Accountant advising small business owner in her cafe
Some accounting firms oversee a broad range of tasks, whereas others specialize in a specific area. Discover how to select the right one for your small business needs. — Getty Images/ sturti

Outsourcing accounting services can free up your time, prevent errors and even reduce your tax bill. But the dizzying array of solutions may leave you baffled. Do you need a bookkeeper or a certified public accountant (CPA)? Or, perhaps you want to handle your general accounting tasks, like accounts receivables, but hire a consultant for cash flow forecasting.

Some accounting firms oversee a broad range of tasks, whereas others specialize in a specific area. Discover the different types of accounting services available and learn how to select the right one for your small business needs.

Different types of accounting services for small businesses

Accounting services fall under general or financial accounting. General accounting refers to regular duties, such as recording transactions, whereas financial accounting plans for future growth. You can hire a bookkeeper to enter data and run reports or work with a CPA who provides financial advice.

Small businesses hire third-party or part- or full-time employees to handle tasks in the following areas:

  • Bookkeeping: Input data into your accounting software or general ledgers, such as customer and vendor invoices and credit card transactions. They may also reconcile banking statements and record payments.
  • Tax management: Prepare and file tax returns, make quarterly tax payments, file extensions and handle IRS audits. Small business owners also assess their tax burden and stay abreast of upcoming changes to avoid paying more than necessary.
  • Financial reporting: Produce financial statements, including the balance sheet, profit and loss (P&L), cash flow, and income statements. These are used to make decisions, secure funding and more.
  • Payroll processing: Track work hours, calculate wages, withhold taxes, issue checks to employees and ensure accuracy. Accounting services may also include making payroll tax payments.

In addition, you can hire consultants to design and set up your accounting system, provide financial planning advice and explain financial statements. You can outsource chief financial officer (CFO) services, such as succession planning and oversight of mergers and acquisitions.

[Read: A Guide to Small Business Accounting]

When outsourcing accounting tasks, it’s crucial to think about the types of services you want to hand off to another person, what level of involvement you wish to have and how your needs will change in the next few years.

What accounting services does your small business need?

Often, small business owners outsource tax services first and add payroll assistance as their company grows. According to the National Small Business Association (NSBA) Small Business Taxation Survey, 68% of respondents use an external tax practitioner or accountant to prepare their company’s taxes. In contrast, the NSBA’s Technology and Business Survey found that 55% of small business owners manage payroll online, and 88% manage banking accounts digitally.

When outsourcing accounting tasks, it’s crucial to think about the types of services you want to hand off to another person, what level of involvement you wish to have and how your needs will change in the next few years. Create a list of processes and duties, and highlight those that you’re willing to outsource. Next, it’s time to find the right accounting service provider.

How to choose accounting service providers

Now that you have an idea of what type of accounting services you need, the question is, who should you hire to provide them? For example, while a bookkeeper handles data entry, a CPA can speak on your behalf to the IRS and provide financial advice. Financial providers can be individual contractors, employees or full-service firms.

Before deciding, consider these questions:

  • Do you want a local accounting professional, or are you comfortable working virtually?
  • Does your business require industry knowledge to perform accounting tasks?
  • Should your outsourced services integrate with existing accounting tools?
  • Do you want to outsource human resources (HR) and payroll to the same vendor?
  • Are you looking for year-round assistance or end-of-year tax management services?
  • Can a contractor complete the work, or do you need a team of professionals?
  • Do you need a mobile app or online portal to oversee your accounting services?

[Read: How to Find the Right Accounting Firm for Your Business]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published November 30, 2021