Selecting the right small business accounting services will require you to invest some time. Finding the best bookkeeping services for small businesses requires six key steps: identifying your needs, deciding what tasks to keep, getting referrals, deciding between a virtual or local firm, identifying quality candidates, and asking the right questions.
Bench, the sponsor of this article, specializes in providing bookkeeping services for small businesses on a cash basis. If you don’t need anyone to manage accounts payable, accounts receivable, or inventory, then Bench is ideal for you. With Bench, entrepreneurs don’t have to input information or manage their expenses manually. Their bookkeeper will handle all of this for them. And, unlike many of its competitors, Bench gives you a free month of bookkeeping services so you can “try before you buy.”
The six steps to find the best bookkeeping services for small business are:
1. Identify the Small Business Accounting Services Required
The first step in finding small business accounting services is to determine what your needs are. You’ll need to answer some basic questions, such as whether you sell products and need to track inventory, or if you have 1099 contractors or W-2 employees that you need to pay.
In general, bookkeeping services can be summarized into six key categories: income and expense tracking, accounts receivable, accounts payable, inventory tracking, financial reporting, and payroll processing.
The six key bookkeeping services small businesses generally require are:
Basic Income & Expense Tracking
In general, every small business needs to keep track of their income and expenses. Basic income and expense tracking involves downloading all bank and credit card transactions to an accounting software, categorizing all income and expenses to the appropriate accounts, and reconciling the accounts on a monthly basis. Most bookkeeping firms will provide this basic level of service.
Accounts Receivable (A/R)
If you provide goods and services on credit to customers, you will need to create invoices, manage customer payments, and follow-up on unpaid invoices. Most virtual bookkeeping services require you to perform these day-to-day A/R tasks. For this reason, you’ll need to make sure you have expertise on hand to manage these activities or choose a local bookkeeping services firm.
If you do decide to go with a virtual bookkeeping service firm, you will need to provide them with your A/R aging report and they will make sure your open accounts receivable balances are included in your monthly financial reporting package.
Accounts Payable (A/P)
If you need to track unpaid bills or write checks to pay vendor suppliers, you will need to have an in-house expert who can manage these activities for you or choose a local bookkeeping services firm. Most virtual bookkeeping services will not perform these day-to-day A/P tasks, but local firms will. Many virtual bookkeeping services will only manage expenses paid online through your bank or credit card company.
If you do decide to keep A/P in-house, you will need to provide your bookkeeping services company with your A/P aging report so that they can include your open accounts payable balances in your monthly financial reports.
If you sell products, you will need the ability to track the quantities and costs of all your purchases and sales. This includes creating purchase orders, receiving products into inventory, and recording inventory adjustments as needed. Similar to A/R and A/P, most virtual bookkeeping services will not manage these daily inventory tasks for you. Instead, you will need to have a person on your staff manage these activities or choose a local bookkeeping firm.
Similar to A/R and A/P, you will need to provide your virtual bookkeeping services company with a report that shows the inventory quantity and value on hand so that they can ensure these numbers are included in your monthly reports.
Access to accurate financial reports on a regular basis is one of the key benefits of hiring a bookkeeping service. If you’re in an industry that requires special reporting (e.g., nonprofit organizations), be sure to discuss your reporting requirements when interviewing firms. Similar to Bench, most bookkeeping services will provide you with a Profit and Loss Statement, Balance Sheet, and Cash Flow Statement on a monthly basis.
If you have employees or 1099 contractors that you need to pay, you will most likely have to keep that task in-house or outsource it to a payroll service company. Payroll processing is one of those specialized areas that many bookkeeping service firms do not offer. Check to see if your payroll service integrates with the accounting software used by your bookkeeping service company so that the information can easily download and be included in financial reports.
Since most virtual bookkeeping services don’t manage A/R, A/P, inventory, and payroll, you may need to consider hiring an in-house bookkeeper or a local firm. The good news is that most bookkeeping services will take your reports for the activities that you manage and include them in your monthly financial reports. For most small businesses, this is enough. Bench has pricing that starts at $95 per month and you can try it for free.
2. Determine What Bookkeeping Tasks Will Remain In-House
After you determine what your bookkeeping needs are, you may find there are some tasks you prefer to keep in-house. For example, to ensure you maintain good customer relationships, you may want to manage customer billing and payment collection instead of outsourcing it. If you have a bookkeeper on staff, you could have them continue managing A/R along with any of the other tasks you want to keep in-house.
If you don’t have a bookkeeper on staff, consider hiring one to handle anything that the bookkeeping services company does not. Instead of hiring a full-time bookkeeper, you can probably get away with having an existing employee take on administrative tasks, like creating invoices and writing checks to pay bills.
Regardless of who does the work, you must ensure that they have the expertise to do the job. If the volume of A/P and A/R requires a full-time employee, we recommend you hire an in-house bookkeeper to handle all aspects of your books. However, if you just need basic income, expense tracking, monthly financial statements, hire a bookkeeping services company like Bench. It will cost a lot less than an in-house bookkeeper.
3. Consult With Your Tax Professional or CPA
If you have a tax professional or CPA who prepares your taxes, you need to include them in this decision-making process. There are three key areas that you should have your tax professional weigh in on: what accounting software to use, the chart of accounts setup, and their preferred method of communication.
As note, the three key areas you should seek the advice of your tax professional are:
- Accounting software: If you plan to give your CPA or tax preparer access to your data, you need to know what accounting software they use. While some bookkeeping service companies use QuickBooks, which most accounting and tax professionals are familiar with, other firms may use a proprietary software that your accountant may not be familiar with. If they are not familiar with the software, you may just want to provide them with the reports needed to prepare your tax return.
- Chart of accounts setup: Many CPAs and tax professionals have a standard chart of accounts they like to use. I recommend that you ask your tax professional to provide you with their standard list or have them review your chart of accounts before you or your bookkeeping service start recording transactions.
- Preferred method of communication: Find out if your tax preparer or CPA would like to work directly with your bookkeeping services company during tax time or if they prefer to go through you. Ideally, you can give your CPA or tax preparer access to your data so they can go into the system and pull the information needed to prepare your tax return without having to bother you.
We have done the legwork for you to review the top virtual bookkeeping services companies. Based on our findings, we recommend Bench to small businesses. Bench is the only company we reviewed that will provide you with a free trial before you sign up.
4. Choose Between Virtual & Local Bookkeeping Services
Virtual bookkeeping services are typically best for businesses that use cash basis accounting and are on a tight budget. Local bookkeeping services firms are ideal for businesses that use the accrual accounting method and don’t have an in-house bookkeeper who can manage A/R, A/P, inventory, and payroll.
While a local firm may sometimes feel more personal because you can drop by their offices and meet the staff, you should hire a firm that you feel comfortable sharing your financial data with and that will work best for your business.
Pros of Virtual Bookkeeping Services
There are a number of pros of hiring a virtual bookkeeping services company. For example, the rates tend to be more economical, you have more companies to choose from (since you are not limited to your city or state), and you will be able to reduce or eliminate the need to keep paper receipts and bank statements (since you will upload this information to your bookkeeping services company).
The pros of hiring a virtual bookkeeping services for small businesses are:
- Budget friendly: Virtual bookkeeping services may cost less than hiring a local firm because they may not have the overhead that a brick-and-mortar shop would have, which means they can afford to charge less.
- More companies to choose from: When you hire a virtual bookkeeping company, you can hire a company that is located anywhere in the world. You are not limited to just your physical geographical location.
- Reduce or eliminate paper receipts and documents: Most virtual bookkeeping services will use cloud accounting software and connect all your bank and credit card accounts to eliminate the need for paper bank statements. If you do need to submit receipts or other documentation, you will do so via a secure online customer portal.
Cons of Virtual Bookkeeping Services
There are three main cons to hiring a virtual bookkeeping company. In general, it tends to be less personable than a local company because you can’t drop by an office and you don’t get to meet your bookkeeper face-to-face. Plus, you need to be careful to verify the legitimacy of the virtual bookkeeping service. Additionally, there are some tasks you’ll generally need to keep in-house, like payroll processing.
The cons of virtual bookkeeping services for small businesses are:
- Potentially less personable: Many virtual bookkeeping services communicate with customers via telephone, chat, or email. This is how they are able to keep their overhead down but also does not allow you to see your bookkeeper face-to-face. However, many virtual companies are using virtual meeting rooms like Zoom to meet with clients face-to-face.
- Difficult to verify if legitimate: Many people are skeptical of using virtual bookkeeping services because it’s difficult to determine if a company is legitimate. A good rule of thumb is to ask other small business owners or your CPA for a referral. You can also check to see if the company is registered with the Better Business Bureau (BBB).
- May not take on all bookkeeping tasks: To keep it simple, a number of virtual bookkeeping companies will not take on bookkeeping tasks that interface with customers, vendor suppliers, or employees. However, the firm should be willing to include your A/P, A/R, and inventory balances in your monthly financial statements whether they manage those tasks or not.
Bench is our recommended bookkeeping services for small businesses. They specialize in managing small business finances so that you can focus on moving your business forward. They have affordable pricing plans that start at $95 per month, and you can try Bench risk-free with a free trial.
Pros of Local Bookkeeping Services Company
There are several pros of hiring a local bookkeeping firm. For example, it is often a much more personable experience and nine times out of 10, they will take on all your bookkeeping tasks if you don’t want to keep anything in-house.
The pros of local bookkeeping services company are:
- More personable: Hiring a local bookkeeping services company is more personable because you can meet your bookkeeper in person.
- Easy to verify business is legitimate: Dropping by the office to meet the staff will go a long way to ensure that the business is a legitimate one. However, you will still need to verify that the staff is properly licensed and trained.
- Will most likely take on all bookkeeping tasks: In general, local bookkeeping companies will take on all of your bookkeeping tasks, such as accounts receivable, accounts payable, and payroll processing.
Cons of Local Bookkeeping Services Company
While hiring a local bookkeeping services company may be a more personable experience, there are still cons to doing so. For example, they may charge more than virtual bookkeeping services, you are limited to companies in your geographical location, and they don’t tend to be as tech savvy as virtual bookkeeping services companies.
The cons of local bookkeeping services companies are:
- Pricier than virtual companies: Unlike virtual bookkeeping services companies, local firms may be pricier because they offer more services than you can get from a virtual bookkeeping services company.
- Smaller selection of companies to choose from: When you’re looking for a local bookkeeping services company, you are limited to your geographical area. This typically means a location that you don’t mind getting in your car and driving to, which could narrow your search considerably.
- Not tech savvy: While there are exceptions to every rule, a local bookkeeping services company may not be as technologically savvy as virtual bookkeeping companies. This could mean that you may be required to drop off documents or email bank statements on occasion.
As mentioned, there are pros and cons to hiring a virtual bookkeeping services company and local firms. The ideal firm should be affordable, a legitimate business that has good internal control, and a licensed staff performing the work. Bench checks all of the boxes when it comes to an efficient, affordable, and legitimate bookkeeping services firm.
5. Begin Searching for a Bookkeeping Services Provider
There are several resources that allow you to find the right small business accounting services. Industry and professional associations are great, or you could ask your tax professional (if you have one).
We recommend Bench to small businesses looking for a firm to outsource their accounting services to. At a starting price of $95 per month, Bench is affordable and will take care of tracking all of the income and expenses, bank reconciliations, and monthly reporting for cash-based businesses.
Five great resources where you can find referrals for small business accounting services are:
Industry associations are another great resource to locate qualified bookkeepers or bookkeeping service firms that specialize in your particular industry. Most industries have local and national associations located across the United States. If you are a real estate agent, nonprofit organization, or contractor, you may want to check out one of the following associations.
Below are three professional associations for real estate agents, nonprofits, and contractors:
- National Association of Realtors: The largest trade organization in the U.S. It has more than 1.1 million members, 54 state associations, and over 1,300 local associations.
- National Council of Nonprofits: The largest network of nonprofits with more than 25,000 members. They specialize in identifying emerging trends and promote solutions that benefit charitable organizations. You can use their directory to find a chapter in your local area.
- Associated General Contractors of America: The leading association for the construction industry. It has over 26,000 construction firms that are members and 89 local chapters across the U.S.
Professional organizations for certified public accountants (CPAs), enrolled agents (EAs), and certified bookkeepers are another great resource to help you find the right bookkeeping service for your small business. The American Institute of Professional Bookkeepers (AIPB), the National Association of Certified Public Bookkeepers (NACPB), and the Professional Association of Small Business Accountants (PASBA) are the three we recommend you check out.
Three professional organizations you should consider are:
- AIPB: A national organization for bookkeepers who have completed a certification program and have earned the designation CB (Certified Bookkeeper). Small businesses looking for a bookkeeper can post a job on this site or review resumes and profiles of bookkeepers and bookkeeping services looking for new clients.
- NACPB: A nationally recognized organization for bookkeepers who have completed a certification program and have earned the designation CPB (Certified Public Bookkeeper).
- PASBA: The PASBA includes CPAs and EAs who provide accounting services to small businesses across the United States. They have a directory of thousands of accountants that you can choose from, simply enter your ZIP code to find one in your local area.
Fit Small Business Bookkeeper Directory
Our own bookkeeper directory here at Fit Small Business is a great resource to find a bookkeeping service for your small business. The services provided by each firm will vary, but include bookkeeping, accounting, payroll, and tax preparation.
Referrals from Other Small Business Owners
One resource small businesses tend to overlook is talking to other small business owners to see if they have a bookkeeper on staff or a bookkeeping service that manages their books. If they are happy with the level of service they are getting, ask them who they are using. If they have a great bookkeeper on staff, find out how they found that person.
6. Interview Your Bookkeeping Service Finalists
Now that you have a list of companies that provide bookkeeping services for small businesses, prepare a list of questions to ask during the interview. These questions are designed to give you insight into the level of expertise of the company, what you can expect to pay, how you will communicate, the reports and other documents you can expect to receive, and how often.
Ideally, you should do some research on your own to find out how long each company has been in business. In addition, you should check their Better Business Bureau (BBB) rating so that if there are any issues, you can ask about them during the interview. You can download the questions for future reference.
The type of questions you should ask when interviewing a bookkeeping services company are:
How Long Have You Provided Bookkeeping Services for Small Businesses?
Find out how long they have been in business and the types of clients they have had during that time. For example, are most of their clients small businesses or do most of their clients fall into the mid to large size companies? You want to go with a service that specializes in small businesses but can also scale as you grow, especially if you don’t plan to be a small business forever.
Do You Specialize in a Specific Industry?
Find out what industry most of their clients fall into. Do they have a specific niche or do they have clients that fall into a variety of industries? If you are in an industry that requires special reporting, like nonprofit organizations, it’s important to find a bookkeeping service that understands and can meet the specific needs of your industry.
How Much Do You Charge for Bookkeeping Services?
Many bookkeeping services charge a monthly fee and should offer at least a couple of packages that you can choose from. On average, these services will range between $95 and $1,300 or more per month. Fees are generally based on the total monthly expenses, number of transactions per month, or a custom fee based on the type of services required.
How Often Do You Increase Your Prices?
To avoid any surprises later on, you need to find out what changes in your business could lead to a price increase. Depending on which bookkeeping service company you go with, fees are generally based on your monthly or annual revenue, number of transactions, number of bank and credit card accounts, or monthly expenses.
How Will I Communicate With You?
As we discussed previously, one of the downsides to hiring a virtual bookkeeping firm is you generally don’t get to meet your bookkeeper face-to-face. This is why it’s critical that you find out what the communication options are. If possible, you want to have one point of contact that you can go to if you have a question. You should be able to reach this person via phone, email, or chat (if available).
I recommend that you steer clear of any company that tries to limit you to email or chat. The option to speak with a live person should always be available.
Is There a Trial Period?
In general, most of the bookkeeping services on the market don’t require you to sign a contract. With that said, there is really no need for a “trial period.” If it doesn’t work out, you can always cancel the service. If you want to see what you would be getting before you actually hire a bookkeeping services company, find out if you can try their services out for the first month.
If you don’t have a lot of time to interview bookkeeping service companies, you should choose Bench. There are no contracts, they have great customer reviews, and they will provide you with one month of free bookkeeping services before you sign up.
What You Can Expect to Pay for Bookkeeping Services
As part of our research to find the best bookkeeping service for small businesses, we looked at features, cost, and user reviews for more than a dozen companies. We found that bookkeeping services on average start at $195 per month and can go as high as $1,300 or more. The basis of what you can expect to pay varies by firm but falls into three primary categories: monthly transactions, monthly expenses, and the type of bookkeeping services you require.
The three primary ways bookkeeping services are priced are:
- Monthly transactions: Pricing tiers are broken down by the average number of bank and credit card transactions made each month. The fewer transactions, the lower your bookkeeping services cost.
- Monthly expenses: Pricing tiers are broken down by the average amount of expenses you have each month. The fewer expenses you have, the less you will pay for services.
- Bookkeeping services required: Pricing tiers are based on the type of services your business needs. Basic income and expense tracking is generally included in all tiers. However, if you require accounts payable or accounts receivable tracking, you would have to select a mid- or top-tier package or maintain these tasks in-house.
Of the three primary ways bookkeeping services are priced, Bench uses the monthly expenses method. Bench offers four pricing tiers that run between $95 and $345 per month. The Bench Starter plan is $95 per month and is ideal for a cash-based business that has on average less than $1,000 in monthly expenses. Bench can also serve larger businesses with up to $1,000,000 in monthly expenses. Head over to the Bench website and request your free trial.
Frequently Asked Questions (FAQs) About Small Business Accounting Services
This section includes the most frequently asked questions about how to find the best bookkeeping service for your small business. If you don’t see your question below, you can post your question in our Fit Small Business forum and either myself or one of our team of experts will answer it.
Some of the most frequently asked questions about small business accounting services are:
1. Do I Have to Sign a Contract When I Hire a Bookkeeping Services Company?
Most bookkeeping services companies will not require that you sign a contract. However, they may require a 30-day notice before canceling services. If you do encounter a bookkeeping services company that requires you to sign a contract, it’s recommended that you have an attorney review the contract or go with a different company.
2. What Is the Average Cost for Bookkeeping Service?
Bookkeeping services on average start at $195 per month. Keep in mind that pricing will vary based on your monthly expenses, monthly transactions, and the type of services you require. The more expenses and services you require (e.g., income and expenses, A/P, A/R), the higher the cost.
3. What Do Bookkeeping Services Offer?
The menu of bookkeeping services offered will vary by company. Most virtual bookkeeping services will only manage income and expenses for cash basis businesses, whereas many local bookkeeping services will do bookkeeping, payroll, and taxes. Select a firm that can provide the type of services your business needs now and in the near future.
Now that you know what you need to take into consideration when looking for the best bookkeeping services for your small business, it’s time to take action. To recap, there are six steps that you need to follow: identify the services you need, decide what activities will remain in-house, consult with your CPA if you have one, choose a virtual or local firm, do your research to locate prospective firms, and interview the finalists.
One of the companies that should be at the top of your list is Bench. Bench is a virtual bookkeeping service company that specializes in managing the books for small businesses on a cash basis. They have an affordable package to meet every budget and they will complete a month of your books so you can try them before you sign up.