Why "Cheap & Easy" Online Bookkeeping Services are Neither
Online "full-service" bookkeeping companies have been on my mind a lot lately. Mostly, it's because we've recently had to do so much clean-up work for clients who have previously used these services to keep their books.
Over the past week alone, we've started working with three different clients who previously employed three different online accounting services. All three have told us, separately, how the solution that was supposed to save them money and make their life easier ended up costing them hundreds or thousands of dollars for incomplete, inaccurate financials.
So, if bookkeeping is really just a matter of putting the right numbers in the right spots, how is it that these companies are falling so short of the mark? Let's look at a comparison of how an internet bookkeeping company works versus how we work.
Utilizing technology vs. relying on technology.
I won't be a hypocrite; I love technology, and we use it at The Bookkeeper to make our work faster and more accurate. (We even have clients in other areas of the country, with whom we've never met in person.) However, trusting technology to make the correct judgment calls, without checking behind it, leads to errors. Online bookkeeping services enter transactions based on vendor defaults; for example, this can lead to a $10,000 bank transfer being labelled as a "bank service charge", because the bank is listed as the vendor in the downloaded transaction description, and that's where it defaults. An expert familiar with the account is going to be well aware that the $10,000 is not a service fee, and will assign the transaction appropriately. And speaking of experts...
Hiring the best people vs. hiring the most people.
One of the things I am most proud of in the growth of my company is the team we've assembled. We have some very experienced people, and everyone is focused on constant education and improvement. We offer better benefits than our direct competitors, and do a lot to ensure that our employees have a clear path to growth within the company.
When I first started seeing the product being put out by these online bookkeeping companies, I was curious about what it must be like to work there. I went to Glassdoor and read some reviews by current and former employees, which confirmed a lot of my suspicions. Even the positive reviews spoke of their company as a "great stepping stone" to employment in a more traditional firm. Several employees spoke of it being their first job after graduation. I'm glad that there are good employment opportunities for young bookkeepers, but I don't feel that I would want them to be the point person responsible for a client account.
Inclusive service vs. charging for "add-ons".
Possibly due to the fact that their employees have less experience, online bookkeeping services do not offer full bookkeeping to the degree that a traditional company would. Most do not allow for entering invoices, bills, line of credit, fixed assets, nor payroll; if they do offer these services, it is at steep surcharges. (One company offers payroll for up to only three employees for $100 a month!) We recognize that things like bill-pay, tracking receivables, filing sales, recording depreciation, etc. are all necessary for truly accurate financials, and should be included as a part of the original agreed-upon rate, without being snuck in as a costly "add-on". Speaking of pricing...
Charging for the work done, instead of how much you think the client can afford.
I am always suspicious of companies which offer pricing based on monthly expenses or revenues in dollar amounts. Here's a secret: larger companies aren't always more work. Imagine a client who is a business broker; this client might make $20,000 in one month, but it might be on only one sale! Now imagine a client who is a dry cleaner; the dry cleaner might make less than half of that, but it could be in hundreds of transactions. Which one do you think takes more time for the bookkeeper to enter? One transaction, or hundreds?
Businesses who charge based on amount of money passing through the client's account are often just trying to see how much they can get away with charging. They know that a client who only spends a few thousand dollars a month will not want to see a large proportion of their budget go to a $450/month online bookkeeping solution. Likewise, they know that a client spending $100,000 a month will not notice that amount to the same extent. It is, in my opinion, a deceptive marketing practice.
Proactive vs. reactive service.
Most online bookkeeping companies ask clients to submit bank statements at month-end, and then just download the transactions into the system at that time. As we've discussed before, we get into client accounts, at minimum, twice a week, to help monitor cash flows, identify potential problem areas, and review areas of improvement. This allows for timely and therefore relevant information, as well as allowing us to compile period-end financials much more quickly, since most of the work is already done by the time the month closes.
This is not to say that online bookkeeping services can't be helpful in select situations. If a client has a high number of very basic transactions, with no fixed assets nor liabilities, and no interest in tracking invoices nor bills, no payroll, and no sales tax, an online solution might be more cost-effective for them. However, I would highly encourage anyone else to get a second consult before signing an agreement with an online-only bookkeeping company.
