Does your small business need a bookkeeper?

Keeping track of your finances and accounts is the ultimate key to the success of any business. You may, however, find that you spend more time maintaining your books than running your business. A good question to ask yourself is, “Do I need a bookkeeper?”. 

The entrepreneurial spirit thrives on a DIY mentality: Do everything yourself, and don't spend a dime until you absolutely have to.

Financial help, such as a bookkeeper, is especially hard to justify because you may not be able to afford one. But, with a growing business, you can only handle bookkeeping on your own for a limited period of time. Having a professional solely focused on maintaining your business finances will only benefit the growth of you and your business. 

Everyone wants to utilize tools that can make their business more competitive and profitable. One of the most important tools in your toolbox is the bookkeeping service. Legal matters shouldn't be handled by anyone other than a lawyer, and bookkeeping shouldn't be handled by anyone other than a bookkeeper.

So, does your business need a bookkeeper? Let's examine a few factors to consider when answering that question.

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What does a bookkeeper do?

Organizing financial processes, preparing financial statements, and presenting data for future uses, like budgeting or fundraising, are key responsibilities of a bookkeeper. When strategic analysis and forecasting become priorities, they may also serve as the foundation for a stronger finance team.

Competent bookkeepers should be able to:

• Keep a general ledger and record all accounting data (i.e., track and record incoming debits and outgoing credits).
• Reconcile your books with the monthly balances you receive from your financial institutions and correct discrepancies.
• Manage payments to vendors, financial institutions, etc., and accounts payable (AP).
• Prepare invoices for customers and manage accounts receivable (AR).
• Maintain records of inventory.
• Produce balance sheets, income statements, and other financial statements that show financial health and trends.
• Maintain accurate financial records for your company in order to facilitate better reporting and analysis.
• Manage payroll as needed.
• Ensure that all tax documents are prepared before filing your return.
• Comply with federal and state laws and regulations.

In the end, a bookkeeper maintains your books so you or your accountant can see where money is coming from and where it is going. 

 Helpful Resource: What are the benefits of bookkeeping?

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When does your business need a bookkeeper?

Keeping track of high volumes of transactions can be time-consuming for growing businesses. 

If your business reaches any of the following points, you need a bookkeeper:

If your books are never up to date

In the event that your bookkeeping falls behind, your books fail to reflect your actual financial situation. As a result, understanding cash flow and measuring business health can be difficult.

Without updated books, you don't know what you're making and what steps to take to increase your income.

Plus, if your books aren't in order, you'll have tons of bookkeeping to do during tax season, making an already stressful time of year even more challenging when you need tax preparation.

If you hire a bookkeeper, you can expect to receive monthly financial statements, so you know where your money is going.

If your sales have increased, but your profits haven’t

No matter how hard you work to bring in new business and keep your customers happy, you're not going to make more money if you're not making more in your bottom line.

It is a sign that you need to increase your profit margins if your revenue is rising but your bottom line is not. A bookkeeper can provide tax-ready financial statements which will help you identify where you need to cut costs so that your business can become more profitable.

If your cash flow is unpredictable

Did you ever have the feeling that you had money coming your way from clients, but you weren't sure how much it would be or when it would arrive?

When it comes time to pay freelancers or contractors, do you find yourself empty-handed?

This is why you need cash flow statements. The cash flow statement shows you how much money other people owe you and how much money you owe other people.

Every month, your bookkeeper can help you get an update on your cash flow.

 Helpful Resource: What is a cash flow statement?

If your DIY bookkeeping takes up more time than you can afford

Be careful not to take your personal time for granted. In addition to causing burnout, overworking adds up to dollars per minute.

Start by tracking how much time you spend on bookkeeping each week. Calculate the value of your time, and then determine how many "dollars" you spend on bookkeeping each month.

Compared to professional bookkeeping, your "salary" as a bookkeeper is low. When you treat your bookkeeping time as an actual expense in cash, you'll have a better idea of whether you should continue doing it.

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What can a bookkeeper do for your small business?

Modern bookkeepers are capable of a variety of tasks, including keeping books. Their duties can vary greatly depending on the business they work with.

The following are some of the duties of a bookkeeper that will help your business run smoothly:

Day to Day Management of Accounts

Your bookkeeper can oversee all transactions in your business's accounts on a daily basis. With software to keep track of your sales and purchases, it's much easier for them to keep an eye on your cash flow.

This also saves time entering data.

Maintain Up-to-Date and Accurate Records

A bookkeeper will ensure that all of your business records are up-to-date. Additionally, it will be their job to catch any discrepancies between the books and your business accounts, so you can resolve them as soon as possible.

Manage Bank Accounts

At a basic level, bookkeepers manage transactions brought in through software, like an app. Bank feeds, that link the software with your business bank account, allow you to see each transaction in real time.

 Helpful Resource: Why you should open a business bank account

Handle Accounts Payable and Accounts Receivable

Your small business bookkeeper usually makes payments on your behalf. Expenses, supplier invoices, and petty cash can all be paid with this method.

One of the other responsibilities of bookkeepers is preparing and sending invoices to your clients so that you can receive payments on time. Managing accounts receivable ledgers and following up on late payments will also be the responsibility of a bookkeeper.

Prepare Financial Statements

A bookkeeper will also be responsible for preparing some significant financial statements for small businesses. Profit and loss statements, balance sheets, and cash flow statements are examples.

These financial statements show a business's bottom line, operating expenses, assets and liabilities, and cash inflows and outflows.

Process Payroll

There are many services that bookkeepers can provide. Some perform payroll functions and other HR duties for small businesses. Assisting companies in processing paychecks and tax payments for their employees can be one of these services.

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How much does a bookkeeper cost?

The costs of bookkeeping for a small business will depend on many factors. Number of monthly transactions, number of employees and how payroll is processed, number of expense accounts, credit cards, invoices to send out, bills to pay, number of balance sheets to reconcile, etc. As well as these basic bookkeeping activities, your costs will also be influenced by how your accounting systems, policies, procedures, and reporting needs are set up and administered.

Prices of part-time bookkeepers can vary widely. Depending on the job description and location, internal, part-time rates average around $20/hour. Typically, they perform basic bookkeeping duties and will need to be supervised and managed.

Depending on the number of transactions and complexity of services, outsourcing your bookkeeping can cost you anywhere from $500 to $2,500 a month. One of the benefits of outsourcing is that you can customize the services you receive to meet your bookkeeping needs.

A lot of businesses are concerned about outsourcing, not understanding how it works. With today's technological advances, outsourcing has never been easier. The benefits of outsourcing bookkeeping are it is more efficient and less expensive than hiring an in-house bookkeeper.

 Helpful Resource: How much does a bookkeeper cost? Guide

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Do I need a Bookkeeper or an Accountant?

In fact, it's a trick question. You might need both.

It is similar to having to hire both a carpenter and an architect when building a house.

Accountants can analyze the big picture of your financial situation and offer strategic advice. The accountant prepares key financial documents, such as a profit-and-loss statement, if necessary, and files a company's tax returns.

Accounting firms can also serve as outsourced chief financial officers, advising entrepreneurs on financial strategies such as securing a line of credit against receivables for new products when tax season ends.

A bookkeeper, on the other hand, handles the day-to-day tasks of a company's finance department. They ensure that new employees fill out all the required paperwork, submit invoices and follow up on them, and pay the bills. Bookkeepers also track company expenses so that every cost is entered -- and recorded correctly -- into the software so that the business is ready for tax time along with filing any other reports to creditors or investors.

 Helpful Resource: Bookkeeper vs Accountant - What's the difference?

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Do I Need a Bookkeeper If I Have QuickBooks?

QuickBooks can be useful for small businesses depending on their size and familiarity with it. You may know how to enter data into QuickBooks, but are you using it to its fullest extent? That's where a bookkeeper comes in.

QuickBooks' real value is in how well you can use it to gain business insight. In addition to knowing how to use financial software, a bookkeeper can extract insights from the data to make better business decisions. 

Without a bookkeeper, small businesses often enter inaccurate and incomplete information into QuickBooks. This results in poor decisions and it is much harder to interpret the results.

Instead, you should ask: How confident are you in using QuickBooks? QuickBooks experts, such as bookkeepers, can help you make the most out of your software.

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When Hiring a Bookkeeper is the Right Choice

In order to succeed as a small business owner, you need to be able to think strategically. If you do not hire a bookkeeper, you will not have the information or the time you need to plan your strategy. The money spent on a bookkeeper is well spent when you have someone who is dedicated to maintaining your records and providing you with cash management.

As a small business owner, you are naturally so busy that you have no time to pay attention to records and where your money is going. With a minimal monthly fee, you can see trends on paper so that you can deal with issues before they become serious.

A bookkeeper will probably only be needed for a few hours per week if you have a small number of employees. You will only have to pay $30 to $40 per hour for an experienced bookkeeper on a contract basis. Some companies charge a minimum of $100 to $150 per month for their services. The best option for you may be to hire a part-time professional or to hire a service provider.

When it comes to the question “Does my small business need a bookkeeper?” the answer is most likely yes.

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How to Hire the Right Bookkeeper for Your Small Business

When you're looking for a local bookkeeping firm, it's usually a simple matter of Googling to find which ones are in your area and then doing your homework to determine which will be the best fit for your business. It's common to ask for references from similar customers, so you can get an honest impression of what it's like to work with them.

There is no reason to hire a full-time, in-house bookkeeper unless your business has more than thirty employees or over a million dollars in revenue.

As a result, you have three options: hire a freelancer, work with a bookkeeping firm, or use a remote bookkeeping solution. Each approach has its advantages and disadvantages.

Choosing a freelance bookkeeper is the most affordable option if your finances are simple and you're okay with your bookkeeper not being available all the time.

Bookkeeping firms have multiple bookkeepers working under one roof. A bookkeeping firm is a smart choice if you are concerned about not having someone you can count on every day.

Online bookkeeping solutions use cloud-based software to connect you with a team of bookkeepers who handle your books for you. Automating the majority of the manual work makes it more affordable than a full-service bookkeeping firm. Small businesses that do not deal with a lot of cash will find this a great option.

You're on your way to understanding your business better and plotting a course for future growth when you hire the right bookkeeper.

Here are the things a bookkeeper or bookkeeping software solution should offer you if you're ready to get started.

Availability

It is important to be able to contact your bookkeeper quickly and receive a helpful response. Consider switching services if your bookkeeper takes too long to reply to emails, or goes on vacation without letting you know.

Clear, easy communication

In addition to being able to communicate with accountants and other bookkeepers, bookkeepers must have a human, everyday perspective. Jargon should never overwhelm conversations to the point that you are unable to comprehend what is being said. Your bookkeeper should be able to explain your books to you in a language that you understand.

High-security standards

In the event of a cyberattack, even the best accountant in the world will be rendered ineffective if their computer—and your business's financial data—is taken offline. It should be possible for your bookkeeper to confirm that security essentials have been implemented.

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What will happen if your business doesn't hire a bookkeeper?

Choosing not to hire a bookkeeper will not result at the end of the world. However, you may limit your financing options, make costly mistakes in pricing, or make bad decisions based on inadequate information.

It can be difficult, if not impossible, to see where your business is going without accurate financial records. A bookkeeper is trained to catch minor mistakes that can cause big problems, such as running out of cash.

Additionally, they are familiar with your company's income and expenses, so it is easy to track invoices, pay for supplies, and reconcile everything each year.

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Get Help With Your Business' Bookkeeping

Managing your time is a common reason to hire a bookkeeper. Recording your business's daily cash flow can take a lot of time. There are only so many hours in the day.

Your bookkeeper will be responsible for managing the books of the business while you focus on growing it and making money. This is their primary responsibility. By hiring a bookkeeper, you let a team of professionals handle your day-to-day accounts.

When all signs point toward professional help, it's time to take the next step.