Thinking of setting up accounts payable automation for your startup or small business? These best practices will help you streamline your processes.
September 22, 2020
As a startup business owner, it often makes sense to minimize costs by directly managing your own bookkeeping tasks when you’re first starting out. But as your startup grows, the time and expertise it takes to properly complete your bookkeeping each month means you’ll inevitably engage a bookkeeping professional. If you’re at this stage, you’re likely wondering: Which type of bookkeeping solution works best for startups?
Most early-stage startups and small businesses have too few transactions or administrative tasks to require a full-time bookkeeper. Instead, the majority choose one of these two common options:
Both of these solutions cover your basic bookkeeping tasks, such as recording transactions, reconciling bank and credit card accounts, and managing accounts payable. But the main difference between hiring a bookkeeper and outsourcing your bookkeeping is that an outsourced bookkeeping service provider gives you access to an entire team of experts. This is important because the services each individual bookkeeper can offer are limited according to their skill set, the tools they’ve worked with, and the time they can dedicate to your business. If they are unfamiliar with a specific transaction type or accounting process, they may not be equipped to handle it properly.
Because outsourced bookkeeping solutions have multiple bookkeepers, accountants, and finance experts on staff, they have broad-based experience with different stages of companies, industries and types of transactions; as a result, they are in a better position to review and troubleshoot a wider range of situations than an individual bookkeeper can. For startups, this key difference produces four major benefits of outsourcing bookkeeping.
As your startup grows and evolves, your bookkeeping solution will need to scale along with it. Because most outsourced bookkeeping teams have access to experts on multiple topics, they can easily accommodate your changing bookkeeping needs. At first, your startup may just need someone to manage your accounting software and perform routine bookkeeping tasks. As your finances become more complex and you need extra support, many finance firms that offer outsourced bookkeeping also have the expertise to offer accounting services and CFO services as needed.
While a part-time or in-house bookkeeper may have a keen understanding of your type of business, you may face hurdles as your business expands into new areas. For example, if your core focus is a B2C product and you expand into offering B2B products, your part-time bookkeeper may not have the experience or skill set to accurately set up the bookkeeping systems required to support your B2B business operations. You’re then faced with the prospect of either hiring another bookkeeper who can cover the B2B aspects, or finding a replacement bookkeeper who can do both. In contrast, if you choose a team of outsourced bookkeepers with experience across different business verticals, they’ll be fully equipped to update your accounting and bookkeeping operations to suit your new business plans.
It can be difficult to find a high-quality bookkeeping expert in your business vertical to hire on a part-time basis, and, particularly in the early days of your startup, it’s tempting to hire a less experienced bookkeeper to keep costs low. We’ve seen many businesses switch to outsourcing bookkeeping after missing out on opportunities because their part-time bookkeeper wasn’t familiar with the particular requirements of their industry. When you work with an outsourced bookkeeping firm, you get the advice and oversight of their senior bookkeepers and experts in your vertical, without the cost of hiring them individually.
The amount of time you get with a part-time bookkeeper will be set in their contract; outside of these hours, they’ll be focused on other clients. This can be a problem if time-sensitive bookkeeping tasks (such as responding to customer requests or delivering up-to-date financial reports during a fundraising process) come up when your bookkeeper isn’t available. You may end up waiting days for a response, or taking valuable time away from core business priorities while you step in to handle these tasks yourself.
When you work with an outsourced bookkeeping solution, you can contact the team and have someone deal with your request at any time during regular business hours. Some solutions even offer extended hours so you can get answers to your questions, no matter what time it is.
In addition to having less restrictive contact hours, outsourced bookkeeping solutions can also be more flexible about the amount of work that needs to be completed each month. As your transaction volume increases or your business finances become more complex, it may become more than a part-time bookkeeper can tackle within their set hours, but still not enough to require a full-time or in-house bookkeeper. An outsourced bookkeeping service will have the capacity within their team to cover your bookkeeping needs.
Whether you work with a part-time bookkeeper or an outsourced service, your bookkeeper will lay the groundwork for a smooth tax preparation and filing experience. Having a team of bookkeepers can help here: They’ve likely had extensive experience preparing for tax filing, and will have the bandwidth to get your books ready ahead of time.
Your virtual bookkeeping team will ensure that your expenses and transactions are properly categorized and your documentation is organized and readily available, so your books are up to date and ready for the tax accountant to process. When your bookkeeping service delivers the tax packet, the accountant won’t need to waste time looking for missing financial information or sorting inaccuracies, and you can be confident that you won’t be leaving money on the table.
Zeni is a full-service finance firm that provides bookkeeping, accounting, and CFO services for startups and small businesses. Whether you’re looking for a service that manages your every financial function (bill pay and invoicing included!), a senior finance expert to put together budgets and projections, or advice on filing your annual tax return, Zeni’s complete solution has you covered.
Advanced bookkeeping practices are the basis of what Zeni does, and are included in all our service plans. Our customers tell us they prefer Zeni to other startup bookkeeping solutions because they get the following benefits: