Tax accounting and bookkeeping go hand-in-hand. But as most CPAs know, one of these services is far more valuable than the other. In other words, bookkeeping is a “loss leader,” while tax accounting is often the money maker.
While most firms have accepted that bookkeeping will never be their top source of revenue, that doesn’t mean that bookkeeping can’t be profitable. In fact, with the rise of cloud technology and a growing number of third-party software providers, some accounting firms are starting to see outsourced bookkeeping services as a clever solution to a long-time problem.
To understand why CPA firms are starting to bring on outsourced bookkeeping services as partners, we’ll break down the benefits of outsourcing and how firms are profiting from the arrangement.
The Problem With Bookkeeping
In order to understand the rise of outsourced bookkeeping services, it’s necessary to understand some of the problems that bookkeeping itself presents for CPA firms.
While bookkeeping on its own is fairly straightforward, it requires a great deal of time and attention in order to be done properly. For a firm full of highly-trained CPAs, spending hours on tedious tasks such as reconciling accounts or preparing monthly reports means less time for other projects.
Herein lies the next problem.
Bookkeeping does not have very high-profit margins for firms. If CPAs are spending all of their time on low-value tasks such as bookkeeping, they’re not bringing in as much for the firm as they would if they focused on more profitable, high-value services. In other words, bookkeeping tasks prevent CPA from efficiently using their time to focus on value-added services such as tax planning, investments, financial disclosures, wealth planning, advising clients, and more.
The Benefits of Outsourced Bookkeeping Services
In response to the bookkeeping dilemma, third-party providers have come to the rescue. These outsourced bookkeeping services combine leading cloud technology with teams of real accounting professionals to take a firm’s bookkeeping off its plate. In turn, this kind of partnership has a number of important benefits for firms.
A Time-Saving Solution
Time is the most precious commodity that accounting firms have and bookkeeping partners know this better than anyone. Bookkeeping partners help firms save tens of hours each week by doing the bookkeeping for them. Bookkeeping partners use the latest cloud accounting technology and enlist a team of highly-trained bookkeepers, which allows them to do the bookkeeping for dozens of clients in a fraction of the time it would normally take an accounting firm.
Leveraging New Technology
While today’s accounting firms are well-versed in the latest cloud technology, CPAs don’t always have the time to learn how to use dozens of different software programs. Bookkeeping partners are able to stay on top of the latest technological advances and in many cases, they develop their own cloud bookkeeping software. These outsourced bookkeeping services often employ the latest advancements in artificial intelligence, including auto-reconciliation, auto-categorization, and workflow automation, to deliver faster results and eliminate costly errors.
Boosting the Firm’s Bottom Line
As mentioned above, it’s no secret that bookkeeping doesn’t bring in the big bucks. However, outsourcing can help address this issue. By outsourcing low-value tasks like bookkeeping, firms can free up their CPA’s time. As a result, CPAs have more time to focus on the kind of high-value advisory services that boost a firm’s bottom line.
With growing clients comes a growing workload. But if an accounting firm has partnered with an outsourced bookkeeping service, it’s the bookkeeping service that bears that extra workload. Bookkeeping partners are equipped to handle the bookkeeping of companies big, small, and everything in between. This means there’s never a need for accounting firms to hire additional hands as their client’s workload increases.
Keeping Up With Competitors
For some firms, bookkeeping isn’t worth the trouble and they’ve chosen to drop the service entirely or scale back their bookkeeping operations. However, dropping bookkeeping as a service puts these firms at a major disadvantage when compared to the firms that still function as one-stop-shops. Outsourced bookkeeping services help to solve this dilemma because it allows firms to keep bookkeeping services on the table and stay competitive—without the extra workload.
For today’s busy accounting firms, it’s clear that outsourced bookkeeping services like OpenDigits provide an effective solution to the problem of bookkeeping. To find out how OpenDigits can help your firm streamline your bookkeeping operations and reduce overhead costs, get in touch for your free consultation.