make so many transactions that they need a separate accounts department. In most cases, the records are maintained by the sole trader. Account books are maintained in the office and are updated at
the end of the day for most emerging businesses.
But, as your business continues to grow, you will need to think about hiring an actual accountant for the job. The accountant will be responsible for maintaining the books of accounts and making sure that all internal and external transactions made by the company are recorded. Internal transactions are those that are made within the office such as clearing vouchers for petty cash, making salary payments to employees, and withdrawing capital for personal use. All transactions must be recorded in separate accounts.
What is Bookkeeping?
The term “bookkeeping” mainly refers to the management of the financial affairs of any entity. A bookkeeper might not be a certified accountant, but should have appropriate knowledge of how to update the accounts and make journal entries. All records need to be properly maintained in case of an audit. The IRS or the authority responsible for collecting taxes might need business owners to show their books of accounts if they have a doubt about the tax returns that were filed.
Every company creates financial statements by the end of the financial year. These documents are used by the company to compare past performance and to see whether the business is growing or not. Investors use the financial statements to decide whether they should invest in your company or not.
At some point, you might have to think about bringing on an investor to help your business grow. The injection of capital could significantly improve the rate of growth and allow you to multiply your profits dramatically. These are just some of the reasons why bookkeeping is essential for emerging businesses.
The Problem
This leads us to a small issue: most businesses can’t afford to pay the amount of money that’s needed to set up and then run a separate accounts department. Almost all profits generated by small businesses are reinvested in the company for the production of new inventory.
Accountants need a separate space to work in. You will also have to invest money in developing a software program that the accountant can use or buy a license for a multipurpose accounting program. Rather than spending so much money on setting up a separate accounts department, a better option would be to set outsource your accounting requirements to another company altogether.
There are many companies that offer tailored accounting service to emerging businesses. You can use their services to make sure that your accounts are all updated and tallied. It doesn’t even cost a great deal of money, thus acting as a double benefit for business owners.
The Benefits of Outsourced Bookkeeping
There are many different reasons why you should consider outsourcing as a genuine option for your accounting problems. Before we proceed further, it’s important for you to understand exactly how outsourcing works. When you outsource the service to another company, both parties will first have to sign a confidentiality agreement. This agreement ensures that your financial information will not be leaked to other parties.
Once the contract has been signed, the company will assign an agent to take care of all your accounting needs. The company will update all financial records as soon as a transaction occurs. At the end of the month, you will receive a comprehensive financial report highlighting all major transactions. Outsourcing offers plenty of benefits to business owners. Here are a few.
Price
One of the biggest reasons why so many businesses prefer to outsource their accounting needs is because it’s such an affordable service. When compared with the alternative of setting up a separate accounts department and hiring an accountant to maintain balances, it would be better to outsource the services to a professional company. All you have to pay is a monthly fee for making use of the company’s services. You can even sign a contract for a longer duration, and the company might discount the price if you sign a longer contract.
Professionalism
There are many companies who hire untrained bookkeepers in a bid to save money. While that seems like a wise move, it’s important to know that untrained accountants might make several errors. They are likely to miss out on transactions and may not know the right format for publishing the financial statements. You don’t need to worry about this issue if you hire a professional accounting firm to manage your transactions. The company will make sure that all accounting transactions are recorded in their respective accounts, and that none are missed. As your business continues to grow, you will be dealing with several debtors and creditors in a day. It’s easy to miss out on different transactions unless you have a professional and experienced accountant working for you.
Depreciation and revaluation will have to be calculated from time to time as well, so it’s important that you hire somebody with experience. Outsourcing minimizes the burden on your company’s payroll and you don’t even need to worry about extending any benefits to the accountant. It’s a fantastic opportunity for business owners who are looking for an affordable yet viable alternative.
The amount of money that you save from outsourcing can then be reinvested into your business. It will allow you to improve your company’s core product offering and also cater to customers in a better manner. It’s an excellent business decision for entrepreneurs who want to maximize their company’s profits without having to spend a great deal of money. Many businesses fail just because they are unable to cut essential costs. By outsourcing, you will be able to save a great deal of money!