Virtual Bookkeeping - How Does it Work?

So you have taken the step and decided bookkeeping is just one of those tasks you really would prefer to outsource. You have interviewed several candidates, but no one has really felt like someone you could totally depend on. Your friend suggests someone, but they live several hours away. You would love to work with that person, but you ask yourself how it can be done?

There are several ways to work with a virtual bookkeeper and it is be best to talk with your virtual bookkeeper (VB) to determine which is best for you, but here are just a few ideas to get you started.

How to Get the Documents to Your VB
Option #1 - Set up Virtual Post Office
By Purchasing a Post Office Box in your VB’s hometown and ensuring all your bookkeeping related documents are sent to that mailing address will make matters easy for your VB. They simply visit the post office regularly to pick up any items that are delivered. If asked about the address by your clients and/or suppliers, you can simply state this is the location of your satellite office.

Option #2 – “Snail Mail” or Courier
Once you receive the documents you can bundle them up and forward them to your VB by “snail mail” or courier. The only drawback in choosing this method is there can be a delay and deadlines may be missed. Of course, it does give you the opportunity to review your invoices and approve or reject them.

Option #3 - Scan Documents and Send by Email or FTP
Finally, if you are still a small business, a very viable option is to scan all the documents that need to be inputted into your accounting software and either email or FTP these documents to your VB. If you are a larger company, this may not be a feasible option as you would probably spend more time scanning and emailing then you would simply entering the items. If you do choose this option, please remember to email your VB every transaction you make including on-line payments, checks written, invoices received, credit card receipts and invoices sent. If there is not an actual paper document then details can be sent to your VB for entry.

What Options are There for Systems to Use
Option #1 - VB Maintains Records
This is perhaps the easiest system to use. By having your VB maintain the records solely there will be no concerns about missed entries, incompatible software programs and lost data. Also, from the VB’s point of view it is the best alternative simply because it is easiest for them. Why?

Option #2 - Online Options
Several bookkeeping software programs now have an on-line capability. All data is entered on-line and can be accessed by both parties; the VB and the client. There are several advantages and disadvantages to using this system and if this is your choice it is best to do a lot of research before deciding on the software package you will utilize.

Option #3 - VB Logs Onto Your Computer to Access Bookkeeping Program
Another option is to have your VB access your computer directly. There are several programs that make this a viable option as well. You can also set up your system to allow your VB direct access to your server. Keep in mind that with some programs since only one person can access your computer at a time this may not be a viable option for you. Also, your VB will have troubles as printing will no longer be an option. For many reports it is key to have a paper trail and this may not always be a possibility.

I Still Want Access to My Records, but How?
Option #1 - Online Options
If you do choose one of the on-line options you will always have direct access to your computer records. Of course, these records may not mean anything to you unless you ask your VB to interpret them or you have some simple bookkeeping background.

Option #2 - Transfer File
You can choose to have the data file transferred back and forth between yourself and your VB. The only risks you take with this are that the file is somehow corrupted, you overwrite a current file during transfer or entries are missed because each of you enters transactions at the same time. Another thing to keep in mind if you choose this option is that you and your VB will have to maintain the exact same software package. Many VBs update their software frequently so this could be a costly choice for you.

Option #3 – Maintaining the File and Having VB Work Utilizing Your Computer
If you do choose to have your VB work on your computer file directly by accessing your computer, you will have full access to your records. Of course again you may not fully understand what you are looking at and may need some interpretations.

Option #4 - VB Sends Full Reports Each Month
At the very least, even if you fully trust your VB and allow them to maintain full control of your bookkeeping software, you should be receiving a full set of reports each month. This will allow you to stay on top of your financial decisions and make crucial business decisions.

What Things Should I Ask to Be Included in My Monthly Reports?
1. Financial Statements
Incl: a) Balance Sheet showing all your assets, liabilities and your investment in the company
b) Income Statement showing profit and loss for the month (nice to have a year-to-date too)
2. Balance in Bank Accounts
3. Accounts Receivables listing including all amounts owed by your clients/customers
4. Accounts Payable Listing including all amounts owed to your suppliers
5. Bank/Merchant Account Reconciliations
6. Detailed Trial Balance Showing All Entries Made during the month

Of course, this can be modified to suit your needs, but if you are making financial decisions these items will be critical to make the best decisions for your company.

How Will We Pay the Bills?
Option #1 - Separate bank account – on line access and/or signing authority
This is a fantastic idea and one where you can set up a “bookkeeping” account wherein you deposit only the funds needed to pay bills in that particular month. All incoming monies from payments from your clients/customers are maintained in a separate main business account. As funds get low, you can transfer more funds from your main business account to this operating account. This way the only access that your VB needs to your main business account is one of simple data entry. For your operating account the VB can have signing authority and on-line access as the funds will only reflect the amount required to pay invoices.

Option #2 – Prepared Checks – Attach to Invoices
Your VB can also prepare the required checks and attach them directly to the invoices with an addressed envelope. These would then be returned to your attention and all you would be required to do is to sign the check and insert it into the envelope for mailing.

Option #3 - Supply of Signed Checks and Ask for the Stubs to be Returned Each Month
Another option is to pre-sign some checks for safe keeping by your VB. If this is an option you choose I would suggest ensuring that the stubs are returned to you frequently so you can maintain a record of what the checks are being utilized for.

Option #4 – Email Listing of Accounts to Be Paid and You Issue Checks and Return to Your VB
Perhaps the popular option is to simply have your VB send you a listing of the checks to be written and the amounts. Once you prepare the checks you send a return email showing the check numbers and date the invoice was paid. This will allow you to maintain full control of what is actually paid for and when that payment is issued.

How Do I Stay Knowledgeable with my Clients/Suppliers?
Option #1 – VB Gives Full Detailed Reports to Client (in layman terms)
If you would prefer your VB to remain “behind the scenes” and hidden from your suppliers and purchasers, it will require several things be in place for this system to work. The first thing is to have detailed reports, written in layman terms for your advantage, so you always are aware what is happening in your financial picture. The second is to have the ability to contact your VB at a moment’s notice to ask questions of them. Finally you will require some knowledge of simple bookkeeping and how it works.

Option #2 – VB Sets up Invoicing, etc. to Have Their Direct Line for Inquiries
One method that works amazingly well is to have your letterhead and invoices show your VB’s phone number listed as Accounting Department – Direct Line. Although this won’t stop your clients from contacting you, you can simply direct them to send all accounting related inquiries directly to your accounting department. Of course your VB would have to be willing and able to handle these inquiries on your behalf. Most people will not even realize they are calling somewhere not local, especially if your VB has a toll free line. It will also create the illusion you are a large company with several departments.

What about the Filing System
Option #1 – Virtual Filing Setup, Your Maintenance
Virtual filing can be done, but the first thing you will want to do is to send everything you have to your VB. That’s right, box it all up and send it by UPS; all your blank checks, cancelled checks, your receipts, invoices, etc.. This will allow your VB to set up a filing system for you. They will document and record the names of your files and send these files, already prepared, back to you. By allowing your VB to set up your files they will know which files you have and will keep a record. Then each month they will return your documents with labels as to which files each document is required to be filed in and if a new file is required they will create that file for you. Still worried about finding the time to file, that is fine too once a year you can send a few files at a time to your VB and they can organize them for you and send them back.

Option #2 – Simple Filing System
A second option for filing that some VBs have used is to simply put all the documents in large brown envelopes and mark the month on the outside. Within that folder they will have smaller envelopes for sales, purchases and miscellaneous documents. Then the only thing you have to do is put the envelope in a large box for year end purposes.

Option #3 – VB Maintains Filing
If your VB has the capability and desire, it is a great idea to allow them to maintain the files at their location. The biggest advantage of this is all the records are at their fingertips. This is key when they are dealing with phone calls from your suppliers and purchasers and need to have the answer within minutes.

Finding the right filing system will depend on whether your business is large or small and how often you will be required to access previous month’s documentation.

Perhaps the biggest advantage to outsourcing to a virtual bookkeeper is you are not limited by your geographical location. You can find the person that feels right for you and will be the best fit for your company regardless of location. That means that you can find a person you feel you can trust even if they live several hours away or across the other side of the country it can work.

One cautionary note I always suggest is to have someone else do tax preparation even if your virtual bookkeeper is capable. This will provide a check and balance system for your accounting records and eliminate any worries you have of trust.
 

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