Best Online Bookkeeping Service Options for Creatives

With all of the software options available to small businesses, why would you choose to use a bookkeeping service instead of do it yourself?  Let's dive into the benefits of outsourcing this function.

Definition of Online Bookkeeping Service

Long gone are the days of bookkeepers slaving over 10-keys and green ledger paper.  Software has automated many bookkeeping tasks, and technology will continue to make it more efficient.  Although software has made do it yourself accounting easier, it hasn't replaced the benefits of a seasoned professional.

Bookkeeping is an essential process of all businesses.  Recording business transactions in their proper accounts is foundational to good accounting.  From this process you have the ability to obtain timely, accurate, and complete financial reports and comply with tax filings.  If you have employees, the process also properly accounts for payroll expenses.

Most businesses aren't large enough to justify the expense of a full time bookkeeper as an employee, with costs exceeding $75,000 per year.  Usually the task of accounting falls to an administrative person like an office manager, or to the business owner themselves.  Although software like QuickBooks online are great tools, they do not make you a bookkeeper.

You can hire a CPA firm to prepare financial statements, but CPA's are NOT bookkeepers!  You can also hire a part-time bookkeeper for your business that does bookkeeping for several companies.  Some of them will come on site to your business, but most are going to do the work virtually.

There is another option for businesses, virtual bookkeeping services.  These companies are experts at bookkeeping only, and do not generally provide any additional services, like tax preparation services.  Their costs are a fraction of what you would pay to hire an employee, and many cases are a great alternative for your business.

Types of Online Bookkeeping Services

There are many different types of virtual accounting services from the local bookkeeper working remotely with businesses in the area to national companies that serve businesses everywhere.  Some specialize in start up businesses, like Bench, while others are designed for project work like Decimal.

To find the best alternative for your creative business, consider your needs now, and in the future.  Consider the following options when selecting a service.

Dedicated Bookkeepers

Will you work with a dedicated bookkeeper based in the United States?  Will it just be them, or are they part of a team of bookkeepers? Are they a professional bookkeeper that can communicate timely and clearly?  Having the same person working on your business financial reports over time will result in more accurate financial reporting, giving you the information you need to make business decisions. 

Having a dedicated bookkeeper also ensures that the information your tax preparer is using is accurate avoiding potential fines and penalties.  It also is easier for you, since you don't have to answer the same questions every month, training someone new.

Catch-up Bookkeeping Services

Are you several months (or years) behind on your recordkeeping.  Make sure that your service can assist with your catch-up bookkeeping.  The quicker you can get caught up the quicker you can file past due tax reports, and sleep better at night.

Does the service guarantee you a fixed cost to do the back work?  Once you've delivered all of the information, can they complete it in a timely manner?

Add-on Services

Some, but not all, virtual bookkeeping services can assist with additional services, such as payroll or sales tax filings.  Do you need someone to assist with these?

Payroll can be done in some bookkeeping software like QuickBooks online or you can use a stand alone payroll services such as Gusto.  Accounting services may use these options or payroll service bureau software to handle this.  One benefit of using a virtual service for payroll is that their software can handle additional items such as benefit tracking, benefit administration, and time keeping.

Sales tax is a tricky one, varying by state and locality.  Not only are their many different tax rates, every state taxes different goods and services.  You need  an expert that can help determine what is taxable for your business and ensure compliance to avoid penalties.

One other optional service to consider is accrual basis accounting.  This is an alternative to cash-basis accounting that requires additional information, such as accounts receivable.  Some services only offer cash based accounting. 

Tax Services

None of the virtual bookkeeping services mentioned including QuickBooks Online provide tax filing services for income tax.  Every business needs them, so you will have to engage the services of a CPA or other tax preparer.

At Core, we combine bookkeeping, payroll, tax planning, and tax preparation into one service, the Core Financial Process.  There is no company that combines all those services to businesses on a national basis, and we specialize in creative industries.  You will have a dedicated bookkeeping team and a dedicated account manager, both financial experts to provide you business insights.

Features of an Online Bookkeeping Service

What should you expect as work product from an online accounting service.  Although services will vary, you should be looking for these things.

Financial Statements and Reports

Standard financial reports include an income statement, balance sheet, and cash flow statement.  It is not enough to simply provide these reports, however.  You need someone to help you understand what they tell you about your businesses financial performance.  You need a guide to help you use this information to make better business decisions.

The income statement, also known as a profit and loss statement, shows how much money your business made during a specific time period.  An annual income statement will be adjusted by your tax preparer to prepare your business tax returns.

A balance sheet shows a snapshot of your financial condition at one point in time, usually at the end of the month.  It shows what you own (assets), what you owe (liabilities), and what is left over (equity).  Although not used as frequently by business owners as an income statement, it still provides valuable information.

A cash flow statement combines the information from the income statement and the balance sheet, and shows you the cash flow of your business for a specific period of time.  Although rarely used by business owners, the cash flow statement is critical to understanding your business performance.

Balance Sheet Analysis

Most creative businesses don't have a lot balance sheet items, but a couple of items need to be considered.  If you have accounts receivable, where your customers owe you money, you need to have this recorded in your financial statement using accrual accounting.

As your business grows, so will your accounts receivable.  If you are not watching this and managing it can lead to cash flow problems.  Having a dedicated finance expert will ensure you don't run afoul of "dangerous" growth.

Debt is another balance sheet item to analyze.  Whether it is bank loans or credit cards, managing your debt is part of managing your cash flow and profit.

Monthly Expenses Tracking & Reporting

Although not generally provided in the standard financial reporting package, you will at times need to reference the detailed expenses behind the reports.  Reports like the general ledger, which shows all of the monthly transactions using a chart of accounts, will give you this detail to determine what is actually causing the changes in your profitability.

At Core we use a unique financial report called the trailing 12-month income statement.  This report shows the last 12 consecutive months of operations.  By comparing one month to the other, we are able to quickly identify changes and trends in your business.  The trailing 12-month income statement smooths out any seasonality of your business and allow for easy comparison of where you are now compared to the past.

Pricing

Most virtual bookkeeping services offer flat rate options for a menu of services, with add-on services being additional cost.  Pricing is usually depending on the number of bank accounts you have as well as the number of monthly transactions.

If you are wanting custom plans, it is best to stick with a local option.

Conclusion

In conclusion, finding the best online bookkeeping service for creatives is crucial for managing your finances and allowing you to focus on your passion. Whether you're an artist, writer, or designer, these services can help you stay organized, save time, and maximize your profitability. So why wait? Take control of your finances and watch your creative career soar to new heights!