A New Approach To Bookkeeping - Outsourcing

The corporate world seems to be going through a unique phase and this has definitely created a sea change in the way companies conduct their businesses. Even though the size and nature of each business vary, one area that has always assumed importance is the accounting or the bookkeeping department. This special section is one of the most prominent parts of an organization and holds an important say in determining the financial decisions and their implications pertaining to the company.

Given the kind of importance that this department has in any organization, it is natural that people working in this department are expected to be intelligent and highly efficient. They are usually well-versed in the various aspects of accounting and financial planning. However, as per the recent trend, businesses find it worthwhile to take up bookkeeping assistance from an outside firm. This has happened because the cost of hiring such people is on the rise and has become a drag on the company resources. Such circumstances have led to steps like outsourcing accounting services to reputed bookkeeping firms.

Outsourcing the bookkeeping functions implies that you are hiring another firm to keep a tab of your company transactions. In other words, you are delegating the responsibility of up-keeping your financial records to an outside agency instead of having your own staff do the job. By following this practice, companies have been able to substantially reduce their costs. Though many may have shied away from this practice for fear of third party misuse of the information they provide, many companies have of late, joined the bandwagon.

This may seem a new thing to most people, but it is not so to many companies who have been doing it for quite some time. An increase in the number of companies following this example proves that there is indeed some sense in doing it. The primary reason for outsourcing is that, when a company is outsourcing its activities, it can drastically reduce the labour cost associated with it. The company saves a lot in terms of administrative costs when these activities are performed in-house. The company doesn’t need to worry about giving higher emoluments for a work, which can be done at a much lesser cost.

In order to get the most out of bookkeeping outsourcing, the company has to choose a bookkeeping firm which has got sufficient experience and qualified personnel to handle different types of business accounts. In today's competitive world, every organization who wants to re-invent itself is seeking bookkeeping assistance from an outside service provider to keep up with the changing business strategies around the world. For small businesses, a sensible strategy to gain the expertise of a bookkeeper and the auditing skills of a CPA will be to hire a bookkeeper to complete the daily entries; and at the same time, to hire the services of a CPA either monthly or quarterly to ensure that everything is in place.

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Bookkeepers and Accountants Choose Double Entry Bookkeeping for Accuracy

Double entry bookkeeping stretches back centuries perhaps even as early as the 12th century and is now accepted worldwide as the accounting standard to be employed by all companies in recording the financial accounting records. The first written explanation of the accounting system was reportedly by a Venetian mathematician Luca Pacioli towards the end of the 15th century.

The accounting industry has grown somewhat since then and today contains many technical words known but largely ignored by non accountants. The understanding and desire to understand accounting terms is further confused by the banking industry while adopting double entry bookkeeping as standard use what appears to be diametrically opposed terms in the presentation of information to their customers.

In accounting terms an asset such as money in the bank is a debit balance while bank customers are told if they have money in the bank it is a credit balance. This arises because what the bank is really saying is when a customer has money in the bank that the balance represents a creditor to the bank as it owes the customer money and is a creditor in the banks books. Hence the bank describes the balance as a credit balance.

The simplest way to understand double entry bookkeeping is the understanding that every financial transaction has a double effect. One effect is to change the profit and loss of the business with sales income increasing the financial profit and purchases reducing the financial profit. While the double entry is that every profit and loss transactions also has a balance sheet effect in either increasing assets or increasing liabilities.

In more complex accounting areas such as journal entries or bank transactions both sides of a transaction may have no impact on the profit and loss account as both sides of the double entry effect the value of balances in the balance sheet. For example when a creditor is paid the bank balance reduces and the amount owed by the business reduces by the same amount.

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Outsourcing Your Bookkeeping - Advantage

The importance of doing proper bookkeeping in any type of business is not in question. There are many benefits to be accrued from doing so but the main ones stand out - find out what you and your business stand to gain.

The foremost advantage about outsourcing bookkeeping services is that your business gets to save money. The very notion that money can be saved may spark incidences where poor decisions can be made; what is important is to ensure that you always seek persons who can offer quality, this is the only way in which you will get your money’s worth. Another very vital advantage that is worth considering is the fact that you won’t be required to pay for the myriad of costs that come with hiring a full-time bookkeeper including the employers payroll tax expense or the workman’s compensation.

Before you make the final decision to hire a particular bookkeeper on an outsourced basis, it is prudent that you pay attention to the figure that the prospective bookkeeper will quote when stating their fees. This is one test of ensuring that the person you are hiring really understands the intricacy of the work at hand. The well informed bookkeeper will charge a fee in the range of at least three times what the hired bookkeeper is paid. The reason for this is that they have to fix in costs that will cover or compensate for lost fees that they would otherwise be paid if they were in full-time employment.

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Bookkeeping Outsourcing: Leading the World to Higher Profits

Bookkeeping, as we all know it is a very mundane task. What people think is that bookkeeping is the same as accounting but they are very different. Bookkeeping means recording of the transactions in various books. Daily transactions like a sale has a multiple transactions, first it going in the sales book and gets recorded as sales, then it gets deducted from the inventory that one has, third it should go into the cash account if its cash sales or should go into the debtors accounts if it is credit sales. All this makes the task not only tedious but also if one forgets on small detail like entering the numbers into a particular book the entire balance sheet would go for a spin. All this makes book keeping a very minute task and hence makes it mandatory for business houses to opt for bookkeeping outsourcing.

The reasons why business houses would opt for bookkeeping outsourcing are plenty. A few of them are explained as under.

First book keeping requires the staff to minutely record all entries and if they are lethargic or bored or absentminded then they could make a mistake of recording a wrong amount or recording the entry in the wrong book. This would turn out to be added work for the owner and create stress and tension. Hence the staff should be able to concentrate at all times. This does not happen as there are various distractions in the work place.

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