Many small businesses start with a shoestring budget. If you are one of them, it’s highly recommended that you take up the mantle of being your own virtual bookkeeper. Usually, bookkeeping applications like Fincent or Quickbooks would be enough for your bookkeeping requirements.
However, your business will eventually reach the point where you must shift your full attention to strategic and other important stuff, not day-to-day operations like creating invoices and keeping records of transactions.
That’s the moment you want to hire a bookkeeper.
In older days, your local bookkeepers were the only choices. However, you can have virtual bookkeepers who are as skilled as their local counterparts. On top of that, they have some distinct advantages.
In this article, we will peep into what you can expect from a virtual bookkeeper, how to screen for one and what values he/she brings to the table.
As the name suggests, virtual bookkeepers do the same work as their local counterparts, at least in the broader sense. They take care of day-to-day financial tasks such as recording transactions, bank account reconciliation and processing payroll. Here is a bigger list of responsibilities that fall under their services:
- Quickbook management:
- Keeping books of accounts up-to-date
- Setting up auto-reminders and payments
- Data entry
- Keeping track of all the transactions
- Classifying those under correct ledgers
- Maintaining documentation of transactions
- Summarizing records.
- Accounts payable management
- Timely payment of invoices
- Vendor/consultant management
- Keeping an eye on expenses
- Maintaining purchase order generation
- Account payable aging analysis
- Account receivable management
- Maintaining customer records
- Provision creation
- Account receivable aging analysis
- Generating invoices
- Debit/credit notes
- Bank account reconciliation
- Credit card reconciliation
- Vendor payment reconciliation
- Financial statements
- Balance sheet
- Cashflow report
- Profit & loss statement
- Custom reports
Since the whole communication takes place online with zero chance of in-person interaction, any decent virtual bookkeeper pays extra attention to address any issue and communicate effectively. Also, some virtual bookkeepers specialize in a specific industry. So they tend to offer tailored services to businesses from that industry.
However, your virtual bookkeepers won’t do collection, financial forecast, coding transactions etc. Therefore, you should contact a CPA for financial services outside of a bookkeeper’s expertise.
Depending on their business model, virtual bookkeepers choose either of these two career paths:
Freelancers and Bookkeeping services.
There is no shortage of individual freelancers offering online bookkeeping services. You can find them on Linkedin, Facebook groups, freelance platforms like Fiverr and even local directories.
The biggest pros of hiring freelancers are lower overhead costs and flexibility. In most cases, skilled freelancers cost less than reputed agencies. For smaller businesses with a tighter budget, that extra money saved can make a difference.
Also, freelancer contracts are flexible and may not require a long-term commitment. It makes them perfect for ad-hoc projects. Small businesses still learning to manage their cashflows appreciate this flexibility as they get to pay only for the occasional service they requested rather than being bound by a legal contract.
On the downside of things, sometimes it’s hard to find the right freelancers. Enough businesses have been burned by self-proclaimed experts without actual skills. So if you want to hire freelancers, make sure they have experience in your industry and evidence of past successes ( reviews, recommendations from others etc.).
Also, your business relationship with a freelancer has a higher chance of ending sooner because of disagreements and differences in methods. Freelancer experts are solopreneurs, so they can’t bring another expert and solve the issue.
Bookkeeping and accounting agencies are an alternative to freelancers.
Agencies often house a band of experts with various backgrounds. Their cumulative knowledge of accounting, taxes and business structure makes agencies better equipped to handle more sophisticated financial needs compared to average freelancers.
Agencies also offer a far wider range of services because of their bigger teams. They often hire experts with different skill sets. Thus agencies can offer more specialized services with a far greater industry focus.
For small businesses, hiring virtual bookkeepers ( be it an agency or freelancers) puts less strain on the budget.
Salary.com estimates the average salary of a US-based in-house bookkeeper lies in the $37,648 to $47,101 range. If you calculate taxes, benefits and other factors, the cost to the company will be even higher than that. Also, those numbers can go up with the experience of your candidate.
On the other hand, based on freelancers’ rates on Upwork, the $20-$80/hr range is the standard. And you will pay your online bookkeepers only for the productive hours, with no employee benefits or extra hidden charges. If you do the math, it’s significantly low-cost, even if you hire experienced ones.
Agencies will cost you some more and there could be monthly recurring charges involved. However, you will still save some serious cash.
Vouchercloud polled 1989 employees and found something very interesting:
Only 2 hrs 45 mins from an 8 hours work day is productive.
In employees' defense, they unintentionally lose some chunks of precious time while coordinating with others, communicating and engaging in normal human activities like eating or taking a break.
Such “leaks” of productive hours are normal but cost you anyway.
However, if you want to plug those leaks, hiring virtual bookkeepers is a great solution. When you hire one, you pay only for productive hours, not for time lost on other activities. So if you consider the output-working hour ratio, virtual bookkeepers are significantly more productive.
If you are a small business with team members you can count on your fingers or a fast-paced startup; conventional business practices may not apply all the time.
For instance, one of your social media campaigns goes viral, and you end up receiving overwhelming numbers of orders overnight. Can you respond to that immediately while keeping order? Such unpredictable situations are common for small businesses and new start-ups.
Now it’s hard to address such challenges with 9-5 commitments alone without violating professional boundaries. However, with a bunch of virtual bookkeepers, you can quickly deal with a sudden change in transaction volume, odd hours and hard-to-navigate financial situations.
Do you need a bookkeeper knowledgeable of foreign tax laws and practices? A virtual bookkeeper is a solution. Need someone to reconcile your accounts at an odd hour? Virtual Bookkeepers can help.
In some cases, an expert virtual bookkeeper can help businesses by covering the gaps in business owners’ financial knowledge.
You probably have noticed many job posts on Linkedin stay open for months. There is a good reason for that: 75% of companies struggle with a talent shortage. In other words, even after weeks of making job listings, reading resumes, scheduling interviews and preparing assignments for interviews, you may not even find the right talent at all.
And, of course, those weeks of back-breaking work will drain a significant amount of productive hours, irrespective of your success in finding the right candidate.
So instead of going through that grind ( unless you have a good reason), consider hiring a virtual bookkeeper.
You can easily choose a freelancer based on his/her previous work and testimonials. And if it doesn’t work out, you can replace him/her with another suited one.
If you go for an agency, you need not worry about the hiring process either. Agencies have high standards and have already picked the right experts for your needs.
Long story short, with virtual bookkeepers, you can get similar quality services without the hassle of hiring an in-house one.
Even if you don’t hire and go for a local freelance bookkeeper, you have limited choices to pick from.
Chances are, your local bookkeepers may not be well-versed in many things, such as foreign tax laws, businesses serving a very niche market or startups with unconventional business models. If you are extremely lucky and find some potential local options, their numbers will be very low.
However, once you set your eyes on virtual bookkeepers, choices are limitless. Freelancers, agencies and even remote in-house bookkeepers- you will have a far greater chance of finding the right candidate online, no matter how unconventional your needs are.
You might see a surge in sales numbers during the holiday seasons or during the successful growth phase. It’s hard to find a new bookkeeper for such occasions. Even your local bookkeepers might not step up as they might ask for a contract for a longer period.
However, you can certainly scale up with a few online freelance bookkeepers. As discussed above, freelancers are a lot more forgiving when it comes to contract terms. You can easily hire multiple virtual bookkeepers during the surge to support you. Once you no longer need their services, you can temporarily part ways without any strings attached.
Hiring any virtual bookkeeper requires some planning on your part. Here are some steps you can follow to ensure a smooth onboarding:
First, figure out how much work you can do yourself using a bookkeeping app like Fincent and what you want to outsource. For example, When your profit hasn’t increased proportionately with sales, you might need to examine financial statements. However, if you don’t know which statement you should look for (and how to create it), you need someone for that.
Also, you want to retain your virtual bookkeeper if both parties are a good fit. For long-term compatibility, you also need to consider your “not-so-immediate” requirements. For example, you might need help during tax season. So, take that into account while looking for your virtual bookkeeper.
Once you clearly understand your requirements, it's time to research your options. Here are some factors to consider:
How does your potential virtual bookkeeper want to communicate? Some might stick to weekly meetings, whereas others might be somewhat flexible in that regard. Also, some bookkeepers are comfortable with elaborate zoom meetings where documents can be screen-shared. On the other hand, some might prefer phone calls and emails only.
Your virtual bookkeeper would have access to your confidential financial information. Therefore, you should ask about how they handle the data. Ideally, your bookkeeping service provider should be open to signing an NDA ( non-disclosure agreement).
However, you should discuss in detail the terms and conditions.
Enquire which bookkeeping/accounting software your prospective bookkeeper is comfortable with. Your virtual bookkeeper should be able to utilize the accounting software you use for bookkeeping.
Some professionals offer extra services ( custom report generation, for instance) for additional fees on an as-needed basis. Others prefer to charge their clients by hours. Depending on your unique requirements, you can opt for either.
Once you determine your top choices, try them out with either a free trial or a very short contract. Short-term contracts are preferable as those allow you to test their services without a big financial investment while avoiding coming across as a “red flag” client who wants free stuff only.
During the onboarding process, you might need to set up your account and provide your bank details before handing it over to your new bookkeeper. However, if the person has a good reputation and signs an NDA, you need not worry.
Freelancers and bookkeeping agencies take many key financial responsibilities off your plate. On top of being as skilled as local bookkeepers and in-house bookkeepers, virtual bookkeepers are more productive, affordable and scalable.
If you are clear about your expectations and screen hard based on your requirements, you will find the right match in no time. Of course, a bookkeeping application like Fincent can do most of the heavy lifting. However, when you combine the experience of a seasoned virtual bookkeeper with the effectiveness of Fincent, all of your bookkeeping-related challenges melt away.
Also, if you are a Fincent user and need some help with taxes then look no further. Fincent offers tax services with additional fees. If you didn’t sign up already, book a demo here.
Fincent: Your Business's Personal Financial Wizard - From Bookkeeping to Tax Filing