Why should you consider outsourced bookkeeping for your ecommerce business?
We’re going to help you answer that by sharing insights and best practices related to hiring a remote book management team.
What is Outsourced Bookkeeping?
Definition and Explanation
This process involves hiring or partnering with a third party to handle your bookkeeping. This third party can be an individual freelancer, independent contractor, a team or ecommerce accounting firm.
In house bookkeeping, on the other hand, involves hiring someone as an employee. This means providing for their benefits, office space, salary, etc.
Types of Outsourced Bookkeeping Services
Full-service bookkeeping
Full service bookkeeping means financial record-keeping from A-Z. This means everything from bank reconciliation and expense management to creating financial statements and reports and all that’s in between.
Partial services
Instead of the full department/whole process, you can outsource specific tasks and parts of a larger process.
This includes outsourcing payroll, inventory management, COGS and other expense tracking, Accounts Payable, and Accounts Receivable.
Why Ecommerce Businesses Should Consider Outsourcing Bookkeeping
Focus on Core Business Functions
A lot goes into running a business. There are more core functionalities than you would expect. It’s more than delivering a product or service to the customer and getting paid. There are functions like marketing and promotion, sales, and business planning.
Unfortunately, there are also auxiliary functions that are very important that just take up a lot of your capacity. Accounting and bookkeeping is one of them.
By outsourcing, you can focus on directly productive activities that help you grow your success and improve your profit margins.
Expertise and Specialization
Handing over this process to experts yields a lot of benefits. For one, experienced bookkeepers can autopilot a lot of processes because they’ve done it so many times. They know the most efficient processes that still maintain accuracy.
You can also hire bookkeepers and ecommerce accountants with specialized knowledge of the ecommerce sector. They’d know about the nuances of bookkeeping and integrating your software with Amazon stores, Shopify, WooCommerce, etc.
Cost-Effectiveness
Outsourcing reduces overhead costs compared to hiring in-house staff.
- You can hire outsourced staff as needed. You don’t need to keep them on full-time.
- You don’t have to pay for benefits or paid leave. You don’t pay for their utilities or rent.
- You can hire overseas from places with lower cost of living, and therefore, lower asking rates.
Scalability
A small business may only need partial services or one bookkeeper on their team. As the business grow though, so does the complexity of their needs. With outsourcing, you have the flexibility to scale your bookkeeping team and services up or down as necessary.
Access to the Latest Technology
Bookkeepers and accountants must be proficient in cloud accounting software and the tools and services included.
They must know how to leverage automation for time-consuming tasks which saves time (and ultimately, money).
These tools make things so much easier for you as well by providing you with the data you need for business strategizing and move-making.
Key Benefits of Outsourced Bookkeeping for Ecommerce Businesses
1. Improved Accuracy and Compliance
Outsourcing to professionals is giving work to people who have done those processes countless times. Because of their experience, they not only would make less mistakes, but would also know how to recognize them and fix them quickly.
This accuracy and efficiency means you have up to date financial records ready for tax season.
Speaking of, they also help you stay compliant with tax regulations and ecommerce laws.
2. Better Financial Insights
Up-to-date and accurate financials also means better reporting. They can help you get the most out of your financial data and run reports using software that provide real-time insights on your business.
This leads to improved decision-making based on accurate financial health.
3. Reducing Risk of Fraud
Outsourcing also allows for a separation of duties. This ensures you have proper checks and balances in place. This increases your security, improves fraud prevention, and lowers the chances of a surprise audit.
4. Time and Cost Savings
Outsourcing means you don’t have to spend the resources to hire and train someone for the job. While they will still need onboarding, the time from familiarization to working is much shorter. Not only that, but they won’t need as much supervision or management.
How to Choose the Right Outsourced Bookkeeping Service for Your Ecommerce Business
1. Look for Industry Experience
When you invest in hiring someone or a team with ecommerce-specific bookkeeping knowledge, you’re paying for smooth operations. They need little to no training as they are familiar with the space and the technical financial nuances.
2. Assess Technology and Software Integration
Make sure that the bookkeeper(s) you’re hiring use a bookkeeping software that integrates with your ecommerce platform (Shopify, Amazon, etc.).
This compatibility is important for smooth migration of data and integration with other apps.
3. Evaluate Pricing and Packages
You may encounter fixed pricing, pricing packages, quote pricing, hourly rates, and more. Your external bookkeeping solution should have a pricing structure that makes sense for you.
For instance, hourly rates might make more sense for partial bookkeeping services.
The importance is you understand the value they are providing. Additionally, for packages especially, make sure you don’t end up paying for services you won’t use.
4. Check for Reviews and Client Testimonials
Reviews, ratings, and testimonials show you how well they have performed in the past. Because of this social proofing, you’re likely to perceive these types of services as less risky.
These help you gauge their competence and trustworthiness when it comes to managing your books.
5. Ask About Security and Compliance
You may trust a third-party’s ability to manage your books, but what about protecting your data? Ask them what security protocols they have in place technologically and systematically.
What checks and balances are there? Do they use security software?
Your financial data is sensitive. Be sure that you are giving it to a party who will manage it responsibly.
Cost Savings
Direct Cost Savings
Depending on their needs, monthly outsourced bookkeeping can cost a small business from $250-$2,500 a month. A single full-time bookkeeper’s monthly salary costs around $3,000 using conservative local estimates.
That doesn’t include all the costs associated with renting additional office space, resources spent hiring, onboarding, and training, and employee benefits.
Indirect Cost Savings
Because you are outsourcing to experts, you are also paying for them to save you from substantial errors that could incur lofty penalties. Their expertise also pays back dividends in opportunity costs as you can focus on your core competencies.
Best Practices for Working with an Outsourced Team
1. Establish Clear Communication Channels
Smooth and transparent communication is crucial, especially with an outsourcing service provider.
You’ll want to establish your main communication platform as soon as possible.
Make sure to clarify response times and assign a key contact person to handle remote communications.
Creating clear communication SOPs is also important for clarity and to prevent unnecessary, time-consuming, back-and-forth.
2. Set Expectations Early
Aligning goals and expectations with your service provider is crucial in the beginning. It starts with knowing your specific needs, how to present them, and your budget.
Then, create a clear job description and job brief before you even start looking for help. Once you’ve found ideal candidates, set up a meeting to discuss your specific needs. Then, set up milestones and clear deadlines.
3. Monitor and Review Regularly
Create a schedule for meetings and updates. This will help you stay on track with your team and monitor their performance.
Make sure you establish ahead of time how often you want to be updated on your financials and performance. That way they know how to cater their service to your needs.
4. Use Collaborative Tools
For project management and collaboration tools, Slack, Asana, and Trello are great options. They help get everyone on the same page and contribute remotely. You can collaborate on the same documents together, leave notes, and post progress updates.
This type of software is great for keeping all team members, remote or otherwise, on schedule.
Frequently Asked Questions
How do I ensure my data is secure when working with an outsourced bookkeeping provider?
Make sure you have data protection and privacy clauses in your remote work contracts. Only outsource from known companies and service providers with a good and trackable record.
Can I partially outsource my bookkeeping, such as only payroll or COGS tracking?
Absolutely! One benefit of outsourcing is flexibility to specific business needs. If you don’t need full business process outsourcing, you can opt for partial service or task/project-based outsourcing.
How long does it typically take to transition from doing bookkeeping in-house to outsourcing?
This usually depends on a few factors such as:
- The volume of your records
- Business complexity
- How organized you are
- How compatible your systems are with the outsourcing provider
- How well your in-house and outsourced team communicates and collaborates
If everything goes smoothly, it should take about 2 weeks to a month.
What Is EcomBalance?
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, Ebay, Etsy, WooCommerce, & other eCommerce channels.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
- Monthly Finance Meeting Agenda
- 9 Steps to Master Your Ecommerce Bookkeeping Checklist
- The Ultimate Guide on Finding an Ecommerce Virtual Bookkeeping Service
- What Is a Profit and Loss Statement?
- How to Read & Interpret a Cash Flow Statement
- How to Read a Balance Sheet & Truly Understand It
Conclusion
Outsourced bookkeeping is a great solution for people looking to save money, elicit expert knowledge, and improve process efficiency.
Working with outsourced teams can be challenging. With the right tools and proper planning, though, you can get the most of the benefits while mitigating the risks.
