5 Best Online Bookkeeping Services for Small Businesses of March 2023

How do bookkeeping services work?

Small-business bookkeeping is the process of accurately recording your business's financial activity. You might choose to outsource some bookkeeping tasks to online services, including:

• Recording transactions.

• Reconciling bank statements.

• Handling accounts receivable.

• Running financial reports.

• Managing payroll.

• Preparing tax forms.

At the very least, you can expect most bookkeeping services to input transactions, reconcile accounts and send you financial statements regularly. Most services touch base monthly, but in some cases, you can pay extra to receive weekly reports. Depending on the company, you can speak with your bookkeeper (or team of bookkeepers) as often as you'd like or several times per month.

How to choose a bookkeeping service

Check that the bookkeeping service uses a suitable accounting method

There are two different accounting methods: cash basis and accrual basis. Cash basis accounting focuses on the movement of cash, so expenses are recorded when payments are made and revenues are recorded when payments are received.

Accrual accounting, on the other hand, recognizes revenue as soon as it's been earned and expenses as soon as they are owed. For example, you record invoices when they're sent out, regardless of when you receive payment. Bills get recorded when they're received, often before cash payments are made. If you have a lot of cash on hand but many bills that need to be paid, accrual accounting will reflect both.

Cash basis accounting is much simpler, which is why many bookkeeping services offer it at a lower price. But accrual accounting can give you a better understanding of where your business stands. So, choose a service that does the right accounting for your business's size and complexity.

Make sure the bookkeeping service integrates with your accounting software

Lots of bookkeeping services are built to run on QuickBooks, an industry leader in accounting and bookkeeping software. Some services also support Xero, another cloud-based accounting software. If you're comfortable with your current software, ensure your bookkeeping service supports it.

Create a list of must-have bookkeeping service features

Not all bookkeeping services offer the same add-on features. Some business owners, for example, might want their bookkeeper to handle payroll, HR or other back-office jobs like invoicing, bill pay and inventory management on top of fielding basic bookkeeping tasks. Even if a service does check those boxes, these add-ons can be expensive.

In reality, more small-business owners may be looking for tax support to take some of the pressure off when it's time to file returns. These services can help you claim the correct small-business tax credits and deductions, prepare your returns and even file them.

Consider whether you need catch-up bookkeeping services

If you haven't always been diligent about your financial record-keeping, most bookkeeping services will go through your old receipts, invoices and bank statements to bring your books up to date. This service usually carries an additional fee, so it's important to price out your catch-up bookkeeping costs while searching for a bookkeeping service.

Think about how — and how often — you'd like to communicate with your bookkeeper

Online bookkeeping services typically offer a dedicated contact or team — but these are still virtual bookkeepers, available by email or occasionally by phone. If you don't want to work remotely, these bookkeeper interview questions may help you find a resource near you.

Online services may offer one-on-one meetings, but you might have to pay more. If you want a higher level of support in the future, such as chief financial officer or CFO-style services, consider choosing a bookkeeping service that will allow you to upgrade later.

Stay within your budget

When comparing services, ensure you're pricing out all the features you need, including add-on services like tax prep, payroll and HR. If you're considering a bookkeeping service that runs on QuickBooks or Xero, include the cost of that software too. Take advantage of product demos and introductory calls to find the right service.