How does outsourcing bookkeeping work?
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Outsourcing bookkeeping is essentially delegating the day-to-day recording and management of your company's financial transactions to an external individual (a freelance bookkeeper) or a specialized firm.
It is a streamlined process built on secure digital access, clear communication, and defined roles. Bookkeeping Services in Cleveland. Here is a breakdown of how the process works in a human-readable, step-by-step format.
1. The Setup: Defining Needs and Granting Access
The process begins with a partnership and setting up the digital infrastructure.
Needs Assessment: First, you define what tasks you need help with. This could range from basic transaction categorization and bank reconciliation to full-suite services like payroll and accounts payable/receivable management.
Provider Selection: You research and choose a provider (firm or freelancer) that has expertise in your industry and is compatible with your current technology (e.g., QuickBooks Online, Xero).
Secure Onboarding: Once the contract is finalized, you grant the bookkeeper secure, remote access to your essential financial systems. This includes:
Bank Feeds: Secure, read-only connections to your business bank accounts and credit cards to automatically pull transaction data.
Documents: Access to a secure, cloud-based platform (like a shared folder or a client portal) where you can upload receipts, invoices, and other source documents.
Accounting Software: Access to your cloud-based accounting software (e.g., QuickBooks or Xero) for them to do the actual work.
2. The Day-to-Day: The Bookkeeper's Role
The bookkeeper’s team takes over the time-consuming, detail-oriented work, often using sophisticated automation tools.
Transaction Categorization: They categorize every single transaction pulled from your bank feed. For example, ensuring that a payment to a utility company is correctly classified as an "Expense: Utilities."
Bank Reconciliation: They match the recorded transactions in your accounting software with the official bank statements to ensure every penny is accounted for and the balances are correct. This is a critical check for accuracy.
Expense & Bill Management:
They manage Accounts Payable (paying vendor bills).
They manage Accounts Receivable (tracking and often sending invoices to customers to collect payment).
Source Document Management: They use expense apps or the cloud platform to match all receipts and invoices to the corresponding transactions, ensuring your records are auditable and compliant.
3. The Monthly Deliverable: Reporting and Review
The process culminates in a review phase that helps you understand your business's financial health.
Month-End Close: The bookkeeper performs the final checks and adjustments to "close the books" for the month, ensuring all data is accurate.
Financial Reports: They deliver your key financial statements, including:
Profit & Loss (P&L) Statement: Shows your revenue and expenses for the period (your profitability).
Balance Sheet: Shows your assets, liabilities, and equity at a single point in time.
Statement of Cash Flows: Tracks where your cash came from and where it went.
Review Meeting: Most high-quality providers will schedule a brief monthly or quarterly meeting to review these reports with you, answer questions, and provide context and insights into your financial performance.