What to Ask an Outsourced Bookkeeper, if You’re a Small Business Owner
A couple weeks ago I promised you that I’d return, to dive into some money mechanics. For as of late, I’ve been observing lots of clients living in “financial friction.” And now that we know the difference between a bookkeeper, controller, and CFO, let’s talk more about the specifics of outsourced bookkeeping. Afterall, as a small business, this is likely your entree to financial outsourcing. And here’s a critical step that I observe people (especially creatives) often brush over: what to ask an outsourced bookkeeper when you’re interviewing them. So here’s a cheat sheet of 10 questions to ask…
1. Are you an operational accountant or a tax accountant?
We talked lots about the differences between these two here (and remember: “operational accountant” is the same thing as “bookkeeper”). Most often, your outsourced bookkeeper will not do your taxes. Sometimes they’re one in the same, but do not assume someone will have capabilities to do both. Know which one you need, and clarify which they are. Bookkeepers (operational accountants) will often have tax accountants they like to partner with and can refer you. Be sure to ask.
2. Who’s your ideal client?
Bookkeeping is a business function where (ideal) client industry and company size really matter. Different industries have different money processes; and this attention to detail matters. The money flows of a professional services business (like Ellevated Outcomes) are simpler than a brick-and-mortar boutique retail business.
Other specifics that matter: buying and holding inventory, transaction count and frequency, total revenue v. real revenue. We work with a lot of interior designers, and this last point can be crippling in their business model. So you need a bookkeeper who really understands your business.
A shameless plug for one of our beloved clients: Keith Rathbun, managing director of outsourced bookkeeper Supporting Strategies of Middle TN. Their ideal clients are small businesses generating $1M+ revenue and are in growth mode. Furthermore, they add the most value for businesses in industries with high-transaction count or intricate processes (e.g. manufacturing, retail, professional services with lots of vendors and accounts receivable) and are technology-adopters who help their clients streamline and improve their money processes (more on that below).
3. What technologies do you use?
As a generalized statement, I prefer when bookkeepers use Quickbooks. Although it’s not my favorite software in the world, it’s the most widely integrated among other technologies and APIs (darn you, Intuit!). It’s also the most scalable, if you have growth ambitions.
However, whether your proposed provider uses Quickbooks or another software, make sure that you as the owner (and CFO) have access to it. I don’t like it when clients’ bookkeepers are gatekeepers to the technology, and they’re beholden to them to answer any money questions. To me, this is a huge risk.
And aside from their bookkeeping software, what other technologies do they use? Bill pay? Client invoicing? Payroll? Inventory management?
4. What do you deliver and when?
Ensure that you have mutual expectation of one another, including their accountabilities to you. At a minimum, I’d expect they deliver monthly P&Ls, balance sheets, and cashflow statements. And a simple thing that many people overlook: when do they deliver their monthly packages? By which exact date, each month? Demand specifics!
5. What do you need from me, to complete your deliverables?
Once you have the answer to #4, follow up with: “What do you need from me (or my team) and by when, to hit these deadlines?” The answer should not be “nothing.” If it is, look elsewhere.
Force them to articulate the step-by-step details. Ask follow-up questions until you understand and can repeat back the play-by-play. This upfront (and perhaps uncomfortable, I know) investment will save you worlds of pain and money on the backend.
6. Do you suggest process improvements?
This isn’t a make-it-or-break-it requirement. But ideally, you want an outsourced bookkeeper who is a more advanced money manager than you (duh). You want someone who knows more about the theory and numbers of bookkeeping and someone who can help you use technology to your advantage.
Example: years ago, the aforementioned Keith Rathbun of Supporting Strategies introduced me to Bill.com. This technology and process has changed my and Ellevated Outcomes’ life. (Not an exaggeration). Because of integrating that technology / process improvement into our money flow, I spend a total of 1.5 hours per month on finance: 45 minutes of actual bookkeeping and 45 minutes of controller and CFO activities. Thanks to our streamlined system, we don’t have an outsourced bookkeeper today because our process and technology is wired for ease and flow, all thanks to Keith’s team’s keen eye on process improvements.
7. What’s your response time?
Similar to “what do you deliver and when?” ask about response time. There will be instances where you’ll need an answer from your bookkeeper outside of scheduled monthly activities; and if you need an answer, it’s probably because you really need an answer. Again, ask the specifics upfront: how many hours is your response time? And who’s my contact if you’re out of the office?
8. Who will I be working with?
If the bookkeeper is a 1-(wo)man show, perhaps it’s a no-brainer (but ask anyway). But do ask who your main point of contact is and their working hours and response time. I’ve had a couple clients in scenarios where their assigned account manager is part time or constantly getting switched around. And it’s a disaster.
9. Share your Financial Frictions
Especially if you’re unhappy with your current bookkeeper, start creating a “finance friction list.” Don’t make it pretty. Don’t overthink it. Open the notes app on your phone; and as you’re moving through your day-to-day (and CEO time), bullet-point the money-related tasks or questions that slow you down or frustrate you. This will be an extremely helpful reference point when you’re interviewing bookkeepers. You can literally hand them your list of requirements and responsibilities. A good one will love this.
10. What’s the cost and onboarding process?
Lastly, if you’re satisfied with the answers to #1-9, ask about cost and onboarding. Strong, accountable bookkeepers are worth the money. But as with any service-based business, there are a lot of providers charging too much money for not meeting expectations.
So do your diligence and interview hard. Don’t be shy to ask lots of questions. And please, please, please: don’t be shy to ask a question because you fear it’s “dumb.” Especially when it comes to money, it’s your responsibility to understand. And it’s your bookkeeper’s responsibility to help you understand.
I have, on occasion, shadowed clients when engaging with their bookkeeper, to help them close their understanding gap. So if you’re one of our clients, please don’t be shy to ask for extra help and support from your Strategist here. Because remember: as a Small Business CEO, the business’s financial health is your #1 priority. So stop at nothing to make this a reality for you and your business.
