Whether you’re just getting started or have been in business for a long time, it can be challenging to decide if it’s time to hire a bookkeeper. Many business owners have to DIY-it and wear all the hats when they take the plunge into entrepreneurship.
We’re going to explore when it is time to hand over the reins and hire a professional bookkeeper… Not your sister’s kid who says they’ll do your books for pennies on the dollar, but a professional.
Accurate Records Drive Everything
Having an accurate set of books obviously gets you prepared for tax season, but what else can it provide?
The goal of keeping up with bookkeeping activities is to create accurate books for your records. This ensures that your tax return is correct and that you get all the deductions and tax credits you are entitled to claim.
Many DIYers put off their bookkeeping until something, like taxes, prompts them to go back and recreate all the transactions from the year. This often results in missed expenses from misplaced receipts or forgotten cash expenses.
Another benefit of having up-to-date records that correctly reflect your business operations is that you are prepared to present your financial picture to investors or to lenders. It also allows you to build a solid idea of what your business is worth if you are considering an exit strategy like selling your business.
Tools to Help You DIY Bookkeeping
You may have the time to do-it-yourself or may not be ready to invest in a full-service professional bookkeeper. There are several tools available to help you create accurate books and records.
QuickBooks probably has the most name recognition and is one of the most prominent vendors in digital bookkeeping software. Their software is used by bookkeepers, accountants, and businesses who DIY-it. QuickBooks has a mild learning curve to learning the program. It allows you to link all of your business accounts to import your transactions so you can set aside a couple of hours a month to stay on top of your records.
Similar programs to QuickBooks include Xero, Zoho, and FreshBooks. A quick Google search reveals many decent comparisons of the products, price points, and excellent overviews of their strengths and weaknesses. I liked this recent one by Business.com that reviews the features and provides a little insight into bookkeeping.
If you have a few hundred transactions coming in each week, even the best software can get overwhelming. In 2019, Xero reported that bookkeepers still spend 30% of their time entering manual transactions.
Professional Bookkeepers – Who, What, Where, When, & Why
The confusion between professional bookkeepers and those like the proverbial sister’s kid comes when you look at the strict definition of what a bookkeeper does. Simply defined, a bookkeeper is someone who records your accounts and documents daily transactions.
However, professional bookkeepers actually take this quite a few steps further than standard data entry and classifying financial transactions. Today’s professional bookkeepers have an impressive list of qualifications and manage a verity of accounting-related tasks, including:
- Many being certified as QuickBooks ProAdvisors, enabling them to navigate the QuickBooks platform and offer reduced pricing.
- Ensure you get paid and pay your bills on time by managing accounts receivable and accounts payable.
- Record incoming cash and, in some cases, make the deposits at the bank.
- Monitor transactions and variances for suspicious activity and report on issues in real-time, helping to catch fraud or excessive spending.
- Reconcile your bank statements, which helps ensure there are no missed or fraudulent transactions.
- Monitor debt levels and apply payments towards debts.
- Set and maintain an annual and monthly budget.
- Process payroll and payroll tax reports.
- Generate accurate financial statements for monthly, quarterly, and annual reviews.
- Send your CPA accurate statements and supporting information for tax time.
There is even a movement to get more bookkeepers certified. This would provide a layer of confidence when selecting a bookkeeper in the digital marketplace.
Ready to Hire a Professional Bookkeeper?
So we went over the who and the what of professional bookkeepers. Now let’s determine if you’re ready to pull the trigger and hire a pro.
Basically, there are three main reasons to hire a bookkeeper. The first is overwhelm. Many business owners put off bookkeeping or creating a financial plan because they feel overwhelmed by the task. So it gets pushed down the calendar. If this is you, a professional bookkeeper is well worth the investment to hand over the reins and reduce your anxiety. The stress-reduction and added sleep are priceless.
The second is time. There comes a moment when your business has grown to the point that your time is more valuable, dedicated on your company, not bookkeeping. This typically occurs when doing it yourself is taking significant time away from profit-generating activities. That 30% stat above wasn’t just for professional bookkeepers. What would you do with 30% more time?
The third is knowledge, financial acumen. A bookkeeper can give you insight into where your money is going, who your top clients are, and help you better understand the business’s cash flow. This information can help you build better budgets and make sound financial decisions backed up by data. You’ll feel secure knowing: yes, you’re ready to buy that new piece of equipment. Yes, you can hire another full-time employee next quarter. And hey, you better talk to Bob about that invoice from 2 months ago.
Are you thinking: All this information is great. But I think we might need a bookkeeper plus some additional services to help us with financial forecasting, analyzing some accounts, and dive a little deeper. We got you covered. We recently wrote about Fractional CFOs. We discussed how a Fractional CFO can assist small businesses in growth mode. This is optimal for companies right on the edge of needing in-house accounting staff but aren’t quite ready to dish out the hefty price tag associated with CFO salaries.
We covered why you need accurate books and records and how those records are used to prepare your taxes, secure investments, and lending. There are options for creating your books yourself by using online products, and though we didn’t touch on it, you can also go the handy dandy spreadsheet method.
Professional bookkeepers are worth their weight in gold. These professionals take the time to help you move beyond just data entry and transaction classification to help your business run more efficiently. They aid you in locating discrepancies and keep you on top of your cash flow.
At Tax Time CPAs, we offer a QuickBooks QuickStart to help you get your DIY set up correctly. We also work with QuickBooks ProAdvisors for all of our bookkeeping services. If you’d like to learn more, please contact us or schedule a Discovery Call.