Futuristic graphical user interface concept. Concept: Virtual Bookkeeping
By: rkapur
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Virtual Bookkeeping: Everything You Need To Know

Small business owners can find it challenging to keep an accurate record of their financial transactions. Bookkeeping can take up a lot of time. It also requires a certain degree of specialized knowledge. 

You could consider delegating your company’s accounting work to one of your employees or even think about hiring a part-time accountant. However, a virtual bookkeeping service provider could offer a better solution. 

Accounting and bookkeeping, are they not the same thing?
While bookkeeping is an accounting process, both tasks are different and are done by different types of professionals: the roles of bookkeeper and accountant are related but not the same.

What exactly is virtual bookkeeping, and how does it work? Let’s find out.

What is virtual bookkeeping?

Virtual bookkeeping has the following attributes:

  • The person who keeps a record of your company’s financial transactions will not work from your office. Instead, the accountant will function from a remote location. You may never meet your virtual bookkeeper in person. All your interactions could be through messaging apps or video calls.
  • An accounting software package will maintain your company’s’ accounting records. QuickBooks Online and Xero are popular options. However, there are several other good alternatives, as well.
  • The virtual bookkeeping service that you hire will usually provide you with monthly bookkeeping for your bank accounts, credit cards, loans, and payment processors. Typically, virtual bookkeepers charge their clients a fixed monthly sum.

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How does virtual bookkeeping work? 

Nowadays, more and more small businesses are using virtual bookkeeping services. This practice has gained popularity for several reasons. Switching to a virtual bookkeeper can provide entrepreneurs more time to focus on their core activities. Additionally, cloud accounting, as virtual bookkeeping is also known, can help to boost your company’s profitability

Let’s understand how the virtual bookkeeping process works

The first step would usually involve a video call when you would discuss your company’s accounting assignment. At this stage, it’s a good idea to tell the person or the firm that you intend to hire about the financial aspects of your business. How many bank accounts do you have? Have you taken any small business loans on which you are making regular payments? 

Be as specific as possible about your needs. Remember that you must prepare for this meeting. You should have all your facts and figures with you. Keep the relevant documents handy so that you can refer to them if you need to.

If the discussion is satisfactory, and you decide to hire the virtual bookkeeper, you could move on to the next step. This involves providing the cloud accounting firm with access to your bank accounts, credit cards, and payment processors. 

What does a virtual bookkeeper do?

Every month, they would furnish you with a set of reconciled accounts as well as financial statements. It would be the virtual bookkeeper’s responsibility to categorize all your transactions and to keep your financial records up to date.

It’s important to understand that a virtual bookkeeping service is not the same thing as an accounting software package like QuickBooks or Xero. These packages require the user to have some basic accounting knowledge.

Virtual bookkeeping is different. If you opt for this service, the entire bookkeeping responsibility is taken off your hands. 

How to find a virtual bookkeeping service 

If you aren’t an accounting expert, how will you choose a bookkeeping service? 

What are the questions that you should ask and the qualities that you should look for?

The first thing that you should do is to inquire about the accounting software package that they use. If the virtual bookkeeping service works with QuickBooks and your records are maintained on Xero, you may not want to take the discussion any further. 

It could be too much trouble to switch over to a new system. 

Cost is another issue. Make sure that you find out how much you will be required to pay. What are the services and reports that you will get? Are there any additional costs involved?

What are some virtual bookkeeping services?

  1. Bench is a popular bookkeeping service provider. Bench can also work with your CPA and provide the inputs required at tax-filing time. 
  2. inDinero could be another good option. This is an accounting software and services company that can provide you with a specialized package that includes tax filing. They can even help you with accounting for earlier years as well as your back taxes.
  3. If you run a restaurant, you may want to consider bookkeeper.com. The company has a specific bookkeeping program for restaurant owners. 

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Try and find a company or bookkeeper that has other clients that operate in the same industry as yours.

Pros and cons of virtual bookkeeping

So, should you make the switch to virtual bookkeeping? 

Is it worth the expense and the trouble of reorienting your financial records?

There are several advantages to cloud accounting.

  • The firm that you engage with is likely to have a great deal of accounting expertise. It will be incredibly hard for a small business owner to hire an employee with the same level of knowledge and experience.
  • Another benefit is that you will have someone to turn to if you need advice with your taxes or with a specific accounting query. 
  • You’ll save time, too. Outsourcing your bookkeeping could give you several extra hours a week. You can reorganize your schedule and devote more attention to activities that can help you to grow your business

But there are downsides, as well. 

  • Virtual bookkeeping can be expensive. The amount that you would be required to spend could be beyond your budget. 
  • Additionally, all your data would be maintained in the cloud. Not having your financial records on your own computer could mean that you exercise a lower degree of control over them. You could also face data security issues. 
  • You’ll have to carry out a careful review of the pros and cons of virtual bookkeeping before deciding whether you want to use this form of accounting for your business.

Virtual bookkeeping vs. traditional bookkeeping 

Here’s a table that provides details of the differences between the two forms of bookkeeping.

Virtual bookkeeping and traditional bookkeeping–how they differ
Virtual bookkeepingTraditional bookkeeping
Where are the accounting records maintained?In the cloudOn your computer
Who does the accounting work?The virtual bookkeeping companyYou or one of your employees
What is the degree of expertise available?Specialized accounting expertiseIf you do them yourself, maybe you don’t have enough knowledge. An employee might not have the same degree of knowledge and expertise as a virtual bookkeeping company
What is the level of data security?Data security could be compromised if someone hacks the virtual bookkeeping company’s systemYour data would be in your control (it could still be hacked)
What is the expense involved?Virtual bookkeeping is relatively inexpensive. However, you’ll need to study the total costs involved before you can conclude that it’s a more economical optionHiring an in-house accountant can be expensive. But you will have immediate access to their expertise and advice

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Virtual or traditional?

Deciding to hire a virtual bookkeeping company can be complicated. It’s essential to find a firm that matches your requirements and has a good reputation with other small business owners. 

Remember that when hiring a bookkeeper, virtual or not, you should ask for references and also speak to some of the companies that have used the services of the bookkeeper that you are considering.

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