Bookkeeping is a critical part of successfully running any business, as it assists you in determining its financial health and overall profitability. However, as your business grows, tracking your expenses and keeping everything categorized properly can become a significant task, one that you don’t have the time to complete on your own. With that in mind, it makes sense to consider hiring a bookkeeper. The question is whether you want to hire someone in-house or not. After all, your business might not be ready for the expense of additional team members, but you still need someone with bookkeeping expertise. To achieve that, you might turn to online bookkeeping options as a way to expand the skills available to your business without expanding your team. With that in mind, let’s talk about online bookkeeping, including what it is and how you can utilize it to benefit your business.
What Is Online Bookkeeping?
Online bookkeeping is a web-based bookkeeping system for businesses and individuals where the bookkeeping is encrypted and managed online rather than on your company’s network, accessed through your desktop or laptop. Instead, you utilize the internet to access your bookkeeping, which allows you to hire a freelance bookkeeper or bookkeeping service with relevant experience in your industry without necessarily adding to your staff.
The business owner and the online bookkeeping system are the two main players. As the owner, you can opt to handle the bookkeeping yourself using the online system or hire a bookkeeper. You also pay a monthly or annual subscription price to access the online bookkeeping system through a vendor website. Having specific users tied to your account means you know exactly who has access to your financial data. Plus, the online bookkeeping vendor provides security measures to maintain the integrity of your data through regular data backups, system maintenance, strong privacy measures, and continuous improvements.
What Are the Benefits of Online Bookkeeping?
There are multiple benefits to utilizing an online bookkeeping application, which include the following:
- Convenience – You can access your financial data anytime from any device with internet access.
- Multiple Person Access – Depending on your subscription level, multiple people from your company and your bookkeeper can access the system.
- Data entry – Faster and more accurate basic data entry since the system can be connected with your bank and credit cards to provide automated data entry. Data syncing also reduces the need for manual data entry.
- Regular updates of software – The updates mean you have the latest information on taxes and accounting to keep your financials accurate and up-to-date.
- Working from the same data file – Everyone is working in the same data file, so the need to backup, transfer, and reimport the data file into a desktop accounting software is eliminated. Plus, there is less of a risk that a transaction isn’t recorded in the main data file.
- Collaboration – Getting help from your bookkeeper is easier than ever because both of you have access to your live file and have the right information to give you an informed answer.
- Security – Loss of data is reduced, as data is stored on large corporation computers and higher quality hardware via the cloud system. Plus, user authentication methods are in place to ensure that only authorized users access your data. Levels of access can also be put into place, thus setting individual access permissions.
Obviously, there are many different benefits to utilizing online bookkeeping software. One of the biggest benefits is how the software is synced with current tax laws, thus making sure you are paying the right amount of tax and maintaining compliance. Additionally, as you set up your categories for various expenses, it is easier for you and your bookkeeper to determine which categories are growing and where both income and expenses are coming from.
How Does Online Bookkeeping Work?
Online bookkeeping dives into the realities of a world that has become increasingly dependent on technology to manage our businesses and their finances. With that in mind, let’s dive into how online bookkeeping works for a typical business.
Cloud-Based Bookkeeping Software
First, the software is stored in the cloud with security measures in place to keep your data private and encrypted while also addressing bug fixes to make sure accuracy is maintained and your data file is complete.
Data Entry and Automation
Data syncing can assist in streamlining your workflow, allowing for transactions to be automatically categorized by creating rules to tell the program how to deal with specific transactions. You can also automate invoicing utilizing schedules.
Bank Account Integration
Part of the benefits of automation is that entries can be made through data syncing with your bank and credit cards, thus reducing the risk of errors from manual entry.
Collaboration and Accessibility
To gain access to a bookkeeper with financial expertise related to your industry, cloud-based accounting software is the key. Collaboration and accessibility are easy to achieve for your team, making it possible to keep everything updated while also hiring a bookkeeper or bookkeeping service who can manage your financials.
Examples of Online Bookkeeping Services and How It Works
There are multiple accounting software options available, each offering different applications and options tailored to meet the needs of your business. Let’s explore a few of them and what they have to offer.
QuickBooks Online – Quickbooks is one of the premium online accounting software options, providing options catering to online businesses, the self-employed, and larger businesses. Many accounting services also highlight their compatibility with Quickbooks, making it easy for businesses to collaborate with their bookkeeping service or accounting team.
Xero – Xero is an accounting software with a focus on real estate, including tracking rent payments, along with other features geared to managing expenses, maintenance, and more. Business owners can also utilize the software for bill pay and invoicing.
Wave Accounting – With Wave, your business gains access to a suite of money tools, including invoicing, accepting online payments, and more. Plus, Wave is free, with the ability to add options as you need them. It works great for freelancers and professionals who need invoicing and accounting options.
Zoho Books – Zoho Books is an online accounting software to manage finances, automate business flows, and assist you in working collectively across multiple departments. It also offers an integrated platform, which allows you to add more applications to manage and run every aspect of your business, no matter where your business is located.
How Do I Get Started with Online Bookkeeping?
To get started with online bookkeeping, you need to choose accounting software and follow its setup process. Here are a few points to keep in mind. One of the best ways to do so is through a bookkeeping service.
Choosing the Right Online Bookkeeping Service
When choosing the right online bookkeeping service, it is important to focus on what your business needs. Many services highlight their specialization and expertise in various industries or business models, such as e-commerce.
Setting Up Your Online Bookkeeping System
Many online bookkeeping services offer to set up your data on the accounting software of your choice, making sure all your transactions are included, frequently known as catch-up data entry. They will also set up your categories and create any rules to assist in automating your data entry process.
Importing and Organizing Financial Data
Once your data is initially imported, they will work with you to make sure that everything is organized and categorized properly. Plus, they will handle inputting transactions going forward.
What Are Some Online Bookkeeping Best Practices as A Business Owner?
As a business owner, your goal is to protect your data and ensure its accuracy. With that in mind, best practices include limiting access to only your bookkeeper and key members of your financial team. Make sure passwords are changed regularly, create individual rules for access, and use two-factor identification to add another level of security.
Frequently Asked Questions
1. Do online bookkeepers get benefits?
Typically, online bookkeepers are not hired in-house and so do not receive benefits. If you opt to hire your online bookkeeper as a permanent part of your staff, you can opt to include benefits as part of their salary package.
2. Where can I find an online bookkeeper?
There are a number of ways to hire an online bookkeeper, including various websites focused on providing accounting support staff. Keep in mind, you want to make sure that you verify their experience, education, and certifications prior to hiring.
3. Is online bookkeeping secure?
It is secure as long as you follow the basic security steps, including regularly changing passwords and two-factor identification.
4. Can online bookkeeping help with tax preparation?
Yes, because it can assist in calculating the amount of taxes owed, as well as the dates quarterly payments are due. Additionally, having all your transactions accurately recorded and categorized will make it easier for your accountant to complete your filing process.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
Using online accounting software gives you multiple benefits while also providing a platform for your business to utilize an online bookkeeping service. Your business will also benefit from collaboration, automated data entry, and other services, which can be added to fit your needs. Step your business into the future with an online bookkeeping software today.
