It’s a common situation, you hire a bookkeeper and you go through several months of calls, emails and endless onboarding tasks to get them in a position where they can deal with your books autonomously. You’ve sunk a lot of time into getting this person ready to rock and roll, but their performance is lukewarm at best. You’ve now got a choice, stick with a disappointing service or go through that whole process again. Neither option is appealing and your frustrated – understandably so.
But switching bookkeepers shouldn’t be an onerous task, and if it is then this is most likely a sign that your current bookkeeping systems don’t use best practice, and that you’ve been dealing with firms that don’t have a streamlined onboarding process. In this guide we’ll provide advice on why, when and how to switch from your previous accountant or bookkeeper.
When You Should Switch Bookkeepers, Signs To Look For
There are a number of reasons to decide to switch bookkeeping service. By far the most common reason we see is the books being done so late that the business owner feels they have no knowledge or control over their financial position, by which I mean they don’t know how much profit they’re making, they don’t know what their current tax liabilities are and they definitely don’t know how to manage their cashflow. But there are plenty of other reasons for switching.
Lack of Communication – freelancers vs accounting firms vs bookkeeping firms
Bookkeepers are notoriously hard to get hold of, and when you need to know critical financial information, you need to know it now. The cause of poor communication is most commonly due to the type of outsourced bookkeeper you have:
- Freelance bookkeeper – By far the cheapest option is to hire an individual who offers bookkeeping services. It’s just them, and their rates are usually significantly lower than bookkeeping firms. The problem is that they have no holiday or sick cover, and as they’re only one person, their schedule frequently gets taken over by whichever client has the most urgent need. While there are some great freelance bookkeepers, we commonly meet clients who complain their freelance bookkeeper takes months to respond.
- Your CPA Accountants – while you’d assume that CPA accounting firms would make the best bookkeepers, the reality is quite different. Tax accountants don’t regularly work in the dozens of common accounting software that make up the modern cloud ecosystem, so they often don’t have the knowledge to properly leverage the latest accounting tech stacks. They make their money preparing corporate tax returns, and Canadian tax returns are mostly due in the period January – April. It’s common for accounting firms to drop bookkeeping completely during this period, and even outside of this period, bookkeeping is a low profit and low priority focus for accounting firms.
- Bookkeeping firms – Do what they say on the tin. This is a firm that is set up to specifically focus on corporate bookkeeping services. For example, our firm does corporate books monthly, and we aim to respond to any client emails within a maximum time frame of 36 hours. There are managers (qualified accountants) who review the bookkeepers’ work every month, along with providing holiday and sick cover. Bookkeeping firms provide the best communication and best bookkeeping for small business.
Needs Not Being Met – Bookkeeping vs Outsourced Financial Management
There are a lot of services that can be included when doing accounting for small business owners. In fact, there are so many that we find most new clients are surprised by what can be taken off their plate. The important thing to understand is that there are two ways to treat bookkeeping:
- It’s mainly a compliance exercise with some reporting insights. You need books prepared so that you can pay your taxes and see the previous month’s profitability. Your books are still prepared every month, but you separately keep track of what suppliers need paying and you handle this yourself.
- Your books are your master source of truth. They are updated frequently enough that you can use them to keep track of which suppliers have and haven’t been paid, and your bookkeeper uses your accounting system to raise supplier payments – which you then approve. This is really a small, outsourced finance department, and it needs to run like clockwork.
Clients frequently tell us they thought having a bookkeeper meant that all their business finances would get dealt with by someone else. This can be the case, but you’ll need a firm that can build and run a small, outsourced finance department for you.
Reports Not Answering Real Business Questions
It’s common for bookkeeping firms to not provide regular financial reports. The rational of moving to a bookkeeper who gives you up to date profit and loss statements is straightforward, but some small businesses need more from their reporting.
Some retail businesses like eCommerce companies want to know their gross profit by product type, and companies providing project-based services (e.g. construction and some trades) need to track their profitability by project. These are more complex requirements that need a bookkeeping firm comfortable with implementing the overall finance department needed to capture and code expenses on a more granular basis. Bookkeeping firms provide the best advanced reporting options and best bookkeeping for small business.
Unexpected Fees from Current Accountant
No one likes an unexpected bill. Bookkeepers generally bill one of two ways; Hourly billing which fluctuates based on how long it took the bookkeeper, or fixed price billing (e.g. charging the same fixed amount per month). There are pros and cons to both, but we’ll outline why we think fixed price billing is the better option for your business.
We’ll start with the elephant in the room; hourly billing creates no incentive to be efficient at the work. In fact, depending on how busy your bookkeeper is, hourly billing can create an incentive to be less efficient. Why go through the effort of learning how to use new software, only to work less hours on your client and to thus reduce your billings. Accounting systems must evolve with the business, meaning that they are regularly undergoing process changes and being slightly restructured. On a fixed monthly fee, a firm has an incentive to try and streamline your accounting system iteratively – which over years of being in business makes a big difference.
There is a more subtle reason why fixed price billing is superior, which is that it helps ensure a good client firm fit. We don’t know how other firms manage their quoting process, but we have to do a detailed discovery call and full review of the accounting system in order to provide a quote. We must understand the scope of the work in order to provide a quote that’s fair for the client and profitable for us. Our quoting process can take a senior accountant four plus hours of review time, and by the time it’s finished we normally have a basic framework for any restructuring needed. Like any good business we only take on clients we know that we’re a good fit for, because that means happy clients. Firms billing by the hour don’t have this incentive, so you’re much more likely to be onboarded by an hourly firm, only to discover that they didn’t realize your accounting needs were so complex, and for the relationship to sour.
Missing Important Deadlines
Nothing is more frustrating than wanting to pay your taxes on time, having the money to pay them on time, and still getting hit with late payment fines because the filing was late and no one could advise you of an estimate to pay.
These unnecessary delays can be avoided by finding a firm that has proper systems in place to make sure that you never miss a deadline. For example, we have a task management system set up with recurring reminders not just for tax filing deadlines, but also for installment payments. The CRA generally expects quarterly installments to be paid for things like GST and Corporate Income Tax, so you need someone telling you how much to pay in installments to keep you compliant.
Limited Accounting Software Skills
The world is moving fast, and the only option is to keep up. Many bookkeepers learned their skill on a single accounting software, such as QuickBooks Desktop, and have built their entire firm around this software. Unfortunately, desktop only applications generally don’t allow you to easily plug into the hundreds (possibly thousands) of apps which have been designed to automate common pain points for businesses. It’s virtually impossible to build a high-quality modern accounting function without having a very good knowledge of most common cloud-based solutions and the apps that can be integrated with them.
How to Switch Bookkeepers
So, you’ve decided to switch bookkeeper for one of the many reasons outlined above. Your probably asking yourself, how do I go about this and how time-consuming is this handover process going to be?
Research & Contact New Bookkeepers
The best way to find a good bookkeeper is to reach out to any other business owners you know and ask if they have a bookkeeper they rate highly. If no one has someone they’d really recommend, then a Google search is the next best place to look. Check Google reviews carefully, and check their website to see if they provide the services you need. Their website is a great way of seeing if they’ll be good at communication, as if it’s full of meaningless business jargon (which most of them are) then don’t expect them to be able to explain complex accounting issues in concise, everyday language. We also recommend looking for firms that at least provide a price guide, as this will allow you to have discovery calls with firms that are actually in your budget.
Don’t reach out to lots of firms, rather find ones that fit the above criteria and try to get two or three quotes before deciding.
Notify Your Previous Provider
The best way to have a smooth transition from one bookkeeper to another is to make sure there is a handover. Your existing bookkeeper will have a lot of technical knowledge about your accounting system and financial records, and making sure that they provide quality handover notes and even have a handover call with the new bookkeeper is best practice. This transition process should be agreed on when confirming the notice period.
It’s also best practice to agree on clear deadlines that they are expected to have fully completed the books up to, which means reconciling all of the banks in the accounting system with the real PDF bank statements (thus verifying that the accounting system is correct). You should also confirm this is done before paying their final invoices, as many bookkeeping firms bill a fixed monthly fee, and you shouldn’t be paying this if they didn’t actually do the agreed upon work.
Let Us Take Care of The Rest
If you’re looking for a new bookkeeper or want a professional opinion on how efficiently your financial data is set up, just book an appointment using the button below. Our discovery call is in-depth, and we’ll provide honest and detailed feedback regardless of whether you decide to go with our service
How Time-Consuming Is Switching Bookkeepers?
The answer to this really depends on how up to date and well run your accounting system is currently. If the books are up to date and there is an existing accountant or bookkeeper who can hand over good processes, then the change can be quite seamless.
If there are major issues with how your accounting system is setup, then the business owner’s input will inevitably be needed. But this isn’t work generated by changing bookkeepers, rather it’s work caused by needing an updated accounting system.
Potential Challenges of Switching Bookkeepers
The most common issues we see are clients who have lost their CRA My Business login and are unable to grant us third party access to file tax returns on their behalf. Often, the previous bookkeeper was the only person who had copies of excel based accounting schedules, so all information needs to be transferred over to the new bookkeeper.
What Time of The Financial Year Can I Switch Bookkeepers?
You can switch bookkeepers at any time of year. If your books have not been updated for a significant period of time, then it will be hard to find a firm that can get this work caught up quickly during tax season (January – April). If your books aren’t up to date, then we advise getting a new bookkeeper as soon as possible.
Make The Switch – Why Choose Plyo Bookkeeping?
Our firm has been built to specifically provide bookkeeping and payroll services. Our staff are accountants rather than bookkeepers, and your books are reviewed by a senior accountant each month before your financial reports are issued. We offer proactive advice and can deal with more complex reporting requirements, we respond quickly to all our clients’ queries and we set our clients up with best in practice solutions using the latest technology. We build in CFO consulting time into all our packages, meaning you don’t just get high-quality financial statements, you get someone to help you understand them to benefit your business’s financial strategy.
Switching Bookkeepers – TL;DR
Accounting for small business owners provides unique challenges. Most folks don’t realize how much better their system could be, and it’s worth talking to a bookkeeping firm just to get a sense of what’s possible. The tasks involved in switching bookkeepers are quite straight forward and mainly comprise providing the required third-party logins to various software. The real work that will require some input from the owner comes when you need your system streamlined and modernized – but this is time well spent as it will result in long run cost savings and better reports that allow you to make business decisions with confidence.