driven business decisions. While hiring an in-house bookkeeper has its advantages, outsourced bookkeeping services can help reduce many business risks.
To understand how outsourcing can reduce business risks, you first need to understand what these services are and how they work.
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What Are Outsourced Bookkeeping Services?
Outsourced bookkeeping services are third-party professionals that handle most or all of the tasks that an in-house bookkeeper would handle, including:
- Accounts receivable
- Accounts payable
- Transaction coding
- Financial reporting
These service providers have teams of professionals who focus only on bookkeeping or accounting services, making them experts in the field. We also offer payroll services alongside our bookkeeping services, so we will also include that in today’s article. However, it’s important to note that your outsourced bookkeeper may or may not provide payroll services.
When outsourcing, businesses gain the advantage of having an experienced team of knowledgeable professionals handling their bookkeeping without taking on the costs and risks of hiring in-house.
Along with offering cost savings, virtual bookkeeping services can also help reduce business risks.
6 Ways Outsourced Bookkeeping Services Reduce Business Risks
1. Reduce Employee Errors
Even if you hire a highly experienced bookkeeper, there is still a risk of human error. Errors can lead to penalties, fines and other consequences.
Outsourcing won’t eliminate the risk of error completely, but it can greatly reduce it. When you use reputable bookkeeping and payroll services online, you can rest assured that a team of professionals will be handling your accounts. These service providers have checks and balances to help ensure accuracy. Often, more than one person is watching over your account.
2. Help Prevent Cash Flow Issues
Cash flow is the lifeblood of a business, but errors in bookkeeping or financial reports can lead to cash flow shortages. Having an accurate picture of your cash flow and being able to create reliable forecasts can help you plan for potential shortages before they put you in a bind.
Virtual bookkeepers can help you:
- Monitor your cash flow
- Create statements and forecasts
- Help you develop strategies to avoid cash shortages
Outsourced bookkeepers can also help with cash flow by ensuring that your business gets paid in a timely manner. As a business owner with so many tasks, it’s easy for receivables to fall to the back burner. But failing to send invoices promptly only delays payments and has a negative effect on your cash flow in the long run.
When you work with an outsourced team, you can rest assured that invoices will be sent out right away. The quicker invoices are sent, the quicker your business will be able to replenish its cash reserves. Depending on your agreement with your outsourced team, they may also be able to help with collecting past-due invoices.
3. Reduce the Risk of Non-Compliance
Tax laws change every year. In 2022 alone, there were many changes to tax laws and regulations.
Staying compliant with tax laws and regulations starts with the foundation of good bookkeeping. Without clean and accurate books, it’s impossible to produce an accurate, compliant tax return. When using a reputable bookkeeping company, they will ensure you’re books are up-to-date and support you in having an accurate, compliant return.
4. Better Understanding of Your Costs
When you use bookkeeping and payroll services online, you get a complete and accurate picture of your business’s actual costs.
Outsourced providers can help you understand your true costs of labor and job costing so that you can optimize your pricing, reduce your expenses, and – hopefully – improve profits. They can also help you identify which clients or customers are costing you more than they are worth, so you can take action. Taking action may mean “breaking up” with the client or amending your pricing to restore profitability.
5. Reduce the Risk of Fraud
A recent survey from PwC shows that 46% of organizations reported experiencing fraud or other economic crimes in the last two years. Often, fraud is committed by employees. And if you have a sole bookkeeper with no controls or checks and balances in place, there will always be a risk of fraud.
Fraud can start with a fake expense or invoice and evolve over time. If left undetected, this activity can go on for months or years and do serious damage to a business’s finances.
Outsourcing your bookkeeping won’t eliminate the risk of fraud entirely – nothing can – but having a separate service provider handle these tasks can reduce it. Why? Because there will be checks and balances in place as well as controls to help reduce the risk of fraud and ensure accuracy.
When there are many sets of eyes reviewing your records and books, there’s a greater chance that someone will catch suspicious activity before it has a chance to do serious damage.
Outsourced teams have their reputation and livelihood to consider. Fraud would jeopardize both of these things.
6. Ensure Your Financial Data is Always Up to Date
Virtual bookkeeping providers specialize in bookkeeping and accounting services. They have teams of professionals working on their clients’ accounts. Because they focus only on these services, they have the time and manhours to ensure your financial data is always up to date.
An in-house team may not have the ability to keep up with growing demands and generate accurate financial reports in a timely manner. If you don’t have access to the most up-to-date and accurate data, you run the risk of falling under poor financial management.
Final Thoughts
Outsourcing your bookkeeping comes with many advantages, including time and cost savings, but it can also reduce business risks. From reducing employee errors to reducing the risk of fraud and better understanding your business’s performance, there are many reasons to consider outsourcing your bookkeeping.
To learn more about how we can help with your bookkeeping, schedule a call today.
