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False economy: when one bookkeeper costs more than a team

The business needs of many SMEs are outpacing internal resourcing. When it comes to bookkeeping, this can mean added risk.

May 18, 2022, updated May 18, 2022

In many organisations, the bookkeeper, whether staff or outsourced, acts as a central point for financial operations, having combined responsibility for specific bookkeeping tasks and crossover to operation duties.

While this is a convenient way to operate, Elizabeth Elliot, Perks Director, Bookkeeping cautions that it can increase risk.

“This has the potential to cause inefficiencies if the bookkeeper takes on responsibilities that should sit with other roles within the organisation,” explains Elliot.

“There can be duplication and lack of understanding.”

She says that segregation of duties can be difficult to achieve in SMEs.

“Outsourcing is a way of achieving some segregation, reducing opportunity for deception and increasing the ability to prevent costly errors,” she continues.

She points to key financial areas in a business that should be managed separately. These include processing invoices and authorising payments; ordering, invoice checking and processing; and credit card access and reconciliation.

A simple review of current bookkeeping operations will uncover most potential problems. Elliot suggests asking the following questions:

  • When your current bookkeeper is sick or on holidays, what is the impact on your business?
  • If your current bookkeeper were to leave your business, what would the impact be?
  • How many ‘backups’ do you have trained that can step into the shoes of your bookkeeper for any duration of time?
  • How many of the following areas are managed by the same person/manager?
    • Purchases/Accounts payable
    • Sales/Accounts receivable
    • Payroll
    • Bank accounts & reconciliations

“If, like many business owners, you find it is difficult to succinctly answer any of these, your organisation probably has a highly centralised practice of bookkeeping,” suggests Elliot.

“While at the best of times this may provide a sense of control, it can easily derail if the person is absent from the business for any length of time.”

Scaling up to build an in-house bookkeeping team is one option to avoid future disaster. The other is to outsource bookkeeping to a professional firm.

Elliot says there are many benefits to outsourcing, including year-round peace of mind that business needs will always be met, the ability to negotiate a fixed fee for the service, and scalability should the business’ needs change.

Additionally, she says it can deliver agility for a business.

“By having well-maintained books and processes, you will gain a clearer picture on your financial and operating position.”

“Centralising your information into a cloud-based system means you can access information on your business in a timely fashion, enabling you to make well-informed decisions or pivot where necessary.”

She also underlines the importance of relationships for good business practices.

“Having an outsourced bookkeeping team can enable you to streamline your accounts payable and receivable processes, minimising delays and keeping you in good standing with your customers and suppliers,” she explains.

Another benefit is easier collaboration, with everyone working toward the organisation’s business goals.

“Whether you use outsourcing to take over from or complement your internal staff, a well-established external bookkeeping team should act as an extension of your team.”

“They should be able to provide tangible examples and referees that can attest to how they have helped alleviate time, divided focus and burden from the internal staff of other organisations.”

She says it is also critical that operational bookkeeping translates seamlessly into the information that an accounting partner requires to meet the business’ compliance and reporting needs.

“Regardless of whether your accounting partner sits on the other side of the country, or next door to your bookkeeping partner, having your processes and information well-documented and organised into an accessible, multi-user, cloud-based environment means less time spent sorting through the information.”

Essential to this is that the bookkeeper stays on top of constantly changing technology and is qualified to assist the organisation to get the most out of the available technology and software. Elliot recommends checking their credentials and listed software partners.

“You should be asking is your provider a Xero Platinum Partner? Are they well-versed with MYOB and QuickBooks and other legacy systems?

“Without proven experience with a variety of systems, it might be questionable as to whether they will be equipped to ensure that your everyday bookkeeping information is accessible at the touch of a button.”

Similarly, she says it is important to ensure that the business is accessing a talent pool of highly skilled bookkeeping professionals with up-to-the-minute knowledge and adhering to rigorous professional standards.

Elliot’s final advice is that “no plan for success is complete without a roadmap to get there.” As such, it is critical that bookkeeping processes match the business’ needs – enabling the operation to run as efficiently and effectively as possible.

“Experienced bookkeeping providers should be able to articulate how they would go about assessing, discussing, designing, and onboarding processes to better support your business, if needed,” she says.

A great bookkeeping team will ensure adherence to your approved processes, making sure that the right people are responsible for the right approvals and that the information they provide gets to the bookkeeping team in a fast and accurate manner.”

“And the all-critical on-boarding process should allow for minimal to no downtime, so that your day-to-day operations are uninterrupted, and efficiencies felt from day one.”

Topics: business
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