Top Outsourced Bookkeeping Mistakes & How to Avoid Them

Outsourcing your bookkeeping is one of the best decisions you as a business owner can make. That’s because it frees up valuable time and gives you access to expertise when it comes to managing your finances. 

However, as with any service, there are potential pitfalls that can arise when businesses fail to understand how to navigate the world of outsourced bookkeeping. Without proper oversight, outsourcing your bookkeeping can lead to errors that could cost your business time and money. These mistakes often happen when expectations aren’t clearly set, or when bookkeeping tasks are not regularly managed or monitored.

Keep reading to discover the most common mistakes associated with outsourced bookkeeping and how you can avoid them to keep your finances in top shape.

Outsourced Bookkeeping: Avoid These Common Mistakes 

Outsourcing your bookkeeping can provide significant benefits, but many businesses make critical mistakes that can lead to costly errors. In this section, we’ll explore the most common outsourced bookkeeping mistakes and provide actionable tips on how to avoid them.

Mistake #1: Failing to Choose the Right Outsourced Bookkeeping Service

When it comes to outsourcing your bookkeeping, one of the most significant mistakes businesses make is failing to choose the right service provider. But with so many bookkeeping companies available, it can be difficult to know which one aligns best with your business needs.

Many business owners opt for an outsourced bookkeeping service based on price alone. Or they select a company with little experience in their specific industry because of their otherwise positive reputation. This could lead to a mismatch between your needs and what the service can provide, which may ultimately create confusion and inaccuracies.

How to Avoid This Mistake

To avoid this mistake, take the time to research the bookkeeping services you are considering. Make sure that the provider specializes in your industry and has a proven track record of success. A good outsourced bookkeeping service should understand the intricacies of your business, from sales tax reporting to payroll, and be able to integrate with your current software tools.

Mistake #2: Not Regularly Updating Financial Records

Another common mistake is failing to keep your financial records up to date. In a busy work environment, it’s easy to push bookkeeping to the backburner. However, outdated records can lead to inaccurate financial reports, missed payments, and the inability to make timely financial decisions.

Many business owners assume that once they outsource their bookkeeping that they don't have to worry about it again. Unfortunately, this is far from the truth.

How to Avoid This Mistake

Set clear expectations with your outsourced bookkeeper regarding how frequently they will update your financial records. You should also regularly monitor your accounts and make sure the records are up to date. 

Implementing cloud-based tools like QuickBooks or Xero can help with real-time updates and give both you and your provider access to the most current financial data.

Mistake #3: Ignoring the Importance of Financial Reports

Some businesses make the mistake of ignoring the value of regular financial reports, which can offer insight into business performance, trends, and profitability. Without these reports, it can be difficult to assess how the company is performing, leading to poor financial decisions that can ultimately hurt your business.

How to Avoid This Mistake

Work with your outsourced bookkeeping service to ensure that your financial reports are generated regularly and presented in a format you understand. These reports should include income statements, balance sheets, and cash flow statements. Having these reports at your fingertips will allow you to make informed decisions and stay on top of any potential issues before they arise.

Mistake #4: Underestimating the Value of Communication

Communication is essential when outsourcing any business function, and bookkeeping is no exception. Poor communication can lead to misunderstandings, missed deadlines, or incomplete financial records.

For example, if you fail to inform your outsourced bookkeeper about new business changes, like a new revenue stream or hiring additional employees, your financial records will become inaccurate. This leads to incorrect financial reporting.

How to Avoid This Mistake

Ensure that there is clear and continuous communication between your business and the outsourced bookkeeping team. Establish a regular meeting schedule to go over updates, discuss any changes in your business, and clarify any concerns. Setting up a shared platform for easy access to your financial data will also streamline communication.

Mistake #5: Not Integrating Cloud-Based Tools with Bookkeeping

In today’s digital age, many businesses still rely on outdated systems to track their finances. These outdated tools can hinder the accuracy and efficiency of your bookkeeping, leading to delays and costly errors.

Cloud-based tools, such as QuickBooks Online, Xero, and FreshBooks, can make bookkeeping more efficient by providing real-time updates and easy access to financial data from anywhere.

How to Avoid This Mistake

Make sure your outsourced bookkeeping team is well-versed in using cloud-based accounting tools. Cloud-based solutions allow for easier collaboration and ensure that both you and your bookkeeper can access the same information in real time, reducing the risk of errors.

Mistake #6: Overlooking Tax Compliance

Tax compliance is one of the most important aspects of bookkeeping. Many businesses underestimate how complex tax regulations can be, especially in industries with specific tax rules. Failing to stay compliant can result in penalties, fines, and audits, which can cost your business significantly.

How to Avoid This Mistake

Work closely with your outsourced bookkeeping provider to ensure that they are up to date with the latest tax laws. They should be able to assist with HST/GST filings, tax preparation, and other compliance issues. Staying proactive with your taxes will help avoid costly surprises down the road.

Mistake #7: Not Setting Clear Expectations with the Outsourced Bookkeeper

A major mistake that many businesses make when outsourcing their bookkeeping is not clearly defining expectations from the outset. Without clear guidelines, you and your bookkeeper may have different ideas about what needs to be done, how often, and what deliverables are expected.

How to Avoid This Mistake

Before hiring an outsourced bookkeeping service, outline the tasks, deadlines, and communication expectations. A contract should include specific terms, including the frequency of reporting, the types of reports you expect, and any deadlines. Setting expectations ensures that both parties are aligned and avoids confusion.

Outsourced bookkeeping is an invaluable tool for businesses looking to streamline their finances, but it’s not without its challenges. By avoiding these common mistakes, you can set your business up for success. Remember that outsourcing should be a partnership, and with clear communication and regular updates, you can leverage outsourced bookkeeping services to manage your finances effectively and make informed business decisions.