Outsourced bookkeeping is gaining ground even as some business owners remain resistant due to misconceptions about hiring an outsourced bookkeeper. Successful outsourcing of bookkeeping can save payroll and overhead costs and free up time that could be more productively applied towards revenue-generating activities.
Multitasking lowers productivity by as much as 40 percent, according to research by the American Psychological Association. Such task-switching not only slows the work process, but the associated stress also increases. So, why not take advantage of readily available assistance?
Application Service Provider Technology
The Application Service Provider (ASP) technology enables an outsourced bookkeeper to access the client’s network. The same technology enables the client to view the information at any time from a connected device. This allows clients to review the progress of business operations at home or on the road.
An outsourced bookkeeping service, or bookkeeper, hosts the selected accounting software, or a web-based one, and keeps it updated and maintained.
Primary Concerns or Misconceptions
Control will be lost with outsourced bookkeeping.
The most common misconception is the business loses control by outsourcing the bookkeeping. Yet, with a properly designed system, the bookkeeper just takes over the tracking of transactions while the business owner retains management control.
Access to accounting data will be restricted.
Customers can access their accounts at any time.
The data will be accessible to others.
No one can access data without permission if the service provider is good. Clients’ data is password-protected. Data transfer is protected by Secure Sockets Layer (SSL) encryption technology. The services provide greater security than businesses normally have with their in-house software and data. The data is also backed up on a real-time basis.
Lose control of data.
With a hosted ASP, data files are owned by the client, who may download them, if the service is discontinued. But, with internet accounting packages like Quickbooks Online and Sage 50cloud Accounting (Peachtree), data transfer of this type is not possible. Hard copy printouts of data files will need to be inputted into in-house software upon discontinuation of service.
Lose control of the money and ability to make decisions.
This is an unfounded concern. In fact, with monthly financial reporting, businesses are better positioned to make financial decisions more expeditiously.
There will be no insurance.
Online bookkeeping services can provide a certificate of Insurance showing you are insured for a certain coverage amount.
Worries about the service will require giving up the CPA.
A bookkeeper’s function is different from the functions of an accountant. Bookkeeping involves a process of eight steps in the bookkeeping cycle of a business, typically in monthly cycles requiring the entering of transactions into a database, making adjustments, and preparing reports.
An accountant has knowledge of the process and uses this information; but, the accountant’s role is interpretive, not the process of performing mechanical tasks.
Requires a long-term commitment.
Service agreements can be from month to month with a 30-day notice of cancellation.
Need to purchase costly computer equipment.
Online bookkeeping can work with any computer that has internet access. Service providers can work with software packages such as QuickBooks and Sage 50 Accounting (Peachtree) or with internet-based accounting packages rented from vendors on a monthly basis.
ASP service will host an application; but, clients need to obtain the license for the software to be used. The ASP service sets it up on its system and clients can access the software and data from any computer with an internet connection.
How it works
ASP technology hosts software that is rented or purchased and then updated and maintained by the service provider. Clients can be assigned a dedicated staff accountant responsible for managing the financials. Bank statements are downloaded, invoices can be sent to customers, and bills can be paid on request. Businesses can mail, fax, scan or email information to the service provider.
Service providers can be flexible and work with clients to develop a process that is more manageable for them.
Business need to be careful in their choice of bookkeeping software
This is because the web-based systems are not as developed as bookkeeping software that is complete applications. Also, data access on discontinuation of service may become problematic. With an ASP vendor, clients use the same software which they would load onto their own computers.
They will always own their data and be able to maintain it with the original software on their own system if they choose to discontinue the service.
They will not be required to re-enter data into their own systems on discontinuation of the service. Having software on an ASP service enables businesses to access their accounting data from any device that has internet access without the need to invest in a network.
The benefits of an outsourced bookkeeper
Small businesses will save money by not having to hire an employee with all the associated costs of employment. There will be a reduced opportunity for fraud or embezzlement with an outside professional examining data for discrepancies.
They will gain access to specialized skills without training or hire employees who can leave and with replacements needing training. They will have access to the knowledge of experts experienced in problem-solving for similar clients.
Businesses can concentrate more on the profitable aspects of the business. The service can provide customized services to accommodate individual needs, such as specific reports at regular intervals. Clients may choose to exclude those services they do not find useful.
The service can be scaled to match the growing needs of an expanding business. If small business owners and managers overcome their misconceptions about hiring an outsourced bookkeeper, they can start reaping the benefits of having one. Service providers offer an array of services to suit every client’s needs.