First of all, what is a bookkeeper? A bookkeeper is a person that has knowledge and the ability to record the financial transactions of a business. They understand how to categorize transactions into debits and credits and what general ledger account to record them in. They then take the balances in the general ledger accounts and turn them into financial statements, which consist of an Income Statement, Balance Sheet, and a Statement of Cash Flow. A bookkeeper will not be able to complete your taxes; however, a CPA or Enrolled Agent (EA) can accomplish that task. A bookkeeper will work with the CPA or EA at tax time to help the process wherever needed.
Now, how can a bookkeeper help your business? Business owners often wear multiple hats and take on many responsibilities. Many of these responsibilities can be very hard to accomplish. Whether they are hard because it might not be a skill the owner has, or the task is considered boring to the owner. Successful business owners have recognized these tasks need to be completed accurately and timely, so they have found others to take the bookkeeping off their plate. The financials of the company are incredibly important and need to be accurate and up to date. If you are a business owner who considers the task of maintaining the financials as “hard” then you should consider hiring a bookkeeper. In addition to this, other reasons to hire a bookkeeper which will be discussed more in depth below are:
- To produce accurate financial statements
- To know where your cash is when you need to know
- To free up your time to spend time focusing on your business, family time, or unwinding with outside hobbies
- To keep your business head count down leading to time and money savings
Produce Accurate Financial Statement
A bookkeeper will reconcile general ledger accounts and ensure transactions are booked appropriately. This leads to accurate financial statements, which in turn gives the business some great benefits.
- At tax time your tax accountant is not scrambling to understand and correct 12 months of data to get to the point where they can start to prepare the taxes. This leads to more of your time spent on the business. It will also decrease your tax bill as it shaves off hours of billable time that your tax preparer would charge you.
- If you need a loan or have a loan or are looking for outside investment the financial institution or investor will require accurate financials to make a decision. If you can quickly provide professional and accurate statements, then you begin the process on the right foot. Professionally produced financial statements generally gives these decision makers an initial positive first impression, which could be the difference between a yes or a no.
These next two points are arguably the most important aspects to having accurate financial data.
- Understanding your financial condition can make business decisions much easier. Understanding your margins and what products are selling better than others or what your biggest expenses are allows you have confidence when moving forward when it is time to make a business decision.
- When you have timely financials, you can react more quickly if business is growing faster or slower than you expected. You can downsize or upsize the business appropriately and timely leading to less disruption to the business.
Know where your cash is when you need to know
Have you ever bounced a check by mistake from not knowing what your true account balance was? Maybe you checked your bank account and saw you had the money but forgot about an outstanding check that happens to be presented the same day. Did you every delay a payment to a supplier because you were not sure if you had enough money in the account? Was a deposit returned for insufficient funds that you might not have noticed? A bookkeeper resolves these issues because one of their main jobs is to ensure the bank accounts are reconciled. This allows you to go into your accounting software and see the correct account balances and know your cash position whenever you need. You do not have to remember which checks are outstanding or which deposits have not cleared the bank yet. Not knowing how much cash you have can create a lot of additional fees through overdraft or penalties from vendors.
Additionally, having your accounts reconciled regularly can lead to better collections. You can see which auto payments have not hit your account or what checks were returned. By having accurate account reconciliations, you can make decisions about your business and have confidence that you will not have a vendor shut down your account due to lack of payment. This will allow you to have a timelier cashflow since you can rely on your accounts receivable balances and ensure customers are paying and checks are clearing.
You can spend time focusing on your business or family time
As stated earlier, business owners wear a lot of hats and carry a great amount of responsibility to their families, employees, employee’s families, customers, and community. This forces business owners to work long hours including weekends. Bookkeeping generally gets put off until after hours or on the weekends since focusing on customer needs during business hours is the priority. Burnout is a common issue with business owners and can cost your business dearly. Business owners can counteract this through strategic hiring. A bookkeeper is a great hire in this situation since they can focus on your books and allow you to focus on customers and growing the business. Additionally, bookkeepers can focus on ensuring bills get paid on time and receivables are timely.
Sometimes freeing up a few hours a week is all you need. By being able to put the business aside and have time to travel or spend time with family allows a business owner a fresh perspective on the business, which can lead to stronger customer relations and growth. Having up to date books and someone keeping an eye on finances takes a lot of stress and work of your plate.
Hiring an outsourced bookkeeper can allow a small business to cut down on employee head count and save money
The right time to hire an employee is a difficult decision to make. Many business owners wait too long because they may think the task does not justify paying an employee yet. Bookkeeping is one of those tasks because for most businesses it does not require a full-time employee. Outsourcing this function is a great alternative. Some benefits to outsourcing the bookkeeping function are:
- Employee benefits and taxes are generally one of the biggest expenses to a small business which you save by outsourcing the bookkeeping function.
- Employee turnover is a major headache and a waste of time and money. Hiring new employees and training them costs you a lot of time and money. By outsourcing the bookkeeper, you don’t have to worry about this since their staff already know how to do the job. If the bookkeeping company loses their employee, it is up to them to replace the employee and retrain them on your books.
- You only pay for what you use with a bookkeeper and do not have to worry about paying an employee for downtime while they are waiting for more work. Professional bookkeepers also have efficiencies they can utilize that allow them to complete the work faster than a hired employee furthering the cost savings.
- Many bookkeepers offer monthly bookkeeper packages that take the size of the business into account. As the business grows or as you gain confidence you can add other services for the bookkeepers to perform. A benefit to fixed monthly pricing is there are no surprises as what you are paying at the end of the month.
- Bookkeepers are experts at the accounting software they use and get your system set up appropriately and ensure you have the correct chart of accounts.
- Properly categorized expenses can make it easier to see where and when you can cut costs leaving more money for growth or outsourcing other tasks to free up more of your time.
Every decision a business makes is crucial to its success. Having accurate and timely financials is critical to making these decisions as well as providing you time to focus on what decisions should be made. Letting a professional handle the critical task of maintaining your bookkeeping can be a competitive advantage. Let other business owners spend their hours on a difficult task while you focus on getting customers.
So are you already asking the right question – Do I need to hire a bookkeeper for my business? There are clear benefits and advantages to hiring a bookkeeper and as an added bonus it will allow you to sleep a little easier, which is always a good thing.
If you are ready to take the next step and hire a bookkeeper to complete the accounting for your, hit the “Let’s Talk” button and schedule a meeting with Longview Financial today.