So you’ve come to a point in your business where you’ve decided to outsource your bookkeeping, but don’t know what exactly you need. We’re here to help! We’ve broken down the particulars of the 2 types of bookkeeping Numberwise offers – after-the-fact bookkeeping and live bookkeeping – to help with your decision.
After-the-Fact Bookkeeping
With after-the-fact bookkeeping, accounts are reconciled at a regular interval (monthly or quarterly) after the end of the period under review. For example, Mary owns a yoga studio and has opted for monthly bookkeeping starting in June. In July, the bookkeeper will reconcile all bank and credit card accounts for June by coding each transaction to its respective financial statement account.
About half of our clients at Numberwise select after-the-fact bookkeeping on a monthly basis. If you’re going the after-the-fact route, we recommend monthly, with the exception of very small companies and start-ups where quarterly bookkeeping may suffice.
Live Bookkeeping
The other half of our clients opt for live bookkeeping, which generally happens on a weekly basis, but can also be done daily. The bookkeeper reviews banking transactions from the last reconciliation day (previous week/day) and posts them so the bank account is reconciled. This method provides up to date bank, credit card and account balances. Using the example above, if Mary opts for weekly bookkeeping, her books will be reconciled on a chosen day each week.
We have found that for larger clients with a high volume of transactions, daily bookkeeping is necessary. And, in case you were curious, live bookkeeping does include the monthly/quarterly/annual reporting you would receive in after-the-fact bookkeeping as well, because those are essential for a bigger picture of your business.
Live bookkeeping is great if you’re asking:
- What’s happening with my business financials right now?
- Who do we owe money to right now?
- What’s in the bank account right now?
How Are My Bills Paid?
After-the-fact bookkeeping generally does not include bill payment services. Because books are reviewed in longer intervals, bills would not be paid in a timely manner. This leaves the responsibility of bill payments to the owner or a designated person in your company. It is important that this person reviews the bank balance frequently to ensure adequate cash on hand for bill payments, payroll, etc. as your accounting software will not reflect up to date balances.
Live bookkeeping usually includes bill payment services (but doesn’t have to). Depending on your bookkeeper, bills may be paid manually or by using bill payment software. At Numberwise, we use Bill.com as our bill payment software.
Using bill payment software helps streamline the payment process and allows the business owner to review and approve bills at their convenience. Bills are uploaded either by the bookkeeper or the business owner. Bill.com also has an email feature to easily email invoices to the right place, for the bookkeeper to process and code, then tag for approval. If you want to learn more, check out our recent blog comparing bill payment software to paper checks.
Payroll
Payroll services may be included with either after the fact or live bookkeeping. This option depends on your bookkeeper and agreed upon services. There are many payroll service providers but we highly recommend Gusto.
Pros and Cons
Now that you know more about your bookkeeping options, let’s talk about the pros and cons of each. One advantage of after-the-fact bookkeeping: it’s less costly. It is also a good option for business owners who are heavily involved with business finances and cash management. However, it does not provide up to date account balances. For business owners who rely on accounting software to see accurate cash balances, this may not be the best option. Another disadvantage is that potential issues or problems may not be uncovered in a timely manner.
On the other hand, with live bookkeeping (while more costly) the account balances are reviewed and reconciled “live” or on a more frequent interval. It’s a great option for business owners who rely on the accounting system to be up to date and accurate. Also, potential issues and discrepancies are exposed in a timely manner leading to quicker resolutions.
Another benefit of live bookkeeping is that receivables and payables are monitored on a frequent basis. Payments are applied to invoices in a timely manner and therefore, the accounts receivable balance is up to date.
The Bottom Line
There are many things to consider in choosing the best bookkeeping method for your business. The most important thing to do is determine your needs and wants. Do you need your books to be up to date? Do you rely on the reports/balances in the accounting system? Do you want to outsource/streamline your bill payment process? When you’re ready to make the decision, we’re here to help!
