Article by Evan
Who to trust with outsourcing is one of the most important decisions an ecommerce firm can make, and outsourced bookkeeping is no different.
A good move here can lead to smoother operations and better financial decisions, while hiring the wrong team can lead to nasty (and expensive!) surprises down the line.
With that in mind we want to provide an all-in-one resource to help you take care of your bookkeeping so that you can focus on the rest of your business.
Table of Contents
First, the Basics: What Exactly is Bookkeeping?
In a nutshell, bookkeeping is the recording of all the financial transactions that happen in a business each day. This goes from the smallest payment to a supplier all the way to receiving payment for a major contract. All of these items need to be recorded somehow and it’s a bookkeeper’s job to do so.
A common misconception when thinking about bookkeeping is equating it to accounting. These are in fact two separate jobs, although they are closely linked. The bookkeeper compiles data while the accountant helps make sense of it for management, reporting, and planning. An accountant can help business owners calculate their taxes, (tax bookkeeping) prepare detailed financial statements or create projections. But, the raw material that the accountant needs for all of this comes from the bookkeeper.
Most day to day bookkeeping work revolves around filling up a general ledger and monthly accounts. Here, all the transactions of a business are recorded, along with debits and credits. Additionally, it is up to the bookkeeper to prepare proper invoices and payroll – two critical functions in a business.
Gone are the days of large dusty tomes and inkwells. Most businesses have migrated to virtual bookkeeping. There are many options that make use of the latest technology such as mobile apps and cloud bookkeeping. Many also tailor their offerings to specific industries such as the Shopify QuickBooks desktop integration package. But even with the advances of AI, there is simply no substitute for a skilled and experienced bookkeeper.
Why Bookkeeping is Critical to the Success of Small Businesses
We hinted at this above and we can’t stress enough the importance of bookkeeping as a factor in a business’s success.
All the accounting tasks that businesses perform as they grow are based on bookkeeping. So, high quality accounting decisions require high quality bookkeeping, while bad bookkeeping (miscategorizations, missing transactions, etc) can turn a routine audit into a fiasco.
Owners rely on bookkeeping for decisions every single day. Major operational or financial decisions are often done based on the business’s books and if the numbers are off, this could lead to poor decisions and huge losses. A wrong assumption based on erroneous books can turn a great strategic decision into a massive failure. So, high quality bookkeeping is critically important for high quality decisions.
Likewise, good bookkeeping involves accurate classification of your business’s expenses into a sufficient number of useful categories. This provides invaluable information that managers can leverage to see how to improve your business’s profitability and margins.
But solid bookkeeping is just as important for daily business operations. Your business doesn’t function inside a vacuum. It is interconnected with a web of suppliers, employees, or distributors. Good bookkeeping allows a business owner to easily keep track of all these financial relationships, ensuring there are no shocks to your cash flow and most importantly, that your own employees are paid on time.
Why Outsource Bookkeeping?
When just starting out, business founders often do everything themselves: operational management, financial management, sales, marketing, cleaning toilets – on top of making top level strategic decisions as CEO.
Business owners at this stage may not think they need a bookkeeper, and they may be right. But managing the books can take up a lot of time, energy and focus — commodities that are in short supply when running a small business. Eventually, work builds up to overwhelm the founder and basic bookkeeping can take a back seat to other immediate tasks. But bookkeeping is an essential business support task no business owner can ignore for long.
This leaves founders with two options: Either refocus on bookkeeping, neglecting other critically important work,or hire a bookkeeper. Ecommerce founders can also outsource bookkeeping to a virtual assistant bookkeeping solution provider, which often have expertise in ecommerce businesses.
Taking the first route, doing the work alone in-house, really requires the founder to learn bookkeeping from the ground up to complete high quality work — something that no founder has time for. Taking on an increasing number of support roles really taxes founders, and leads to a range of negative outcomes: heart attack, divorce, family estrangement, bankruptcy, etc.
The second option often leads to virtual assistant bookkeeping horror stories, where the virtual assistant creates more new problems than they solved.
The smart choice is to outsource and simplify bookkeeping to a professional and use that newly freed up time to refocus on priorities, such as reconnecting with family, getting some exercise, or growing the business.
Speaking of growth, nowhere is opportunity cost more felt than in the start up phase of a small business, where every small decision can lead to both negative and positive impacts. In many cases, the benefit from outsourced bookkeeping is worth it because the return on growth from the time you have freed up far outweighs the cost of outsourcing to a bookkeeper.
When to Outsource Bookkeeping
The thing about outsourced bookkeeping is that the amount of work required scales with the business. In the very beginning, the amount of bookkeeping you will need to do will be minimal. However, as the business grows, so do the pace of transactions and the amount of bookkeeping to keep track of them.
This is doubly so in the ecommerce space, where businesses can rapidly scale up in days and weeks instead of months or years. For these businesses outsourced bookkeeping is something to start before you think you need it.
That’s why we believe that while in the beginning you don’t have to outsource bookkeeping and may be better off doing it yourself. But, once it reaches the point where you are spending 3 to 5 hours on it each month, you are better off relying on outsourced bookkeeping in order to save time and keep scaling.
Another important criteria to check before you begin with outsourced bookkeeping is to make sure you have a stable source of revenue coming in. Bookkeeping is an ongoing task that needs to be constantly tended to. Huge administrative headaches can occur if your revenue is still spotty and you have some months where you won’t be able to cover the outsourcing, leading to gaps, service disruptions, and the potential to miss important transactions.
Who to Outsource Ecommerce Bookkeeping to for the Best Result
As an ecommerce business owner, the first thing you want to check is whether this outsourced bookkeeper is familiar with the ecommerce space and ecommerce invoicing. Each industry has its own quirks that are important for your bookkeeper to understand. Make sure to ask whether he/she is an ecommerce bookkeeper and has relevant experience, whether as an Amazon bookkeeper, shopify bookkeeping or other related platforms.
For example, there are unique features in Quickbooks for Amazon sellers that someone with experience would know and if needed, the right bookkeeper will know how to set up Shopify Quickbooks online integration.
The next thing you need to look for is their level of experience. We’ve gone on and on about this, but bad bookkeeping can cause a whole host of issues down the line. To avoid this, you want to look for an outsourced bookkeeper with at least 5 years of ecommerce bookkeeping experience and who has experience with QuickBooks ecommerce packages.
This guarantees that they will understand the specific needs of your business as well as the ins and outs of the ecommerce industry. For example, ecommerce firms whose business revolve around Amazon would naturally want someone who can do bookkeeping for Amazon sellers.
You may be tempted to cut corners here and pay the minimum price when outsourcing or take a gamble on someone with less experience. While this may cut costs in the short term, the long term damage may be far more costly. When you pay peanuts, you tend to get monkeys: these cheaper options may not know how to properly use software platforms and they may not be able to think like a manager and make their own, well informed, decisions.
Accountants make terrific bookkeepers. They are very familiar with the work and most have a license which proves their expertise. Finding an accountant willing to do outsourced bookkeeping work is another story because accountants are over qualified for bookkeeping.
The license is also important as there is no internationally recognised license for bookkeeping like there is with accounting or practicing law. However, there are certifications out there that add legitimacy to a possible candidate.
How to Outsource Bookkeeping Once You Find An Online Bookkeeper
The choice of how to outsource bookkeeping really comes down to hiring an individual or a firm. Founders can choose among a number of freelancers to do their bookkeeping, but this comes with its own problems.
There are many independent bookkeepers who freelance their services to multiple clients. Oftentimes they have their own sites, along with information about them, rates and testimonials. Others spread their name through old fashioned word of mouth.
Another option is freelance sites such as Fiverr and Upwork, where those who are looking to outsource a position can post a job and have others bid on it. This has the benefit of attracting a wide range of choice. This combined with the wide number of foreigners offering offshore bookkeeping services and the bidding system generally leads to a lower overall cost.
But hiring an individual bookkeeper comes with the same headaches as hiring any other team member. You never quite know how reliable the person will be, what happens if they get sick, decide on a sudden career change, and you tend to need a lot more hands on management to ensure they do high quality work.
The other option, hiring an outsourced bookkeeping company, is a much better way to go. Companies tend to be more reliable than individuals, and smaller firms are often started by someone just like you who is putting their future on the line for the success of the business. Smaller outsourced bookkeeping companies are also more likely to tailor to your exact needs, and treat you as a high valued client because you simply mean more to them.
We started Etail Express to handle this exact problem. Our focus is on providing small and medium ecommerce enterprises with high quality and reliable bookkeeping that operates in the background. Since managers are so busy, we hire the most experienced and knowledgeable people we can find and build a deep pool of talent to tap into to ensure that there are no disruptions.
We focus on disaster cleanup work, as well as regular monthly bookkeeping, and helping founders new to professional bookkeeping get started. Click our virtual ecommerce bookkeeping service page for more details.
Bookkeeping Rates. Worth Every Penny?
The final piece of the puzzle: How much should we pay our bookkeeper? How do we know what are good outsourced bookkeeping rates?
Unfortunately there is no one-size-fits-all answer. Outsourced bookkeepers rates vary depending on the level of expertise, the size of business, and where they’re located geographically. Additionally, many offer bookkeeping price packages, where they bundle together numerous services that may or may not help your business.
An expert bookkeeper who specialises in ecommerce, has a proven track record and is able to be a value add will obviously command a higher rate – but in this case paying more may end up being the better long term option as bookkeeping is such a vital operation to a successful business.
Outsourced Bookkeeping: Absolutely Necessary for a Successful Business Today
Management guru Peter Drucker wrote decades ago that the next firm will be made up of top management while everything else is outsourced. Looking at the most successful small and medium sized ecommerce businesses today, we’ve definitely entered that reality.
No manager can do everything alone and, while doing core business functions in-house makes sense, no business should specialize in business support functions such as bookkeeping. That’s why more and more rapidly growing businesses focus on their core capabilities and take advantage of outsource bookkeeping, payroll outsourcing or payroll management, to high quality service providers. We recommend this path for your business as well.