Hiring staff is one of the hardest decisions to make, especially for a small business. One area that often suffers from the penny-wise, pound-foolish error is bookkeeping. As a business owner, it’s important to recognize early on that you can’t do it all and why hiring a bookkeeper, sooner rather than later, may be critical to your success.
It is common for business owners to wait until there is surge in their business before considering the need for a bookkeeper. The result is a lot like waiting until you actually hear the roar of a train before you react – your margin of safety is probably pretty small at that point. A business that is seemingly making great strides forward can be stopped in its tracks when the books fall apart or lag behind reality.
Why a Bookkeeper?
It isn’t possible to run a business effectively without a clear handle on its finances. The current state of profitability, leverage, cash flow, cost of goods sold, and collections are all critically important to your ability to manage and build your business. How can you make a good decision, if you don’t truly know what the impact will be on your business’ financial picture?
The viability of a small business is tied very closely to its cash flow situation. In addition to managing the payables – meeting payroll and paying the bills, they must be able to manage receivables which can be more difficult especially if they come from multiple sources. All it takes is for one cash flow crunch to potentially bring the business to a screeching halt.
Many business owners attempt to do the bookkeeping on their own, largely because it seems fairly simple in the beginning and there are a lot of software programs that make it seem easy. Some owners also like to do it because it feels as if they are very close to the finances of the business. But, as the other marketing, sales and operational needs of the business place greater and greater demands on the time of a business owner, it is typically the accounting function that suffers — largely because it is fairly boring unless you are in finance or accounting.
It is a full service bookkeeper’s job to not only “keep the books,” but to do the invoicing, handle the collections and prepare reports that can, at a glance, provide the business owner with a snapshot of the financial state of the business. The daily reporting enables the business owner to anticipate cash flow issues, respond quickly and stay focused on growing the business. A good bookkeeper is trained to properly use the software or other bookkeeping system, understands payroll and tax payment requirements, and deals with all the minutiae of job costing and expense account management.
A growing business can’t afford to get behind on any of this. If too much time is allowed to pass between the point that you make the sale and you collect the payment, cash flow problems will crop up that can unexpectedly ham-string your business. Also, if you aren’t stuck in the weeds of the day to day posting and bookkeeping, you will be more likely to be able to see financial trends and identify areas of weakness early on. In short, you’ll be better able to plan. All of that can save you money in the long run even if it costs you some money in the short term to hire a bookkeeper.
Finding a Bookkeeper
Hiring a bookkeeper does not have to break the bank and it can be done on a part-time basis or outsourced in the beginning. In fact, many small businesses contract with bookkeeping or accounting services that are paid in proportion to the amount of work they complete for the business. Virtual bookkeeping is also becoming a very popular source for contracted services. These are individuals with bookkeeping or accounting backgrounds that work off-site and charge an hourly fee. Whatever the cost, it is a solid investment in your business’ success.
Get the Ask Conny Hire a Great Bookkeeper Checklist to make the process easy.
A bookkeeper should be able to help the business owner with the following types of services:
- Setting up the accounting system or software
- Monitoring cash flow
- Managing and reconciling bank and credit card accounts
- Preparing financial statements
- Preparing materials for your accountant
- Establishing or recommending accounting procedures
- Managing accounts payable and bill paying
- Invoicing and collections
- Handling payroll or managing your payroll service
At year-end, bookkeepers can usually save you some accounting fees by doing a lot of the basic work of preparing statements and information for your accountant to use. Having kept the books accurately during the year will also help lower your bill because your accountant shouldn’t have to do a lot of clean-up.
Whenever hiring a bookkeeper, it’s important to check references and run a background check. Better to do some due diligence ahead of time than find out you’ve made a bad hire.