What is Bookkeeping as a Service?

It’s a word that’s often thrown around but little understood. After all, bookkeeping as a service is little more than writing down numbers isn’t it? We have computer programs for that now, don’t we?

Only, you’d be wrong.

Bookkeeping is often given a bad rep by certain business owners. Some get it confused with accountancy, whereas others just believe that it is accountancy’s unnecessary and tiresome little brother.

But every successful business knows that bookkeeping does far more than that. So let’s explore and explain bookkeeping as a service. We’d put money on the fact that once you’ve read this article, you’ll join the swathe of business owners that understand that strong bookkeeping grants businesses a healthy financial foundation on which to flourish.

But then again, if you won that bet you’d still need a bookkeeper, wouldn’t you?

What is bookkeeping?

Bookkeeping is the process of recording and categorising financial transactions to provide an accurate picture of a company's financial position.

It's a vital part of any business, as it provides the information needed to make sound financial decisions. If you’re in the food & drink industry, think of a chef. They need the ingredients before they can concoct, coerce and cajole the flavours out of their food.

Bookkeepers make sure that your management has the right amount of ingredients.

The keystone of bookkeeping is accuracy and attention to detail. Bookkeepers must carefully track all financial transactions and ensure that they are properly recorded to precise parameters. This requires a strong grasp of basic maths and excellent organisational skills, not to mention the ability to quickly and methodically scan large sets of figures to identify any outliers or mistakes.

Bookkeeping is essential for businesses of all sizes, from sole proprietorships to large corporations. In bookkeeping as a service, there are 5 main accounts to be handled:

• Assets

• Liabilities

• Revenue

• Expenses

• Equity

What are liabilities in bookkeeping?

Liabilities are essential in bookkeeping as they tell you how much your business owes.

You’ll be able to easily pinpoint your liabilities on your balance sheet which is one of your three major financial statements (alongside your income statement and cash flow statement).

If your business has promised to pay someone in the future and has not yet done so, that is classed as a liability.

Examples of liabilities include:

• Accounts Payable (eg. You’ve purchased products or services on credit)

• Mortgages

• Bank loans

• Wages owed

What is revenue in bookkeeping?

Revenue is otherwise known as your top-line or gross income.

It’s the total amount of money brought in by your business from its day to day operations before taking into account operating expenses, taxes or any other initial figures.

At the most basic business level, it’s calculated by the average sales price x number of units sold.

What are expenses in bookkeeping?

What may seem like a cut and dry definition may not be as simple and straightforward as you think when it comes to bookkeeping services recording expenses.

Expenses are the costs incurred by your business in its efforts to generate revenue, but again, it’s still not that simple.

Expenses and Costs can be categorised differently depending on your business model. Under certain business models, your Costs are money put forward in order to purchase assets (unless it's on credit in which case that would be a liability) whereas expenses are the finances used to cover the use and consumption of these items.

Any clearer?

On top of that, you also need to define operating expenses and non-operating expenses in order to accurately provide valuable financial reports.

To dig in properly, check out our guides on EBITDA for a more in-depth look at these sub categorisations as well as an introduction to depreciation. As for bookkeeping as a service, professional bookkeepers need to understand where each and every transaction falls under in order to properly record your finances.

What is equity in bookkeeping?

Equity is the value of a company's assets minus its liabilities. That’s how bookkeepers help to ensure that a company's equity is accurately reflected in its books. This helps to provide decision-makers with the information they need to make informed decisions about the direction of the company.

Bookkeepers also play an important role in ensuring that a company's financial statement is accurate. This ensures that investors and creditors have the information they need to make sound decisions about their involvement with the company. In short, bookkeepers help to ensure that a company's financial affairs are in order.

Without accurate bookkeeping, companies would be at a serious disadvantage. Bookkeeping is not just a dry, technical exercise; it is essential for the proper functioning of businesses large and small.

What is the difference between bookkeeping and accountancy

Bookkeeping and accountancy are often confused, but there is a big difference between the two.

Bookkeeping is the process of recording financial transactions, while accountancy is the process of interpreting, classifying, and summarising those transactions. In other words, bookkeeping is the data entry of accounting, while accountancy is the analysis and interpretation of that data. Bookkeepers are like the data entry clerks of the accounting world, while accountants are like the detectives who put all the pieces together.

Both bookkeeping and accountancy are important for any business, but they serve very different purposes. Bookkeeping as a service is the foundation that allows accountants to do their job properly. Without accurate and up to date bookkeeping records, accountants would be working with nothing more than guesses.

What do bookkeepers do?

The recording and reporting of all of these figures is a demanding job, but a necessary one. Not only do these figures need to be recorded efficiently and effectively, but they also need to be neatly collated in an easily accessible, yet secure, data file.

It’s these data files that grant you the ease of which to generate reports, view statistics and a glance and dredge up valuable data that affects both your day to day business, and the large-scale decision making of your future.

An easy example of this is your operating income. Your revenue isn’t all the money you have, as you need to take away your operating expenses to gain a more solid look at your income for the year. Then of course you need to calculate your COGS to make more sense of the figures…

To make a long story short, bookkeepers offer you the ability to make decisions based on what you have and your potential. Without them, you’d be gambling in the dark with little regard to the overall state of your finances!

Bookkeeping as a service also takes care of a few other vital matters.

Managing payroll

Payroll can be a thankless task if your bookkeeping software is not up to date. Especially when the government is implementing financial changes every tax year.

Certain bookkeeping services offer to handle payroll for your business and handle it alongside their other financial responsibilities.

Handling deposits

Business finance, especially for startups, can be a close thing. You may not necessarily have the leeway to wait for deposits to be made later when you have immediate expenses that need covering in the short term.

Bookkeepers handle this responsibility efficiently and with minimal fuss, enabling you to be up to date on your accounts receivable at all times.

Maintaining financial reports

Being in the dark about your finances is dangerous to any business.

For bookkeeping as a service, the bookkeepers regularly update you with easily digestible and well presented financial reports over all of your accounts. They provide not only the financial position, but the performance of your business.

Reconcile bank accounts

“Bank account reconciliation” is a phrase that will cause the average person to drift into slumber. It’s boring, thankless and rightfully so.

However bookkeepers perform this process on a regular basis to protect your business. Whether that is overdrawn money, fraud or theft, they ensure that your business keeps going uninterrupted and unbothered.

Every bank account, Paypal account and credit card must be reconciled with every transaction. Even the slightest error could have disastrous results for either your business finances or your relationship with an HMRC tax audit.

In this game of “spot the difference” where the stakes are astronomically high, bookkeepers are experts at it.

How does bookkeeping as a service benefit your business?

Well for starters, everything we’ve previously mentioned is essential to running your business efficiently. From reporting to reconciling, each part of bookkeeping is as valuable to your business as the operation itself.

However, the benefits of these actions mean that accountants, CFOs and management can make the best data-driven decisions available. They don’t have to trawl through the accounts to gain the big picture. It’s already there, presented clearly for them.

The third benefit of bookkeeping as a service is time efficiency.

Bookkeepers are a dedicated force that exclusively works to ensure that your accounts are up to date and accurate. They allow you, your accountancy services and other leadership to focus on their separate responsibilities.

In essence, a vital cog in the machine is your successful business. This is especially true for Startups such as Pluto. Their growing startup couldn’t handle the reporting that their blossoming startup was experiencing.

Is bookkeeping as a service expensive?

The answer, as always, depends.

There are a huge number of factors that play into the costs of a bookkeeper. These can include considerations such as:

• Business size and life cycle

• Number of employees

• Transaction volume

• Method of payroll processing

• Number of balance sheets

• Number of accounts

Bookkeepers will factor in these, and many more, points of interest before charging you a strict amount for their services.

However, the primary distinguishing factor for bookkeeping rates is the question of in house, or outsourced.

In house bookkeepers vs outsourced bookkeeping services

When it comes to in-house vs outsourced, many people will tell you that outsourced services are overpriced and overrated.

Once upon a time that may have been true, but that is simply no longer the case.

With the right outsourced bookkeeping services, you can receive scalable support that meets your financial needs at a price that suits you. Whereas maintaining a full-time, in-house bookkeeper means that you could well be paying a full salary for an employee that only needs a fraction of their time to complete your bookkeeping needs.

Thanks to online bookkeeping and accountancy, it’s easier than ever to source flexible, scalable financial services for your business. This is especially useful to startups who are more mindful of their bottom line in the initial phases.

Get the bookkeeping support that matches your needs.

Find bookkeeping as a service

Our best in class team is here to meet your bookkeeping responsibilities at a scalable rate that suits your finances.

Our experienced team works with cutting-edge AI bookkeeping software to keep your accounts up to date and fully compliant. With a live financial dashboard that’s ready to go with financial reports at the touch of a button you’ll always feel in control and armed with easy to read data.

With payroll, tax and year end worries taken care of, you can focus on the bigger picture of your business and prepare for quick growth in no time at all. Get in touch with a finance specialist today to learn more about our scalable services and remember to visit our School of Startups. It’s the last place you’ll ever need to read business guides from CEOs, CFOs and successful entrepreneurs of all kinds.