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  • Pam Prior

Is Hiring A Virtual Bookkeeper the Right Choice for Your Business?

“Should I hire a virtual bookkeeper?”

It’s a common question from new business owners with limited funds, but the term “virtual bookkeeper” often rubs people the wrong way.

A virtual bookkeeper is simply a bookkeeper who isn’t on site with you. They do your bookkeeping remotely, either through an online service or a hosted service. If your business is a startup, or if your business is entirely virtual, there’s no reason not to hire one.

One of the biggest advantages of virtual bookkeeping services is that there’s no need to hire someone to sit in your office to do the books. A secondary advantage is that it eliminates paper, because everything is scanned and held in digital files. Hiring a virtual bookkeeper can also lead to automating payment processes so you can do away with physical checks and check signing while strengthening your controls around cash.

The real question is what type of virtual bookkeeper you should hire. There are two ways to use virtual bookkeeping services. One option is a virtual solopreneur. The other is a national or regional bookkeeping service that performs your bookkeeping with a more standardized system and a larger team of bookkeepers. And these two types of bookkeeping have very different advantages.


When To Hire A Regional or National Virtual Bookkeeping Company

Take a good look at your business’s particular circumstances. If your own company is virtual, or is a business that needs to rely on a well-tested process, you are a perfect candidate for a national or regional virtual bookkeeping company. These services can guarantee consistency over time, regardless of the individual who is your specific representative. They have and train back-up personnel for each client, ensuring seamless service and responsiveness.

However, the disadvantage of the larger bookkeeping services is that flexibility is limited. The reason they can be so efficient and effective is that they have a standard set of practice. They will tell you how to process things. This can actually be a blessing in disguise, but it may feel frustrating if they’re not as flexible as you want them to be.

Another downside is that they’re more expensive than most startups can afford. And usually, these big firms are strictly bookkeeping companies, which means they rarely give consulting. However, they have CPAs on staff who makes sure you’re in compliance.

When to Hire A Solo Virtual Bookkeeper

Unlike the large bookkeeping companies, solopreneur bookkeepers will know and understand more about your specific business. They build a relationship with you one-on-one, much more so than the national companies will. Also, they won’t have the overhead of the larger companies, so they can price a little better; a definite benefit for startups.

The disadvantage is that in a one-man shop, there’s often no backup. If they’re on vacation, they’re on vacation. If they get too many clients—which happens a lot—their level and quality of service for each individual client drops. They don’t have the bandwidth to do it. They also have no way to scale their businesses; their only route to growth is to add more clients.

Another disadvantage is that you have to make sure the individual is bonded and insured since they’ll have access to your bank account. You should ensure your bases are covered when you make contracts with them. The large firms have this down to a science. As a rule, you can trust that the contracts of the large companies and their insurance coverages are appropriate. With the solo bookkeeper, you don’t always have a CPA at the helm, verifying that the books are in order and handling the complex questions internally before they come to your attention.

Often solopreneur bookkeepers will do whatever the tax accountant needs; whereas the larger company will say, “No, we do accrual accounting for management, and here’s what your tax accountant can do at the end of the year.” With one flip of the switch, the accountant gets what they need to do your taxes, and the value of your financial reporting is elevated to a critical management tool.

This might sound like a lot of disadvantages, but I often refer clients to virtual bookkeepers who are solo-preneurs. It just depends on your business’s needs, and which of these levels is best for your situation.

Six Steps to Finding the Right Virtual Bookkeeping for You

Once you’ve decided which type of virtual bookkeeper fits your business, you’ll want to do your due diligence before choosing one. Use these six steps as a checklist for finding and hiring a great virtual bookkeeper:

  1. Ensure that you understand why you need accrual accounting for your management books.

  2. Get referrals from your friends who are happy with their current bookkeeping and accounting process, and verify online reviews of anybody you’re considering. If you don't have any referrals, search online with various keywords to see what fits.

  3. Then, call and talk to the owner/operator. It would be helpful for you to see whether they have a vested interest in understanding your business model. If they talk to you immediately about debits, credits, and depreciations, hang up the phone. If their statement is, “Tell me a little bit about your business,” that’s a good sign. They should ask you about your procurement, creation, and distribution process. They might use different words, but the bottom line is they need to express an interest in knowing and understanding your business.

  4. Verify that they do accrual accounting. Be sure that they have no problem communicating with your tax accountant in tax accounting language. I’d ask if they have a CPA who reviews the process, and if they and their employees are bonded because they’ll be pulling information from your bank, which means they’ll have access to your bank account.

  5. Check their pricing both for affordability and to see what expectations you can have for service levels.

  6. Find out exactly on which workday they will deliver your financial statements each month. Ask what they need in order to meet that deadline and get it in writing. In my opinion, if it’s later than the fifth workday, you should interview another bookkeeper.

Author, Virtual CFO, and Finance Coach

"Your First CFO: The Accounting Cure for Small Business Owners" on AMAZON

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