Working with an Outsourced Bookkeeper or Accountant? Here’s What to Know

Running a company, particularly a start-up or small business, requires you to wear many hats. Depending on the business’ growth rate and your appetite for getting outside help, you may find yourself in the position of outsourcing key financial functions — and sooner vs. later — such as bookkeeping or accounting.

You may have tackled bookkeeping during your business’ early days or still be doing the work today. Or you may rely on a numbers-savvy team member for help. Whatever your experience, you may have come to the point where it’s no longer worth the time and/or frustration. You need to hire more experienced and available help.

But outsourcing bookkeeping and, especially, accounting (think tax-related work) can carry some risks. That’s why I like to say delegate, don’t abdicate.

Role of a Bookkeeper

I talk about the differences between the two functions in What You Need to Know for Your Business: Accountants vs. Bookkeepers. But here’s a short explanation: A bookkeeper is focused internally on day-to-day data entry. An accountant is often more externally focused on tax-compliance. Of course, some accountants do bookkeeping and some bookkeepers do accounting!

A bookkeeper is a management accounting professional. They’re focused on how you earn and spend money in your business, what you owe and who owes you. They should structure the books to help your accountant have an easier job at quarter-end and year-end. But, more importantly, bookkeepers oversee that you have enough money to run your business day to day.

There’s no professional designation for a bookeeper, like there is with an accountant. We don’t have to take any tests or do any training. While that might sound scary to you, there are ways to find the most qualified bookkeeping partner for your business.

When choosing a bookkeeper, it’s important to know the individual or company’s background, experience and if they have any focus areas.

How to Work with an Outsourced Bookkeeper

When choosing a bookkeeper, it’s important to know the individual or company’s background, experience and if they have any focus areas. There’s no set job description for what a bookkeeper can do, so have a clear list of the tasks you need to be handled and make sure whoever you are talking to is comfortable performing those tasks or has a solution for you.

Some bookkeepers are happy to calculate payroll and depreciate long-term assets, while others are not. Some bookkeepers specialize in certain industries, and if that’s appealing to you — that’s great. Other bookkeepers prefer a broader focus and can be successful with that approach.

At Moxie, our focus is somewhat broad in that we work with creative firms, architects, photographers, social entrepreneurs, nonprofits, professional service providers and other folks who are bringing some good into the world.

While we have clients in other industries, we generally don’t say we’re specialized enough to work with fashion businesses, restaurants or manufacturing, wholesale and other product-based businesses. (Of course, if you have questions about whether we’d be a good fit for you, let us know!)

Role of an Accountant

Think of an accountant as a tax-compliant financial professional. The person could be a certified public accountant (CPA) or an enrolled agent (EA). Both designations require training and certifications.

A CPA could be a chief financial officer (CFO) at a Fortune 500 firm or an advisor to a small neighborhood business. An EA is a federally licensed tax practitioner who can represent a taxpayer before the IRS when it comes to collections, audits and appeals.

Titles aside and speaking in layman’s terms, an accountant’s role is to make sure you’re filling out the right boxes with the right information to keep you out of hot water — and they can help you pay the least amount of tax that’s legally allowed.

An accountant can tell you if you can write off a certain business expense, help you calculate your estimated tax payment and can work with you for any state or federal communication. But some accountants aren’t interested in doing straight bookkeeping work, per se.

Think of an accountant as a tax-compliant financial professional.

Five Layers of Accounting Functions

If the corporate world’s familiar to you, you may already understand the functions of an accounting department. If you’re not, here’s a brief overview.

In large-sized or established companies, there are typically five layers of people or teams overseeing accounting-related functions and responsibilities. First is an accounting clerk who does data entry. Above that person is a full-charge bookkeeper who reconciles the data with bank and other reports to make sure the entry was done correctly.

Next, there’s a CFO who often reports directly to the chief executive officer (CEO). The CFO takes the financial data and does forecasting with it — overseeing budgets, projecting income and expenses and recommending what the business should do with their finances. In addition, the CFO works with a CPA (the fifth layer in the stack) or an accounting firm to file the appropriate paperwork for government agencies.

If the business owner becomes disconnected with the financial side of the business, she may not pay much attention to what the bookkeeper is doing. Hoping and assuming everything’s okay is a strategy. But not a smart one.

How to Work with an Outsourced Accountant

In smaller companies where it’s often just the owner working with other employees in non-financial roles, the first three layers (the data clerk, full-charge bookkeeper and CFO) may become compressed into roles that are a better fit for an outsourced bookkeeper or accountant.

If the business owner becomes disconnected with the financial side of the business, she may not pay much attention to what the bookkeeper is doing. She may even ask the bookkeeper to send the information on to the accountant without reviewing it. This is a temptation to busy business owners. But the bookkeeper or accountant may be making decisions without the owner’s awareness or input — or speaking in a language the owner don’t understand and know how to react to.

Hoping and assuming everything’s okay is a strategy. But not a smart one. When you outsource accounting functions out of necessity or aren’t comfortable running your finance area as a CEO would, make sure some level of bookkeeper oversight is built into the process. This could be reviewing monthly bookkeeping reports, getting the bookkeeping firm to review its own employee’s work or asking your accountant to review what the bookkeeper sends them.

At Moxie, our preferred way to work with clients is when the business owner or her assistant takes the role of the accounting clerk who does the data entry — because she knows what the business earned and spent. Then we can be the one to double check the work as both the full-charge bookkeeper and the “CFO lite.”

Bookkeeper or Accountant? It’s Usually Not an Either/Or

Our goal as an outsourced bookkeeper is to teach our clients key phrases and concepts in our foreign language called accounting, so they understand the conversation between Moxie and the accountant and remain connected to their business’ critical financial functions — delegating but not abdicating.

We also believe that most companies need a solution that encompasses both roles — a bookkeeper and a CPA or EA. If you decide to keep day-to-day data entry in-house, be sure to have an outside tax accountant review the work.

When you pay attention to both the internal and external financial focus areas, your business’ financial health gets the attention it deserves.