Small businesses have limited resources. When the business owners are heavily involved in the company's day-to-day running, they often simply do not have the time to worry about non-core (but business-critical) functions. Bookkeeping is one of those functions.
When running a business, your focus should be on building and growing it, not worrying about documenting every transaction or struggling to understand small business accounting software. Outsourced bookkeeping benefits:
- More time. Outsourcing your bookkeeping means you can focus your time and energy on what excites you and use that time to grow your business. Outsourcing allows you to take certain business functions off your plate so you can focus on what's important for growing the business.
- Lower expenses. Outsourcing your bookkeeping means only paying for services needed, which is usually more cost-effective than having a full-time in-house bookkeeper. Many outsourced bookkeeping services offer flat rate packages rather than hourly billing, taking away the stress of running up the bill whenever you need to ask a question. Having an outsourced business function is typically less costly than bringing on a dedicated full-time employee.
- Flexibility. As your business scales up or down, so too can your outsourced bookkeeping services.
- Professional support. The transition to an outsourced bookkeeper is much easier than you think. We do everything we can to create a smooth transition.
Business process outsourcing (BPO) is a practice whereby companies outsource certain business functions to a third-party service provider. It focuses on services typically restricted to non-primary business processes—like payroll or tech support—that don’t directly contribute to a company’s core business function.
Whether your organization needs outside customer service support or some accounts payable or accounts receivable assistance, working with the right BPO vendor can lead to:
- Reduced business risks: Working with a long-term outsourced partner will ensure you aren't in a jam if your employee is ill or decides to leave unexpectedly.
- Improved operational efficiency: BPO cuts down on repetitive, often manual tasks, creating more bandwidth and opportunity to focus on revenue-generating activities, thereby increasing operational efficiency.
However, before engaging with an outsourcing company, it’s important to understand and weigh your organization’s needs against any potential risks or benefits.
What services do outsourced bookkeepers offer?
It’s important to note that bookkeeping and accounting are not the same.
A business accountant is employed to perform audits, and to prepare tax returns, income statements and balance sheets.
On the other hand, bookkeepers are responsible for ensuring the day-to-day upkeep of a business's financial data in its accounting software.
Bookkeepers reconcile bank and credit card transactions, track bills and income yet to be recognized, and in some cases, they are also responsible for payroll. Ultimately, the role of the bookkeeper is to provide accurate financial reporting, including Profit & Loss (Income) Statements, statements of cash flows, and a balance sheet on a monthly or quarterly basis.
How does outsourcing bookkeeping work?
Onboarding
There is a critical onboarding period before any work is conducted. Aligning expectations between all parties is one of the most important steps in the onboarding process. Even something as small as over or under-communicating can make or break the relationship.
During the onboarding stage, your outsourced bookkeeping team will do the following:
Conduct a deep dive into your current accounting process and books
Before starting, the outsourced bookkeepers must fully understand the business’s current financial processes and documentation. This is done to ensure that all historical records comply with reporting standards and to facilitate a smooth transition from in-house to outsourced bookkeeping. We like to start with a solid foundation, so during the onboarding phase, we will:
- Map out your monthly accounting workflow to clearly outline the tasks and responsibilities for the engagement
- Review your chart of accounts and update the accounts to provide improved insight into your monthly statements
- Take a deep dive into your accounting records to ensure your historical records are in compliance with reporting standards
This includes:
- learning the main sources of revenue,
- detailing the current invoicing process,
- reviewing the chart of accounts to ensure it is optimized for your record-keeping needs and more.
This is the time that any gaps in the current accounting system are identified where your outsourced bookkeeping service provider can help implement new tools to fill those gaps.
Create a customized process map and communication plan
At Enkel, we use process maps to outline what will happen, when and by whom during the month in order for us to deliver the month-end reporting on time. We customize these process maps based on the client’s business needs and the services to be provided.
Request access to your records and accounting software.
With a thorough understanding of current processes and a new process map in place, the next stage of the onboarding process is for the outsourced bookkeeper to get access to your financial information.
They will need access to your current accounting software, such as QuickBooks or Xero, and other tools, such as Shopify, PayPal, Stripe, Dext Prepare, Expensify, etc. Most accounting platforms and apps allow you to provide read-only access to a third party without giving them full permission.
Request access to your banking institutions and CRA account
CRA access allows your bookkeeper to help with your sales tax filings. As with apps and accounting platforms, most banks allow you to provide read-only access to a third party, meaning the bookkeeper has access to view your account transactions without having access to your funds. Most cloud accounting software can pull bank feeds directly from banks, automating the bank reconciliation process.
Transition you to cloud-based accounting software and set up your new tools
Outsourced bookkeeping teams will usually transition your books to a digital platform, which makes it easier for them to do their job. For any processes that are not online — paper invoices, receipts, expense tracking, etc — your bookkeeper will likely encourage (and help) you to digitize and set up integrations with accounting tools like Dext Prepare, which will allow you to take a photo of your invoices and receipts and share them with your outsourced team.
We'll identify the gaps in your system and help you implement new tools to fill those gaps.
We'll also transition your books to cloud-based accounting software if you're currently using desktop software. We usually recommend Xero or QuickBooks Online because of their user-friendly interface, data security, and wide range of accounting features. Our team can also access your financial data online and collaborate with you to ensure your books are well-managed.
If you’re regularly managing expense reports, we can help you get set up with programs like Expensify. If you’re struggling with a drawer that is overflowing with receipts, perhaps Receipt Bank is up your alley!
All of our bookkeeping solutions are completely customized to your needs, meaning you’re only paying for what you need. We’ll never overwhelm you with tools and data that you don’t need. We'll also provide your team with unlimited training on the new tools and processes.
Train your team on the new process and new tools
With all the onboarding preparation work complete, the final step is for the outsourced bookkeeper to train those involved in the new processes and any new tools that have been implemented.
Going live!
With onboarding complete, the bookkeeper can go live and start taking the major parts of the process off your plate. It’s important to note that hiring someone else to do your books, whether that’s an in-house bookkeeper or outsourcing to a service provider, doesn't mean you can be completely hands-off.
They still need your involvement in order to be successful. Outsourcing your bookkeeping simply means that the time you have to spend on bookkeeping is minimized, allowing you to reallocate that time to other tasks while getting accurate financials that you can rely on.
What does the outsourced bookkeeping process look like?
Different service providers have different processes, but at Enkel, our bookkeeping process typically looks like this:
Step 1. Getting your receipts and invoices to us
You’ll send us your invoices and receipts during the month using Dext Prepare. Simply take a photo or email us the document via your custom Dext email address. Your documents will be stored digitally in your Dext account for up to 10 years so in the event of an audit, the CRA will accept your digital documents stored in your Dext account.
Step 2. Review your transactions for accuracy and unknown transactions.
We will review your expenses on Dext Prepare to ensure they are coded correctly before importing them into your online bookkeeping software. Next, we reconcile your bank transactions and identify any unknown transactions. We work with you to determine the appropriate coding for these unknown transactions.
Step 3. Complete bank reconciliation and receive your financial statement package
After month-end, we will complete the bank reconciliations and send you the financial statement package, including your profit and loss statement, balance sheet, and cash flow statement.
There comes a turning point in the growth of almost every small business when certain non-core functions of the business must be taken off the business owner’s plate. For some businesses, the best solution is to hire an in-house bookkeeper, whereas, for others, the benefits of an outsourced bookkeeping service outweigh the in-house approach. Whichever solution you choose, we know you will feel nothing but relief once you no longer have to worry about day-to-day bookkeeping.
Business Process Outsourcing: What You Need to Know
At Enkel, we like to think of ourselves as an extension of your team. When you choose Enkel for your outsourced bookkeeping services, you can rest assured you are placing your finances in the hands of detail-oriented, thorough and professional bookkeepers who will take the time to get to know you and your business.
The Risks and Benefits of Business Process Outsourcing
Risks
Like most business initiatives, there are certain risks and challenges associated with outsourcing your company’s non-core business functions. The most prominent of these include:
- becoming overly dependent on a third-party service provider,
- entrusting your sensitive data to outside sources and
- encountering unexpected costs or growth restrictions
When you outsource activities critical to your business's success—like call center duties, for example—you must rely on organizations over whose internal processes you have no control. If something goes wrong or services are not delivered as expected, the results could harm your workflow and customer satisfaction levels.
Data security and privacy breaches are a concern any time you entrust an onshore outsourcing provider with sensitive business or customer information. But that risk is heightened when the provider happens to be located in a region where local security measures and regulations are more relaxed than they are in countries like Canada and the United States.
Other challenges you may experience with outsourced business services include:
- Budget: outsourcing involves having a clear and realistic budget for these activities.
- Cultural: Working with groups overseas could introduce potential language barriers that could complicate professional partnerships.
- Scalability: It's important to understand the provider's flexibility to take on future tasks that might exceed the complexity and scope of your initial requirements.
You should also recognize that business process outsourcing may require the development of a new model for organizing your business. Leveraging BPO successfully demands a certain amount of agility within your company in terms of adopting new processes and accommodating shifts in established roles and responsibilities. This could lead to a reduction in headcount, individual roles being redefined, or a reimagining of how your teams are structured.
Thankfully, the potential risks attached to BPO can easily be mitigated with proper planning and due diligence. By outsourcing your non-core business processes, your organization can ultimately benefit from greater access to expertise and increased operational efficiency.
Benefits
One of the most attractive benefits of business process outsourcing is the potential cost savings that it could have on businesses. BPO provides an ideal opportunity to reduce your overhead, especially where hiring, dealing with staff turnover, and economizing front office and back office operations are concerned. A general rule of thumb is that a full-time employee's total cost to the business ranges from 1.4 to 1.6 times their annual salary. Considering BPO presents opportunities to reduce your spending on human capital.
Increased access to robotic process automation can also result in cost savings, especially if your outsourced services provider uses modern technologies like Dext and Plooto to reduce manual processes in accounting and bookkeeping.
BPO vendors frequently work on a fee-for-service agreement instead of a fixed package basis. This enables additional cost savings because such fee structures allow service providers to charge appropriately based on seasonal or unexpected fluctuations in your work volume.
Moreover, BPO vendors are often staffed with highly-trained professionals with the specific expertise required to tackle complex issues. For example, an in-house payroll employee might not be equipped with sufficient knowledge to deal with payroll and tax laws in a different province. As a result, you might have to look into hiring an accountant to access other resources, which, of course, comes at a cost. An outsourced payroll provider will have the expertise and knowledge required to tackle issues that arise throughout the year, and usually without any additional fees.
Time savings and improved efficiencies are some of the other benefits of business process outsourcing. Taking important, time-consuming, and often manual processes off your plate will free up your time to focus on what you do best.
The fact is that whether your expertise lies in baking, brewing, construction, or retail, customers come to you because they trust your dedication to your product or service. But that doesn’t necessarily mean your core competencies extend to payroll, bookkeeping, and other back-office tasks!
Outsourcing these types of non-core activities to an expert provider allows you to:
- Enhance the speed and efficiency of your business processes,
- Do away with the need to hire and manage additional staff, and
- Work with a professional who, like yourself, is focused on providing the best possible service around a single business function
By taking advantage of business process outsourcing, the non-revenue generating activities will be better managed, while your company benefits from the improved quality and greater accuracy in terms of the work being produced. Benefits like these, in turn, make it possible for you and your team to invest more time in core business strategies designed to boost revenue and enhance product value.
Choosing the Right Outsourcing Partner
So, how do you go about choosing the right partner for your business process outsourcing needs? It isn’t much of a stretch to compare finding the right outsourcing vendor with finding the right marriage partner! Outsourcing is best viewed as a long-term partnership, with all the commitment, collaboration, and trust that is involved.
To succeed with your BPO project, it’s extremely important to determine whether business process outsourcing is the right move for your company. Only then should you carefully consider your service provider options before moving forward.
Consider following these three steps to find the best BPO fit for your organization:
1) Assess Your Business Processes
Take the time to understand which business processes your company will benefit from outsourcing and which tasks are best kept in-house. You’ll want to be very specific in terms of the type of work that is required, how long it should take, how much it will cost, and the criteria for success. The more clarity you establish around what you need, the easier it will be to narrow down the list of potential providers. Business functions that lend themselves well to outsourcing include:
- Human resources
- Information technology
- Marketing
- Outbound sales or customer service
- Financial operations: bookkeeping, AP, AR, payroll, and controllership
2) Shortlist Your Partner Candidates
Now that you’re clear on your requirements, you can move on to identifying the right business process outsourcing partner. There are usually 3 key factors that come into play when it comes to choosing an outsourced service provider:
- Pricing: Get clarity on whether the BPO partner charges a fixed fee for monthly services, hourly rates, or more of an a-la-carte model.
- Services: Make sure the partner does everything you need them to do. Also, be open to learning about complementary services they may offer which could be added to the scope of the engagement.
- Reputation: It's recommended to seek our client testimonials or ask for a reference before committing to a BPO partner.
Though important, you should not base your decision solely on the service's pricing. Like many things in life, the cheapest option often turns out to be the most expensive in the long run.
Once you've shortlisted the potential service providers for the business activity that you would like outsourced, you should look into their track record and experience of serving businesses similar to your organization. You can read up on case studies on their website or speak with their existing clients if they're willing to provide contact details for you.
Other aspects to consider could be the service provider's ability to scale the process as you grow your business. A good outsourced service provider should be able to provide you with broader services and support to fit your changing business needs.
3) Set up a Contract
Once you’ve chosen your business process outsourcing provider, you’ll need to draft, negotiate, and finalize a contract to put specific terms, KPIs, and service-level agreements in place. It’s important to ensure that the contract terms are feasible and actionable and that they add value to your company instead of creating more work for your employees. At this stage, you may consider having a legal professional review the contract to make sure it's mutually beneficial for both parties and that you're comfortable with the terms.
We provide outsourced accounting and back-office services such as accounts payable, accounts receivables, payroll, and bookkeeping. Our team of experts and cloud-based technologies can help your business improve its accounting processes. Contact us today for a better bookkeeping solution!
