Virtual Bookkeeping Services: How Online Bookkeeping Works

Virtual bookkeeping services promise a simple trade: you stop doing the books, and someone you’ll never meet in person does them instead. For a lot of owners, that promise lands right after a bad experience. For example, maybe the bookkeeping company you used shut down or got bought, and your records went with it. Or maybe you’ve been doing it yourself at night, and you’re done.

Either way, the same two questions come up. How does virtual bookkeeping actually work, month to month? And is it safe to hand your bank statements to a company across the country? Both are fair questions. In fact, they’re the right questions, because the answers separate a good provider from a risky one.

In this guide, we’ll define virtual bookkeeping services and explain why “online bookkeeping” means the same thing. Next, we’ll walk through what happens in a typical month, what a bookkeeper does and doesn’t need access to, and how to compare providers. Finally, we’ll cover what the service costs and what changes the price. By the end, you’ll know what to expect and what to ask.

What virtual bookkeeping services are, and why “online” means the same thing.

To begin with, here is the definition. Virtual bookkeeping services are bookkeeping done by a remote team that records, categorizes, and reconciles a business’s transactions from digital copies of its statements and delivers reports electronically. In other words, the work is the same as it would be in an office down the street. Only the location changes.

Then there’s the vocabulary. Virtual bookkeeping and online bookkeeping are two names for the same service, and providers use the terms interchangeably. For instance, some companies say “virtual,” some say “online,” and some say “remote.” Regardless, all three describe a bookkeeper who works from somewhere else and communicates through email or a portal. So when you compare virtual bookkeeping companies against online bookkeeping firms, you’re comparing like with like. Likewise, a search for virtual bookkeeping services and a search for online bookkeeping services will turn up mostly the same providers.

One distinction does matter, though. A virtual bookkeeper is a person. Bookkeeping software, by contrast, is a tool you operate yourself. A do-it-yourself app, therefore, is not a virtual bookkeeping service, no matter how it’s marketed. If nobody reviews the categories, nobody catches the deposit that landed in the wrong place. Hence, when a provider’s pitch is all about the app, ask who is actually looking at your books each month.

At Merritt Bookkeeping, we describe ourselves as an online bookkeeping service, and we mean the people version. Specifically, our team enters your transactions personally, reconciles your accounts, and sends your reports each month. Our virtual bookkeeping page explains it in the same eight reasons we give for everything we do.

How a month of virtual bookkeeping actually works.

Most owners have never seen the inside of a bookkeeping month. So here is the whole thing, start to finish, as good virtual bookkeeping services run it:

1. Statements arrive: You send your newest bank and credit card statements, or the bookkeeper pulls them through a read-only connection you’ve approved.
2. Transactions get entered and categorized: The bookkeeper records every deposit and charge, then labels each one as a type of income or expense, such as software, rent, or sales.
3. Accounts get reconciled: Next, the bookkeeper matches the books against your statements line by line. Reconciliation is the process of comparing a business’s books against its bank and credit card statements until every transaction matches and the balances agree. Consequently, duplicate charges, missed deposits, and bank errors surface here instead of at tax time.
4. You review: At this point, the bookkeeper sends you the month’s work in a form you can check. Then you flag anything that looks wrong or ask what an item was.
5. Corrections get made: The bookkeeper applies any change you request and closes the month.
6. Reports go out: You receive a profit and loss (P&L) statement, a balance sheet, and whatever else the provider includes. A completed monthly close produces reconciled books and financial statements that show what a business earned, spent, owns, and owes for that month. After that, the cycle repeats.

Notice where you appear in that list: step four, and only step four. Everything else happens without you. That is the whole appeal of virtual bookkeeping services, and it’s why the review step deserves more attention than the other five combined.

What you’ll be asked to provide

Virtual bookkeeping services need less from you than most owners expect. Generally, that means statements for each business bank and credit card account. In addition, you’ll supply a receipt or a quick note for any transaction the bookkeeper can’t identify. Occasionally, you’ll answer a few questions when something is unclear. In particular, a good provider batches those questions instead of emailing you every time one comes up. If you’re behind, the first month also includes older statements, so the bookkeeper can work the backlog one month at a time.

Our online bookkeeping service handles step four with a simple spreadsheet. Each month, it walks you through the work we did, line by line, so you can review everything without opening QuickBooks or learning any software.

Is virtual bookkeeping safe? What a bookkeeper does and doesn’t need.

This is the question owners ask quietly, and it deserves a plain answer. Yes, virtual bookkeeping is safe when the provider handles access the right way. Unfortunately, not every provider does, so the checklist below is worth keeping. Equally important, the safest virtual bookkeeping services are the ones that ask for the least.

Access comes first. A virtual bookkeeper needs to see a business’s transactions, and read-only or view-only bank access gives them that without the ability to move money. In fact, most banks offer an accountant or view-only login for exactly this purpose. Alternatively, you can download statements yourself and upload them. Either way, the bookkeeper sees the activity and nothing else.

Then there’s the other half. A business owner should never share their own primary banking login, and a legitimate bookkeeping provider will never ask for it. Likewise, the same goes for card numbers, PINs, and the password to your email. If a provider’s onboarding asks for your main credentials, stop. The Federal Trade Commission (FTC) makes the general point in its cybersecurity basics for small businesses. Turn on multi-factor authentication, keep software updated, and treat vendor access as something you grant deliberately.

Where your records live, and how you get them back

Records are the other side of safety. According to the Internal Revenue Service (IRS), you generally keep business records for three years, and longer in specific situations it lists. Since electronic records count the same as paper, ask where your books live and how you’d get them back. A provider who keeps your books in software you can export, in an account you can access, has answered the question. One who keeps them in a system you can’t leave has not.

Here’s how we handle it. We work from your bank and credit card statements, and we keep your books in QuickBooks. As a result, your data stays in a format you can take with you if you ever leave. Moreover, you can review every month’s work in a spreadsheet, so there is no bookkeeping portal to log in to and no extra password to protect.

How to compare online bookkeeping services and virtual bookkeeping companies.

Once you know how the month works and what safe access looks like, the providers start to sort themselves. Below are the main types you’ll meet, along with the gap each one tends to leave:

• Software-bundled online services: They keep your books inside a platform they built, which is convenient until the company shuts down or you want to leave. At that point, your history may not export cleanly.
• Hourly freelancers: One good bookkeeper can be a gift. However, the bill changes every month, and the books stop when that person gets busy or moves on.
• Offshore virtual bookkeeping companies: They can cost less, and some are careful. Still, time zones and turnover often push the review work back onto your desk.
• An in-house part-timer: They know your business. On the other hand, you’re now managing an employee, covering their absences, and paying for hours whether or not the work needs them.

A done-for-you team that works in the software your accountant already uses

There is a fifth type, and it’s the one most small businesses end up choosing. In this model, a team of real bookkeepers keeps your books in widely used accounting software. They send you a review you can finish without training and report back in plain English, all for a fixed monthly fee. Bookkeeping kept in standard, widely used software can move to a new bookkeeper or accountant intact, while books kept in a proprietary platform often cannot. Because a team does the work, service continues through vacations and turnover. And because the software is standard, your accountant already knows how to open it.

Above all, the review is where the best virtual bookkeeping services separate themselves. A monthly bookkeeping review only protects a business if the owner can complete it without logging in to accounting software or learning how it works. Therefore, ask to see the review format before you sign. If it’s a login and a tutorial, expect to skip it, and expect errors to sit until your CPA finds them. Similarly, ask to see a sample report package. You should understand the first page without a glossary.

What to look for in a virtual bookkeeping service

So what should you look for? First, a fixed fee with no tiers or contracts. Books kept in software your accountant uses. A review you’ll actually do. Reports you can read on the first page. People you can email, and a team behind them. Any of the online bookkeeping companies on your list should be able to answer for each of those in a sentence. If one can’t, that silence is your answer.

We built our service around that list, and our small business bookkeeping page shows what it looks like in practice. Because everyone on our team collaborates on every client, you never lose “your” bookkeeper. In addition, each month your reports arrive as Fundamental Business Insights™, ten reports that each open with an Insight Statement™ in plain English.

What virtual bookkeeping services cost, and what changes the price.

Price comes last for a reason: it means nothing until you know what’s included. For example, two virtual bookkeeping services can differ by hundreds of dollars a month. Usually, that’s because one runs payroll and files taxes while the other keeps the books. Neither is wrong. They’re different jobs.

Providers charge one of three ways. First, hourly billing means you pay for time, so a messy month costs more. Second, tiered pricing ties your fee to transaction volume or monthly expenses, so the price climbs as you grow. Third, a flat monthly fee stays the same. Flat-fee bookkeeping is a pricing model in which a business pays one fixed monthly amount for its books regardless of how many hours the work takes. As a result, the provider absorbs the busy months, and you get a bill you can plan around.

How catch-up work changes the price

Catch-up work is the other price to ask about, and it matters to more owners than will admit it. Catch-up bookkeeping is the work of recording and reconciling past months a business has fallen behind on, and providers usually price it separately from ongoing monthly service. Some charge full rate for every back month. Others discount it, because entering a year of statements in one pass is more efficient than doing it month by month. Either way, the catch-up price tells you something about how the provider thinks about owners who are behind. If you’re behind, get the catch-up price in writing before you compare monthly fees. Meanwhile, for a full comparison against hiring in-house, we covered the eight reasons owners choose outsourced bookkeeping services in a separate guide.

We charge one fixed monthly fee for online bookkeeping, with no pricing tiers, no contracts, and no hidden fees. If you’re behind, we discount catch-up months, and our pricing page shows both rates. Try us out for three months, because if you’re not 100% satisfied within that time, we refund every penny.

Bottom line.

The word “virtual” describes where the work happens, not who does it. Once you know that, the comparison gets simpler. Choose virtual bookkeeping services the way you’d choose any bookkeeper. Look at the people doing the work, the review you’ll actually complete, and where your data lives when you’re done. Everything else is a detail on a pricing page, and pricing pages are easy to read once those three questions are settled.

If you’ve been comparing online bookkeeping companies and you’d rather stop comparing, that’s what we’re here for. Since we keep our client roster small on purpose, the first step is to ask whether we have an opening. Tell us a little about your business and how far behind the books are, and we’ll get right back to you. Ready to Work With Us?

Your books don’t need to be in your office. They need to be right, and they need to be yours.