How should I outsource bookkeeping?

6 Replies

I'm looking for advice on how to best outsource bookkeeping for a rental portfolio of 15 - 20 SFR and small MFH units. Here's some background. 1) I suck at bookkeeping. I'm in the process of getting everything caught up for this year with hopes to hand it off in January. 2) My wife equally sucks at bookkeeping. I married someone just like me. 3) I want a system that's as easy as possible for me to get receipts and information to the person doing our books. 4) our system MUST be secure. I don't feel comfortable giving account access to this person. 5) we have quickbooks desktop and use for property management. I don't want to change our software for accounting / management because I have another LLC that requires quickbooks. That said, I'm open to compelling arguments.

Here's some of my questions for those of you who have experience with this...  

With 14 properties, how much time would a bookkeeper spend on keeping my books up?  I would hope to get financial statements on a monthly basis

What's the advantage of a local bookkeeper vs virtual?  Is there a benefit to looking for a virtual assistant that does more than bookkeeping?

How much do different scenarios cost? 

What's a good way to setup a system with expenses and getting the bookkeeper this data?

How much tax prep does a bookkeeper do? 

How have accurate books / outsourcing bookkeeping helped you in your business?


@Justin Foster

Good on you for getting a handle on your business. The bookkeeping aspect can be the most challenging, frustrating, and crucial pieces to any business. Real estate being no exception.

Depending on the volume of expenses, 14 properties could easily be done in a few hours a month. Their main job would be reconciling the bank statements to the books. Which should absolutely be done on a monthly basis. It would be beneficial for your future bookkeeper to have these expectations in mind where they reconcile the monthly statements and then just immediately send you a trial balance for approval. 

In 2019 I can't imagine virtual vs local being much different. As long expectations are managed, either route should be sufficient. 

Bookkeepers are fairly inexpensive for the value they provide. In my experience as a CPA I find that the tax prep firms have bookkeepers but their primary service is tax preparation. Rarely do I see a bookkeeping firm that does anything outside of payroll services. 

Moving to QuickBooks Online might be in your best interest if you are looking to streamline a system of getting your bookkeeper expenses and related data. QBO even has a function where you are able to automatically categorize certain recurring payments so your bookkeeper has even less to do.

Again as a CPA having accurate books is invaluable when it comes to tax preparation. I can't say enough about that. It makes things go much smoother and inevitably leads to cheaper CPA fees because the bookkeeper has done a lot of the legwork. 

Ah yes, my favorite topic! 

Time - depends on the bookkeeper, how experienced they are, how organized your information flow is, etc. The real question here is how much time are *you* spending on this, and how much is your time worth? 

local vs. virtual - if the greatest REI bookkeeper lives down the street from you, that means that your books only get done when they can physically get to you. Unless you want your bookkeeper in your house/office whenever they feel like it, you're looking at hiring an employee which is too complicated IMO for the size of your portfolio. When your systems are virtual, you can have the best people and not be tied to any one location in order to get things done.

Pricing - most bookkeepers I know are transitioning to flat rate pricing that includes software costs, based on the complication/volume of your business(es). A great example is the Quickbooks Online pricing for bookkeepers. REI requires "class tracking" which is exclusively a QBO Plus or Advanced subscription. QBO Plus with a QBO Bookkeeper runs at $300 ish per month per business, and that's a "chat roulette" bookkeeper who may not have much experience with REI and that you can't vet like a small business. QBO has priced this for "starter" businesses, so your costs will go up from there. Hourly gets into fun "employee" territory, which I would not do.

Systems - every bookkeeper is different, but there are some major systems usually in play. Common additional apps are things like Receipt Bank or Hubdoc for receipts. Accountant "view only" access to your bank so they can pull statements and check/deposit images without paying themselves. Some sort of client portal for handling sensitive documentation. 

Tax Prep - technically, a tax preparer should be able to use your financial statements to create your tax return. Most folks skip the bookkeeper and make the tax preparer do it all which leads to sloppy returns, delays, and lack of financial clarity throughout the year. Also, lenders often prefer financial statements in addition to tax returns (literally no one likes reading a tax return, it's just common and easy to ask for). 

With 14 properties, how much time would a bookkeeper spend on keeping my books up? I would hope to get financial statements on a monthly basis.  A. You didn't specify if this were just one entity or you had many entities (i.e. what type of structure you have makes a difference in how they do the accounting) I would budget 2-4 hours a week under one structure & then add if you have multiple bank accounts / structures but not by much - maybe an extra hour to account for having to switch into different accounts / bank accounts.

What's the advantage of a local bookkeeper vs virtual? Is there a benefit to looking for a virtual assistant that does more than bookkeeping?  I am a virtual org specialist so I always recommend virtual over local - even if they live in the same town.  I prefer the entrepreneurial mindset & ability to have more stringent contracts/security that you can get with virtual.  Most people believe the opposite but I've not seen that hold up at all.

How much do different scenarios cost?  It depends on how bad you are at bookkeeping and what you really need.  You could get a decent US-based bookkeeper for anywhere from $15 - $45/hr depending on where they are located & how much due diligence you are willing to put in on the hiring.  i.e.  If you want an "easy" hire, paying more through a vetted system as opposed to winging it on will cost more.

What's a good way to setup a system with expenses and getting the bookkeeper this data?   Wave is free.  Zohobooks is fully functional & for the same amount you'd pay for Quickbooks Online you get all the bells & whistles plus all the things QBO will charge you little extras for.

How much tax prep does a bookkeeper do?  Not much.   They will put the expenses and categorize them based on what your Accountant has set up.  I HIGHLY recommend paying for a CFO audit & having them set you up first.  It's not as much as you think and will save you tons in the end because they make it much easier for the bookkeeper to do their job and categorize items correctly so that when you send your files to your CPA there is little to do and everything was already optimized by the CFO to capture the best tax write-offs PLUS you've made the best trade-offs.  Sometimes it's better to not write something off & will make you more money in the end.  I just did an entire podcast on this with a CFO outsource firm.

How have accurate books/outsourcing bookkeeping helped you in your business? For us having a system like described means that we "know our numbers" which is critical in actually understanding where you are. You might have money coming in but truly understanding the appreciation/depreciation aspects, tax aspects & having the structure set up is the difference between being on a hamster wheel & scaling drastically.

@Justin Foster

With 14 properties, how much time would a bookkeeper spend on keeping my books up? I would hope to get financial statements on a monthly basis

There are so many factors to consider that its nearly impossible to give you an accurate answer. Some factors to consider are how many loans do you have, how many mortgages, do you have bank accounts for each property, and how good are you with receipts. 

What's the advantage of a local bookkeeper vs virtual? Is there a benefit to looking for a virtual assistant that does more than bookkeeping?

There really is no advantage in my opinion, unless your going to have the bookkeeper mail checks and do deposits. 

How much do different scenarios cost?

It depends on what you have the bookkeeper do. I would call or email around and see what you get quoted and tell them about your business and what you need them to do each month. 

What's a good way to setup a system with expenses and getting the bookkeeper this data?

It depends on what accounting system you are using? For example with Quickbooks online you can snap pictures and it goes directly to Quickbooks for your bookkeeper to categorize. If you have an in house bookkeeper just bring your receipts to him or her and write on the receipt what property it was for. You cold also email precepts but with 14 properties but I am not sure how much activity you have. 

How much tax prep does a bookkeeper do?

Usually none but there are some CPA's that can do both bookkeeping and tax prep. CPA's bookkeeping services are usually higher. 

Great Questions, Justin. You've really thought through this process. The other have left great answers and I'm not sure I can anything else. 

They are right in you not needing a local bookkeeper vs. a virtual one. Both I'm sure would probably charge you the same unless either one of them has an office which means they have to cover their overhead.

I wouldn't be too caught up on price as much. I'd be concerned about the value and experience they can offer you. From my experience with caring for an investors books in the past who wholesaled approx. 350 houses, remodeled approx. 55 houses per year, and with their books in great order, I would spend approx. 1-2 hours a week which included payroll.

One of the best things you can ask when shopping around for a bookkeeper is "How do you charge?" Meaning, do they charge by the hour or by the month. I would prefer someone who charged by the month so that way you would always know what your bookkeeping expense was going to be. And I'd ask them if they charge extra to have a phone call or 2 a month and if they would charge for extra reports. 

If you already have your financial system in place, then I would guess the bookkeeper would only need to do some minor clean up and there be no set up involved. But if you are brand new and maybe want to start tracking your finances in an online system like QuickBooks Online, then it might would take some about 2-3 hours to get everything set up. Bookkeepers should be on top of the latest and best apps for their clients. If it's to capture a receipt, integrate transactions, keep labor time or track inventory. 

And absolutely you MUST watch your finances like a hawk and they must be accurate. You need to always know what you're spending $$ on so you don't keep making the same mistakes. Plus you never know when you might need to produce your financial portfolio to someone for a loan or for someone to even purchase. Wouldn't that be great!

If you are thinking about hiring someone to care for your books, I'd spend at least an hour on the phone with them getting to them and letting them get to you too.

Hope all these answers help!

@Justin Foster Good for you for recognizing that you need help! I have seen many a client file with disastrous records yet they couldn't bring themselves to appropriately outsource the work to keep everything in order.

With so many productivity apps availability, I think virtual vs local is largely dependent on your needs/comfort level. Virtual won't work if you want literally look over someone's shoulder or sit next to them to review or learn something. Local may not work if they're constrained by when you're "in the office" and/or they're not able to work on their own time at home. 

Anyone you choose, local or not, should have a preferred system in mind that they like to follow - hiring a bookkeeper to follow your system can be more challenging than adapting to a system that works for them (remember, they're the pro at this, not you). That said, if you have a particular facet of your process that is critical for other aspects of your business, your bookkeeper needs to be aware of this so they can be mindful of that as they go about the work.

I do both tax prep and bookkeeping - I'm an enrolled agent on the tax side, but I also do all of the bookkeeping work for a CPA and have a few bookkeeping clients of my own (including some that I also do the tax returns for). CPAs love clean books, and hate bookkeeping, so anyone you hire should be thinking in alignment with what your tax preparer will need at the end of the year (otherwise your tax preparer will charge you a premium for the extra work they have to do to decipher your financial statements). I have overhauled plenty of charts of accounts to be more tax preparer friendly.

Cost can vary based on the scope of work and services offered. As @Ben Day mentioned, there is a shift toward flat/package pricing vs hourly. If the package/services offered in the flat rate fit your needs, there's usually some cost savings there for you (hourly pricing is not an incentive to be speedy).

I hope this helps!

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