Why Outsource Bookkeeping? The Top 11 Reasons

Outsourcing has become a popular trend among companies of all sizes, including for bookkeeping. Bookkeeping is an essential aspect of any business, but for many employers, it can be time-consuming and overwhelming. 

Bookkeeping outsourcing can be an efficient solution. But why outsource bookkeeping?

In this article, we will explore the top 11 reasons why businesses choose to outsource their bookkeeping tasks. 

Whether you are a small business owner or a startup looking to streamline your financial operations and save money, this article will provide valuable insights into why outsourcing bookkeeping may be the best option for your business.

3 Key Functions of Bookkeeping

There are three key bookkeeping functions: financial recordkeeping, bank reconciliations, and preparing financial statements. Let’s explore them more in-depth:

1. Financial recordkeeping

Financial recordkeeping involves keeping track of all financial transactions, including sales, expenses, and payments. This function ensures that all financial data is accurate and up to date. 

It also involves organizing and categorizing financial data to provide a clear overview of your business’s financial health.

2. Bank reconciliations

Bank reconciliations involve comparing the company’s financial records with bank statements to ensure accuracy and identify discrepancies. This function is crucial in identifying errors or missing transactions. 

It also helps in maintaining the integrity of financial data, which is crucial for any business operation.

3. Preparing financial statements

Financial statements are essential for any business, as they provide a summary of the company’s financial performance. These include income statements, balance sheets, and cash flow statements.

Preparing these statements requires a comprehensive understanding of accounting principles and can be time-consuming.

11 Top Reasons Why You Should Outsource Bookkeeping

So, why outsource bookkeeping services? There are numerous reasons why businesses are choosing to outsource, but we have narrowed it down to the top 11 reasons that highlight the most significant benefits of outsourcing bookkeeping for employers:

1. Cost savings

One of the main reasons businesses choose to outsource bookkeeping is overhead cost savings. Hiring a full-time, in-house bookkeeper can be prohibitively expensive for small businesses and startups trying to save money.

Outsourcing bookkeeping tasks allows you to pay only for the services you need, which can result in significant cost savings.

You can also save on labor costs by outsourcing to regions like Latin America (LatAm), where professional bookkeepers offer more competitive rates.

2. Access to expertise

Outsourcing bookkeeping also provides you with access to experienced and knowledgeable financial experts.

Many external service providers specialize in bookkeeping, often making them more efficient and accurate than in-house staff, who may have limited knowledge and experience.

3. Scalability

As your business grows, so will your bookkeeping requirements. Outsourcing allows you to scale up or down quickly without worrying about hiring and training new employees. 

Bookkeeping firms have the resources and flexibility to handle changes in your business’s size and complexity. This scalability is especially beneficial for small businesses and startups that may experience fluctuations in their bookkeeping needs.

4. Focus on core business

Managing bookkeeping can be a time-consuming task, taking away valuable time from focusing on core business activities. 

By outsourcing bookkeeping, you can free up your time and resources to focus on other critical aspects of your business, such as sales, marketing, or product development. This allows for better decision-making with more time to analyze financial data provided by the outsourced bookkeeper.

5. Improved accuracy

Bookkeeping requires attention to detail and accuracy. By outsourcing bookkeeping, you can rest assured that your financial records are being handled by skilled professionals with the necessary expertise and experience in bookkeeping.

This reduces the chances of errors or mistakes, ensuring accurate financial data for strategic decision-making.

6. Enhanced security

Outsourcing bookkeeping tasks means entrusting sensitive financial information to professionals who have advanced security measures in place.

This includes secure servers, firewalls, and data encryption to protect your business’s financial data from cyberthreats. This level of security may be challenging for small businesses to achieve on their own.

7. Access to advanced technology

By outsourcing bookkeeping, you gain access to the latest and most advanced bookkeeping software and tools, such as QuickBooks Online, without having to invest in them yourself.

Outsourcing firms often have dedicated teams that continuously update their systems, ensuring your business benefits from the best technology available.

8. Compliance and financial reporting

Bookkeeping providers have a deep understanding of compliance regulations and can help ensure your business stays compliant with tax laws, payroll regulations, and other financial reporting requirements.

By outsourcing bookkeeping, you can rest assured that your books are accurate and up to date.

9. Flexibility

Outsourcing bookkeeping offers flexibility in terms of services and costs. You can choose to outsource specific tasks or your entire bookkeeping process, depending on your business goals and budget. 

This allows you to customize the financial services you receive and only pay for what you need. And, as your business grows, you can easily scale up the services provided by your bookkeeping firm without having to hire additional in-house staff.

10. Reduced risk of fraud

Occupational fraud costs over $4.7 trillion annually worldwide, and bookkeeping tasks can be susceptible to fraudulent activities.

By outsourcing bookkeeping, you can reduce the risk of fraud, as most reputable bookkeeping firms have strict security measures to protect their clients’ financial data.

11. Better cash flow management

Outsourcing bookkeeping can help you manage your cash flow more effectively. Bookkeeping professionals can provide timely and accurate financial reports, allowing you to make informed decisions about your business finances.

This can ultimately lead to better financial management and increased profitability for your business.

What To Consider Before Outsourcing

Now that we’ve gone over why outsourcing bookkeeping may benefit your business, it is essential to understand what factors you should consider before making this decision.

Choose the right outsourcing location

When outsourcing bookkeeping, it is crucial to choose the right location. Not only can this impact the quality of work, but it also affects communication and time zone differences. 

LatAm, for example, has become a popular choice for outsourcing bookkeeping due to its skilled workforce, time zones similar to those in the United States, and competitive pricing.

Evaluate potential bookkeeping providers

Before outsourcing, it is essential to evaluate potential bookkeeping providers thoroughly. Look for a reputable and experienced provider with a track record of delivering high-quality services.

You can also ask for references or read online reviews to ensure you are making the right choice. Additionally, consider their pricing structure and the range of services they offer to ensure they align with your business objectives.

Ensure data security

Given that 86% of data breaches are financially motivated, the security of your business’s financial information should be a top priority. Before outsourcing, make sure that the provider has robust data security measures in place to protect your sensitive data.

Ask about their encryption methods, backup processes, and disaster recovery plans to ensure your data is safe in their hands. Reputable bookkeeping providers usually give you a detailed security plan and address any concerns.

Technology integration and compatibility

Another crucial factor to consider is the technology and software used by the bookkeeping provider. A seamless integration of systems will make it easier for you to access and manage your financial data.

Make sure their systems are compatible with your business’s current accounting software, or if they use their own, inquire about its features and capabilities.

How to Choose the Right Bookkeeping Service Provider

Here are a few criteria that you should consider when selecting a bookkeeping service provider:

• Specialized expertise and experience: Look for a service provider with experience handling bookkeeping tasks for firms similar to yours. A knowledgeable and experienced provider will ensure accurate and efficient management of your financial records.
• Technology and tools: Make sure that the service provider uses modern technology and tools to manage your books effectively. This can help streamline financial processes, increase accuracy, and provide real-time insights into your company’s financial health.
• Data security: The service provider should have robust data security measures to safeguard your financial information from potential threats.
• Flexible services: Choose a bookkeeping service provider that offers flexible services, allowing you to customize the level of support you need and pay for only what you use.
• Cost efficiency: While cost shouldn’t be the sole deciding factor, it is essential to choose a service provider that offers competitive pricing without compromising on quality and to account for any hidden costs. 

Final Thoughts

If you’ve been wondering why you should outsource your bookkeeping, the numerous benefits it can bring to your business are the answer. 

From cost savings and access to expertise to freeing up time for core business activities, it is clear that the advantages of this solution often outweigh any drawbacks.

If your next step is finding an outsourcing partner, check out our article on the 10 best bookkeeping outsourcing services, or learn more to prepare for your outsourcing journey with our post on key considerations for effective offshore bookkeeping.