There are over 28 million small businesses in the United States, meaning small businesses employ 48% of the workforce.

But small businesses are sometimes too small to do everything on their own. Smart small business owners realize it’s often too expensive to hire a full-time, in-house professional to perform certain tasks.

These business owners turn to outsourcing to save time and money. One task that’s often outsourced is online accounting services.

When looking to outsource, there are a few things every owner must be aware of before they choose which online accounting service is best for their needs. Here’s a guide to understanding online accounting services.

There’s a Difference Between an Accountant and a Bookkeeper

There is a big difference between an accountant and a bookkeeper. However, most people would find it difficult to actually describe those differences.

Yet, many small business owners find they need both bookkeeping and accounting services in order to keep their financials well organized. Here’s why.

The Role of an Accountant

An accountant is usually a CPA (Certified Public Accountant). Accountants use financial information that’s often compiled by the bookkeeper or business owner to produce financial models.

An accountant prepares the company financial statements and analyzes the cost of operations.

Accountants can complete income tax returns and will also help the business owner understand the impact of any financial decisions. Using an accountant allows a business owner to better understand the big picture of their business.

Online accounting services will also allow a business to view the big picture of the business and the path the company is currently taking. Most business owners depend on accountants to help with tax planning, financial forecasting and tax filing.

The Role of a Bookkeeper

A bookkeeper is someone who deals with recording the daily transactions consistently. They help organize the financial information so that an accountant can easily understand the current financial standing of a company.

A bookkeeper records financial transactions, posts debits, and credits and produces invoices. They also maintain and balance general ledgers, historical accounts and any subsidiaries. Typically, bookkeepers will handle payroll as well.

However, a bookkeeper rarely has the knowledge or expertise of current tax laws and would not be able to work with the IRS should a problem come up.

Separate Personal and Business Expenses

Before hiring an online accounting services company, a business owner is going to need to separate their personal expenses from their business expenses.

Knowing which items are tax deductible and which aren’t can get complicated. Especially if a business owner is currently using the same bank account for both personal and business expenses.

Have two separate bank accounts and keep them separate. Dedicate which credit cards are to be used for business purposes and keep them separate from any personal credit cards.

Ask the online accounting services company which account should be used to pay certain bills and taxes. Keep a record of any business expenses that have been incurred for tax purposes.

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Online Accounting Services is Easier and Better for the Environment

Most online accounting services have software that features the basic functions required for business bookkeeping. However, it’s vitally important to choose a software package that is specifically made for small business owners.

Choosing the right software will ensure they’ll have the right templates to use for depositing money, creating invoices and even printing business checks to pay bills.

Best of all, many of the software programs connect to bank and credit card accounts. This means that instead of having to spend time inputting the latest transactions, it will be automatically done instead.

As a result, there will be fewer mistakes and less time wasted reconciling financial information. Also, less paper is needed for record-keeping purposes, which means a smaller environmental impact is made.

And, because it’s all cloud-based, there’s no need to worry about having to back up the financial information. It will be automatically updated and saved as someone works within the software program.

That means, that no matter what, the information is safe and always there when it’s needed.

Set Aside Money to Pay for Quarterly Taxes

An online accounting services company will help a small business develop a system for saving money to pay taxes. Most companies have to pay quarterly taxes.

By keeping track of the financial records, it will be easier to prepare for quarterly and year-end taxes. Setting aside some money each month to pay taxes means fewer problems.

There won’t be a need to take out a loan to pay taxes. No extra cutbacks will have to be made. The business won’t have to file taxes late or end up on a payment plan with the IRS to pay the taxes owed.

Being financially solvent is a difficulty many small business owners face. In fact, most small business owners carry around $195,000 in debt. That’s compared to the $96,000 worth of debt the average American consumer carries.

Plan Ahead for Significant Expenses

However, there are more expenses to consider other than paying taxes. That’s why it’s crucial to set aside money to take care of major expenses.

Major expenses can include repairs, inventory, maintenance and office supplies. It’s incredibly stressful to be hit with an unexpected problem as a business owner.

Without proper forecasting, it could mean taking on extra debt, being unable to pay a vendor or employee, or simply going out of business. That’s why working with an online accounting services company is so helpful.

They’re able to help a business owner plan for a healthy financial future. That’s because they know to plan for unforeseen problems.

Find a System That Works Best for the Needs of the Company

Not all online accounting services are the same. It’s crucial to find a company that provides all the services that will complement the type of business being run.

Some small businesses are run by solo-entrepreneurs. They have no employees. That means their accounting needs are going to be different from small businesses with employees.

Some businesses are service-oriented. Other businesses sell a variety of products and rely heavily on vendors. Their online accounting services for billing and invoicing will be different from one another.

Make sure that the online accounting company offers services that align with the business. Do some research to find which companies provide services that best serve the needs of the business.

This also translates into online support. If there’s a problem, it’s critical that an answer is given in a timely manner. Ensure the online accounting company is willing to provide the type of support that’s needed.

Make Sure the Price Is Right

Every business has different needs. Just like every business is in a different place, financially.

Make sure that whichever online accounting services company is chosen, the cost of their services works within the company budget. Check to see if there are any hidden or unknown costs.

Ask about their fee structure and get an estimate of the monthly costs for the services required. Work out a contract that everyone can agree on.

Shop Around First

Before choosing an online accounting services company, do some homework first. Go online and do a search.

Look at their websites. Make sure they provide services that are best for the company.

It’s usually best to find three possibilities and then do a contrast and comparison to ensure the best accounting services company will be chosen.

Ask for Referrals

Ask fellow business owners which company they work with. Don’t forget to ask what they like best about the online accounting services company. Then ask what they like least about the company.

It’s also possible to find CPA listings online at the website of the American Institute of CPAs (AICPA).

Ask Questions

Don’t be afraid to ask plenty of questions before making decisions. Whichever company is chosen, they will be acting as if they are an employee of the company. Make sure they fit into the current corporate culture.

Check References

Ask the company for client references. If possible, ask to speak with clients who work in the same industry.

Ask the client what they like best about working with the online accounting services company. Ask how long they’ve worked with them.

Then ask what they like least about working with them. It’s important to get a general idea of how the online accounting company treats and works with their clients.

Find Out How Responsive They’ll Be

Let’s say a letter comes in the mail from the IRS. It’s not a good letter, either. It’s a letter that requires prompt attention from the business owner.

There’s nothing worse than finding out the hard way that a company’s finances have been placed in the hands of someone who won’t return calls or e-mails in a timely manner.

Always ask potential candidates what their turnaround times are for filing and reports. Ask how they’ve handled unexpected situations in the past.

Hire the Best

Accounting and financial matters can be extremely time-consuming. That’s why we created a better system.

Our software automates accounting, tax and financial tasks. We also have a team of finance, marketing, sales and software development professionals to help each business owner make smarter strategic and financial decisions.

Get started by requesting a demonstration today.