What’s the Best Bookkeeping Solution for Your Business?
There are plenty of ways to get your books done each month. And every bookkeeping solution has its pros and cons.
Doing your own bookkeeping can save you money, but it will cost you time (and maybe even a few administrative headaches). Outsourcing the task can save you time, but hiring a pro will reduce your bottom line.
To help you find the best bookkeeping solution for your business, let’s examine the options and consider when each is best for your business.
Doing your own bookkeeping is easily the most cost effective way to get your bookkeeping done. Consider taking a DIY approach to bookkeeping when:
- Your business is still in the hobby stage
- Your budget is tight, and you can’t justify hiring a bookkeeper
- Your monthly bookkeeping workload is small and easy to manage
- You have the time and energy to do your books each month
Also, if you’re new to the world of business, saving money isn’t the only benefit of DIY bookkeeping. Doing your own books keeps you firmly connected to your business’s finances. You’ll know when (and where) your money is coming and going. And you’ll learn how to use the information in your financial statements to grow your business.
Before you dive head first into the DIY method, make sure you know what you’re doing (if not, take an online course or ask your CPA for guidance). Accounting errors are easy to make, and they can be expensive to fix.
How DIY Bookkeeping Works
Use basic accounting software or a simple spreadsheet to track your income and expenses. And check that your CPA can work with your DIY system; you don’t want do your own books for a full year, only to find out that you weren’t tracking all of the data you need to file your taxes.
You should also make sure you’re set up to track expenses, deal with small business recordkeeping, handle invoices, and manage payroll (if necessary).
Online Bookkeeping Service
Online bookkeeping services give you the best of both worlds: bookkeepers who do your books, and software to monitor your finances. An online bookkeeping service is a good choice if you:
- Don’t have time to do your bookkeeping (or you’d prefer to spend your time on other areas of your business)
- Have fallen behind on your bookkeeping
- Have made errors doing your own bookkeeping
- Want professional bookkeeping support, but don’t have the budget to hire a full-time bookkeeper
Having professionals do your books will save you time and give you peace of mind. The advantage of working with an online service means that you can store your data securely in the cloud, and access your financials from anywhere, at any time.
How Online Bookkeeping Services Work
Online bookkeeping services connect you with real bookkeepers via a secure, online account. The software and setup provided will generally automate a lot of the legwork involved in sending your financial data to your bookkeeping team. At tax time, an online bookkeeping service may also give you a year-end financial package, which contains all of the financial statements your CPA will need to file your small business tax return.
For example, when you sign up to Bench, you’re paired with a team of professional bookkeepers who gather your data and turn it into tax-ready financial statements each month. You can download your financial statements and message your bookkeeping team with questions via the Bench app. And simple visual reports inside your Bench account help you track and monitor your business’s financial performance.
When you’re shopping around for an online bookkeeping service, consider how easy it is to connect with the bookkeepers. Is the system compatible with your business’s needs? Are they familiar with the specific needs of your business (a good question to ask is: have they worked with other businesses in your niche?) And can you try the service for free before you sign up?
Outsource to a Local Bookkeeper
You can also pay a local bookkeeper to handle your bookkeeping. This is a smart option if:
- You aren’t ready to hire someone in-house, but you’d still like to have in-person meetings with your bookkeeper from time to time
- Your books involve a lot of paperwork, and you aren’t ready to make your business paperless
How Outsourced Bookkeeping Works
Generally, there are two ways to outsource your bookkeeping to a local pro: the freelancer, and the firm.
You can work with a freelance bookkeeper one-on-one to get your books done. Freelance bookkeepers may be able to work online, in-person at your business, or both. It makes sense to hire a freelancer who can visit your business in-person if you have a lot of physical records—for example, paper receipts—and you don’t want to make your business paperless.
You can also outsource everything to a bookkeeping firm. Firms will generally charge more than a freelance bookkeeper. However, a firm may be able to guarantee their service in certain ways, such as staff with bookkeeping certifications. Typically, firms offer their services locally.
A freelance bookkeeper or a firm will operate externally to your business. Try and pick one that offers you secure, immediate access to your financials. For example, choose a freelance bookkeeper who works with accounting software that you are comfortable using.
Another thing to watch out for is security. Make sure the person you hire can be trusted to handle your business’s financial information. Never give a bookkeeper control of your treasury functions. When it comes to handling investments, signing checks, or making online payments or wire transfers, you should be the sole signing authority.
When your business outgrows all of the solutions we’ve covered, it probably means you need to employ an in-house bookkeeper.
According to Entrepreneur.com, it makes sense to bring on an in-house bookkeeper when:
- Your annual revenue exceeds $1 million
- You have more than 30 employees
It’s up to you to determine whether your business can afford an in-house bookkeeper. Their standard pay, according to Salary.com, ranges from $35,223 to $44,620 per year—before taking into account payroll taxes and employee benefits.
If you need in-house support but can’t afford to hire a bookkeeper full-time, consider hiring one part-time, and increasing their hours as needed. Some businesses also bring in a part-time bookkeeper, but assign them additional administrative tasks in order to create one full-time position.
When you’re weighing up your options, keep in mind: the best bookkeeping solution for your business will depend on a variety of factors. Budget. Time. And how willing you are to roll up your sleeves and do the books yourself.
Whichever bookkeeping solution you choose, make sure it delivers accurate financial statements, tax-ready books, and a secure way to store and access your business’ financial records and data.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.