When running a business, you’re sure to encounter lots of scenarios where finances are important. Running a business is about making money, after all. Keeping tack of your business’ finances can become burdensome. It’s isn’t easy to stay on top of the books and grow your business at the same time. So, should you hire a bookkeeper?
Maybe you don’t feel like your business is big enough to warrant hiring a bookkeeper yet, but there are instances where getting expert help is imperative. Here’s everything you need to know about getting professional bookkeeping services for your small business.
What Do Bookkeepers Do for Small Business?
Bookkeepers keep track of your business’ money matters. Your bookkeeper will see to it that there are records of all the money that comes in and goes out of your business. The short description of a bookkeeper is that it’s someone who keeps track of all your business transactions.
Bookkeepers fulfill the following responsibilities for small businesses:
- Keeping track of sales, invoices, payments, receipts, payrolls and purchases.
- Organizing company financial data in to keep in ledgers.
- Preparing financial information for accounting purposes before handing it over to accountants.
- Ensuring business financial processes are efficient.
While this might not seem like much, performing bookkeeping tasks takes much more time and effort than you might realize. Simply keeping track of all your invoices and purchase orders is already difficult, as you’ll need to see to it that appropriate payments are made in correspondence to your financial receipts.
Your bookkeeper will be able to tell you which of the invoices you’ve issued are paid, as well as which ones aren’t. If an invoice is due (or even overdue) your bookkeeper will also be able to tell you.
If you sent purchase orders, your bookkeeper will also know which payments are due and when. This can help you keep up with your financial responsibilities towards your suppliers and contractors.
Bookkeepers vs Accountants
The responsibilities of bookkeepers and accounts are often similar, but there are distinct differences between to two.
Bookkeepers focus mainly on keeping track of your business’ daily finances. A bookkeeper will see to it that there are accurate financial records for your company to ensure you know how your business spends money.
Bookkeeping is important for tax purposes, as you’ll need to know how much profit your business makes to determine your tax liability. If you don’t keep track of business expenses, for instance, you won’t be able to list them as deductibles. As a result, it will seem as if your business made a larger profit than it actually did, which means your business will pay more tax than it should.
Unlike bookkeepers, accountants don’t work in financial record keeping. Instead of creating the financial records (or keeping books) for a business, accountants analyze the information that bookkeepers collect regarding the financial transactions of a business. Based on these records, accountants can set up comprehensive reports to help businesses make better financial decisions.
Because accountants have a good background for analyzing financial data, some accountants also work as financial planners.
Bookkeepers aren’t ideally qualified to draw up complex financial reports and offering financial advice, but accountants are well-versed in business financial planning.
Should You Hire a Bookkeeper for Your Small Business?
Whether or not you hire a bookkeeper for your small business will depend on a lot of things. One of the most important factors to consider is your own bookkeeping skills. If you can’t do small business bookkeeping to save your life, hiring a bookkeeper is a must.
Even so, many business owners who can manage their own books can benefit from hiring a bookkeeper. Just because you’re good at doing your small business’ books, doesn’t mean you have to do it yourself.
There are a couple of good reasons why you should seriously consider hiring a bookkeeper, even if your business is just starting out.
Focus on Your Business Growth
Doing books is a tedious task, so much so that most larger companies employ full-time bookkeepers to get it done. Most small businesses can’t afford to hire a full-time employee to do the books, which is why hiring a bookkeeping firm is a good option.
You may think your business is too small to hire a bookkeeper, but this is a flawed way of thinking. New business owners need to focus on growing their businesses more than anyone else. Hiring a bookkeeper is the best way to take care of your financial admin so that you can hustle.
Make Sure You Have Free Time
Owning a business requires you to be somewhat of a Jack of all trades. From marketing and customer relationships, to managing employees and maintaining equipment – you already have enough on your hands. Even marketing and sales can be a full-time job, trying to work in time to do your books can be almost impossible.
Without a bookkeeper, you’re likely to spend your evenings and weekends sorting out your financial records. This will rob you of any free time. If you keep up such a pace for too long, you risk burning out entirely – a risk your business can’t afford.
Avoid a Bad Credit Score
Your bookkeeper will make sure that all your orders are paid on time. This helps to avoid a bad credit score.
Staying on top of payments is especially important if you run your business as a sole proprietor without registering as an LLC, as any business debt will also affect your personal credit score in this case.
Accurately Determine Your Tax Liability
As mentioned earlier, it’s important to know what business expenses you incur to determine your profit. Without a proper record of income and expenses, it can be difficult to determine how much tax you need to pay.
Business tax is often paid in advance based on quarterly income estimates, so having proper financial records will also help you make better income estimates so you pay the correct amount of tax. In turn, paying the right amount of tax based on your income estimates will help you avoid late payment fees.
When is Your Business Big Enough for Bookkeeping Services?
So, now you know that getting a bookkeeper to help with your business finances is certainly beneficial, but is your business big enough? Should you hire a bookkeeper even if you aren’t making a lot of money?
You’ll be happy to learn that bookkeeping services aren’t too expensive. Compared to other expenses your small business might have, bookkeeping actually offers a lot more benefits for a reasonably small expense.
The fewer employees you have and less transactions your business makes each month, the less time your bookkeeper will need to complete your monthly bookkeeping. Seeing as bookkeeping services are often charged by the hour, this means you’ll pay less if you have a simpler business.
As your business grows, you might hire more staff, send out more invoices and incur more business expenses. This will result in a higher monthly cost for bookkeeping services.
This means your bookkeeping expenses are likely to meet your business where its at. If you have a tiny, simple business, you’ll pay way less than if you’re running a larger business. When you look at it like that, almost anyone can afford to bookkeeping.
What Do Bookkeeping Services Cost?
Bookkeeping can cost anywhere from $15 to $60 per hour. This might seem like a big difference, but there are often good reasons for the disparity.
Factors such as your location can play a role. The cost of living is cheaper in some areas. Everything is cheaper in places with a low cost of living, including bookkeeping services.
Another factor is the bookkeeper you hire. Some businesses hire independent bookkeeping contractors, whereas others get bookkeeping firms to complete their books. There can be a big price difference in the costs between hiring independent contractors versus bookkeeping firms.
While many people assume independent contractors will be cheaper, this might not be the case. Look around until you find a bookkeeper that looks knowledgeable and suits your budget.