How To Ensure Accuracy When Outsourcing Bookkeeping​

The biggest drawback to outsourcing bookkeeping is losing the direct visibility into the work being done on your books. The person or the team who codes all the transactions isn’t in your office, and you can’t look over their shoulders all the time.

The accuracy comes from compliance with accounting standards and structured quality control. Many business owners assume that accuracy is another feature of the service of their partners, but it’s not entirely true.

This guide talks about the controls that ensure bookkeeping accuracy from your outsourced partner and how you can verify they’re in place before you sign up with them.

Accuracy in Outsourced Bookkeeping Is a Structural Problem

If someone miscodes one expense, it instantly shows up on a profit and loss review. Small problems like a bank account not getting reconciled get noticed in two weeks. People stay stuck in the same loop of making mistakes and fixing them.

When bookkeeping is outsourced, you receive a set of reports at month-end. If those reports contain errors, you see the output of those errors, but not the transaction-level entries that caused them. Finding these problems becomes a slow process as tracing the problem backward yourself is slow.

You need to create a system where every discrepancy is immediately checked, explained, and verified. That system comes from controls in outsourced bookkeeping.

The 7 Controls That Determine Accuracy in Outsourced Bookkeeping

A Defined Chart of Accounts

The most common source of bookkeeping inaccuracy is the chart of accounts that doesn’t reflect the actual business type. If your chart of accounts isn’t correct, you’re coding transactions to the closest-sounding account rather than the correct one.

Before any outsourced bookkeeper records a single transaction, the chart of accounts should be reviewed and fully accurate. Every revenue stream should have its own account.

Three-Way Matching on Every Transaction

Bookkeeping outsourcing companies match entries with bank and card reports on a regular basis to maintain accuracy. But matching entries to statements is the minimum. Accurate outsourced bookkeeping applies three-way matching at the transaction level. It gets matched with the bank record, the source document (invoice, receipt, contract), and the GL entry are all reconciled against each other.

This matters because a transaction can clear the bank and still be posted incorrectly with the wrong account, wrong amount, wrong period. Three-way matching catches that before month-end closes.

Bank Reconciliation on a Defined Schedule

The industry standard to reconcile bank accounts is monthly but it leaves room for errors because an error from the first week of the month gets caught by the end of the month.

Weekly bank reconciliation is a solution for that. The question isn’t whether your provider reconciles. It’s how often, and what happens when they find a discrepancy.

A Dedicated Review Layer

As a business owner, a bookkeeper doing his work and delivering to you means the financial statements and reports you receive are directly the bookkeeper’s output. They’re not verified and cross-checked for accuracy.

The review layer should come from a different person with more sets of expertise to check for accounts that might have been skipped to reconcile with source documents, or weren’t recorded or posted wrong descriptions and periods.

Clear Escalation When Something Is Unclear

Your engagement should have a defined escalation path, what triggers a question to you, how that question gets asked, what documentation supports it, and how the answer gets recorded. This should be in writing before work begins.

Period-Lock Controls on Closed Books

Once a period is closed and financial statements have been issued, that period should be locked. No entries should be posted to a closed period without a reason. If anything gets changed, it should have an audit trail to explain why that happened.

This gets violated constantly because a vendor invoice from May arrives in June, and gets posted to May to keep the period clean but it changes the financials you’ve already reported.

Audit Trail Documentation on Every Entry

Every transaction in your books should have an audit trail, so you can trace them; where was it posted, what was posted, by whom, to which account and with what source document, etc.

An audit trail doesn’t just protect you during an external audit. It protects you when you need to understand your own numbers. You can navigate through things when a balance looks wrong, when a P&L line doesn’t match your expectations.

Warning Signs That Accuracy Controls Are Missing

Following are the few signals that tell you that your outsourced bookkeeping engagement doesn’t have the controls it should have.

Reports Arrive Without Supporting Documentation

Reports arriving without supporting documentation means they’re unverified output. You don’t have a way to know to ensure if those numbers are correct.

Discrepancies Are Reported But Not Resolved

If your provider flags a discrepancy and leaves it open for you to investigate, you’re doing half the work yourself.

Your Questions About Specific Transactions Take Days To Answer

The reason behind those delays are miscoded and untracked data with no source documents.

Prior-Period Financials Change Without Explanation

If a financial statement you reviewed last month looks different this month in the same period, ask why immediately. Unexplained prior-period changes are a sign that period-lock controls aren’t in place.

Onboarding Didn’t Include a Chart Of Accounts Review

If a provider started coding your transactions without first reviewing and agreeing on your chart of accounts, you can expect new entries on a new chart of accounts.

Conclusion

Accuracy from your outsourced bookkeepers is never given on default. You’ve to get it yourself by putting in effort. Focus on creating clean systems and processes that make it impossible for your bookkeeping partners to hand over unreviewed and miscalculated reports.