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What is virtual bookkeeping and how it works

What is virtual bookkeeping and how it works

Companies that have a solid understanding of their financials are well-positioned to compete, grow, and respond quickly to a changing market. Unfortunately, tracking and reporting those financials is a complex process that many organizations struggle with.

As the process slows down, companies can fall behind, responding to business needs that surfaced weeks ago instead of seeing where things stand today. Virtual bookkeeping services, whether internal or external, can help both for-profit and non-profit organizations get the financial information they need quickly and efficiently.

What is virtual bookkeeping?

“Bookkeeping” is a broad term that’s often used loosely to include a wide range of services, from entering receipts to performing financial audits, but becoming a “bookkeeper” requires very little training.

Not all bookkeepers can prepare taxes, for example, which requires an IRS Preparer Tax Identification Number (PTIN), and many tax filing professionals have only limited rights. Also, while any CPA can be a bookkeeper, there are far more bookkeepers than there are CPAs. In fact, many bookkeepers are trained in bookkeeping right after high school.

Because of these differences, basic bookkeeping usually refers to the routine tasks of keeping your financial records up to date and generating basic financial statements — balance sheets, cash flow statements, and profit & loss statements. These tasks can be completed internally, or they can be farmed out as an external service.

“Virtual bookkeeping” refers to online bookkeeping services that perform these tasks remotely. Although the term usually refers to external companies or freelancers hired for your bookkeeping needs, virtual bookkeeper jobs can also include internal bookkeepers who work remotely.

Why hire a virtual bookkeeper?

Small business owners use virtual bookkeeping to save time. Every entrepreneur knows that their most stretched resource is the number of hours in a day. Keeping the books up to date is one of the easiest business tasks to delegate effectively. For startups that have a lot of customers or a lot of bills, virtual bookkeepers can save many hours every month.

This is especially true because small businesses may not have a full-time CFO or an in-house accounting department, but they still need to generate financial reports. They may hire a part-time bookkeeper to manage the day-to-day books, and they often use an external accounting firm for tax preparation. This might or might not be the same company.

Whether a virtual bookkeeper is internal or external, an automation platform like Bill.com makes it even easier to delegate these financial tasks. Approval flows are automated, so companies can hand over the bookkeeping while maintaining control over their finances. They can even receive notifications, handle approvals, and communicate about bills or payments on a mobile device.

Larger businesses may also hire virtual bookkeepers, but they’re more likely to have their own internal department for accounting services. To make sure the financial department can easily scale operations to keep up with company growth, internal teams often turn to the kind of automation that BILL provides to reap the same benefits, whether the accounting team is remote or on site.

How does virtual bookkeeping work?

A virtual bookkeeper might be an independent freelancer, a remote bookkeeping firm, a service offered by an accounting firm, or an in-house bookkeeper working remotely. No matter how they’re provided, the key to bookkeeping services is providing the information that’s needed to keep the company’s finances up to date.

Traditionally, at least for small businesses, that often meant driving to a local bookkeeper’s office with a box of invoices and receipts at the end of each month. The bookkeeper would sort through them and enter that information into spreadsheets or bookkeeping software.

Fortunately, things have come a long way since then.

Virtual bookkeeping adds digital, cloud-based tools like BILL to the bookkeeping process, making it easy for a bookkeeper to keep financial records up to date day by day.

Tools to streamline bookkeeping services

Today’s virtual bookkeeping tools make the bookkeeping process much more streamlined and efficient. These same tools can also be used in-house by an internal accounting team. Since they’re designed to work remotely, teams can use them anywhere, even if they’re working in a traditional office.

For virtual bookkeeping businesses, these tools can make the process more efficient and make the workload steadier throughout the month. That lets companies charge by the month instead of by the hour. Monthly fees come with benefits on both sides, providing reliable income for the bookkeeper and predictable bookkeeping expenses for their clients.

Bill pay automation

Traditional bookkeeping services were usually limited. Bookkeepers would enter a company’s financial transactions after they had already happened. Today, virtual bookkeepers can easily add bill pay services to their offerings thanks to digital, cloud-based solutions.

Bill pay software can automate the accounts payable (AP) process, streamlining the way companies receive, approve, and pay invoices. Digital invoices, approvals, and payment let bookkeepers work from anywhere, communicating with their clients and managing their accounts payable remotely.

Finally, bill pay automation software syncs automatically to most major accounting software such as Quickbooks, Xero, Sage Intacct, Oracle NetSuite, and Microsoft Dynamics, making it easy to keep a client’s financial transactions up to date.

Document management

Bookkeepers often need to store documents such as client contracts, past tax returns, bank statements, spreadsheets, and more. Formal document management tools are often expensive, but some financial automation tools include unlimited cloud storage along with the ability to connect those documents to client or vendor records.

Financial operations are more streamlined when vendor invoices and other vendor records are stored in the same place, making it easy to find that information.

Invoice automation

In addition to assisting with the AP process, bookkeepers may also help manage accounts receivable (AR), the process by which companies send invoices and receive payments from customers. Cloud-based invoice-automation tools are designed to streamline that process.

Bookkeepers can quickly create and send invoices, track payment (or nonpayment), and send payment reminders. If a business uses estimates, bookkeepers can generate those estimates and convert them to invoices when the time comes.

Invoice automation platforms also integrate with popular accounting software like Intuit's QuickBooks Online and more, so bookkeepers only need to enter invoice information in one place.

Credit card account management

One of the biggest challenges for bookkeepers lies in handling credit card receipts. All too often, these are delivered in bulk, leaving the bookkeeper to sort them out. Each receipt represents money that has already been spent, and the bookkeeper is tasked with bringing the books up to date, categorizing each expense and attributing it to the right department.

Today, expense management software can integrate business credit cards with tools that let companies set clear budget limits ahead of time. Each manager, for example, can be issued a unique card with a specified budget. As they use the card, that spending is automatically attributed to the right budget, and the books stay up to date throughout the month.

Current and future automation trends

Many companies use online accounting and other finance software to manage their financial data. In fact, more than 120,000 small and midsize businesses use BILL, processing over USD 140 billion in payments annually.

In-house teams use it to streamline their processes — data entry, bill payment, budget management, and more. Virtual bookkeepers use it to expand their offerings and provide even better service to their clients. Learn how you can use BILL's accounts payable software to automate your processes.

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