Running your small business requires much energy and time. Arguably the most important aspect of that management concerns your finances. Yet, there are many competing factors that pull for your time. How much time can you really devote to your company’s finances on a daily basis? Does your business need a bookkeeper?
Do I Need A Bookkeeper For My Small Business?
Why Hire a Bookkeeper?
While this isn’t an easy question to answer, it’s vital to do so. If you’re unable to dedicate enough time to manage all of your company’s transactions, let alone run cash flow statements, it means you don’t have the overview you need on your company’s finances.
And this can have far-reaching effects on your business. To demonstrate, if you are behind on your reports, you don’t have an accurate barometer on how well your company’s finances are doing. This can influence everything from the decisions you make on a daily basis to how you manage the cash you have on hand.
You have enough on your plate as it is. Understanding what bookkeepers do, when you need one, and more can help you see the value of hiring one.
What Do Bookkeepers Do?
In essence, a bookkeeper manages all of your company’s day-to-day transactions, recording them in a general ledger. This might involve using software such as QuickBooks, recording it on a spreadsheet, or manually.
What makes their job so important is they categorize all of your expenses so you can make better sense of where your business’s money is going. They also organize all of your transactions. They prepare financial statements you can use to gauge your company’s financial health.
Typically, there are four statements they’ll prepare for you.
The first is a balance sheet. A balance sheet is a financial picture of how your company is doing at any given time. In this report, the bookkeeper presents all of your assets, which might include cash, property, equipment, and investments.
List of Liabilities
Next, they’ll also create a list of liabilities. This list can include anything from debt to unearned revenue. Additionally, if you are a publicly-traded company, the balance sheet includes an equity section, outlining the authorized shares and amount of those shares.
They can also generate a statement of changes in equity. As its name implies, this shows you how much your share capital has fluctuated over a specified time.
Cash Flow Statement
Another report generated is the cash flow statement. This report compares how much cash your business earns relative to how much money you’re paying out by way of bills, payroll, manufacturing costs, etc. Bookkeepers can run these reports for any specified time, giving you unique insight into your company’s financial health for different parts of the year.
Lastly, they’ll prepare an income statement, specifying how much you earned over a month, quarter or year relative to the expenses your company paid during that time. This is handy for identifying trends.
Along with preparing reports and recording transactions, bookkeepers have a variety of tasks they can do to help your business that includes:
- Paying sales tax to the respective government agencies
- Paying vendor invoices
- Supplying your accountant with financial statements for tax preparation
- Developing and maintaining your company’s budget each year
- Analyzing company finances and bringing any problems to your attention
As you can see, bookkeepers can serve many purposes within your organization. The question is when do you know you need to hire a bookkeeper?
When is a Bookkeeper Right for Me?
Here are some telltale signs that it’s time to add a bookkeeper to your staff.
You Can’t Keep Up
Some small business owners can work up to 60 hours a week. Because you have such an integral role in managing all aspects of your business, chances are you don’t have as much time to spend all the attention you want on financial record keeping.
If you’re unable to spend much time managing your company’s finances, how can you make decisions based on incomplete information?
What’s more, perhaps you want to devote more time to it, but don’t understand the complexity of financial regulations. This is where turning to a trusted bookkeeper can help you immensely. You can leave them to work out all the financial details, allowing you more time to strengthen your business.
You’re Missing Payments
It’s human nature to make mistakes or forget. This is especially the case when you have so much on your plate already. However, if you’re continually missing payments because you don’t have the time or you don’t have a good financial plan in place, it could affect the relationships you have with your vendors and staff. It could even impact your company’s reputation.
You Only Have One Perspective On Your Company’s Finances
It might seem like you have your pulse on how well your company is doing by being involved in all aspects of its operations, but it’s also easy to find that groove and be lost in it too.
This is when you need a fresh perspective. Bookkeepers can provide the data you need so you can gain a different perspective on how well the company’s finances are going.
Struggles With Tax Preparation
Taxes can be bewildering enough when you file your personal ones. On the business side, it becomes even more complicated. Making mistakes on your tax filings could have huge ramifications, especially if you underpay.
One method some small business owners employ is dumping all of their transactional data onto an accountant during tax time, leaving them to make sense of it. The problem with this approach is you don’t have an accurate, real-time accounting of your company’s finances, rendering it difficult to make smart decisions since you don’t have a clear view of your finances.
Another route to take is to file your company’s taxes on your own. However, you might have to file quarterly depending on the type of your business. There are numerous forms you’ll have to supply, such as 1099s for freelancers. In turn, this requires much in the way of time and learning the proper tax laws, which reduces your ability to run your business the way you want to.
Instead, it’s beneficial to hire a bookkeeper, who will work in tandem with your accountant by supplying accurate financial statements to ensure compliance with the IRS and your state and local tax agencies.
Why Would My Business Need a Bookkeeper and an Accountant?
When learning more about a bookkeeper’s role, it might seem like they share many similarities to what accountants do. However, there are distinct differences between the two positions.
As noted above, bookkeepers keep track of all your company’s financial records including transactions, budgets, and more. They are more immersed in the day-to-day financial activity of your organization.
Meanwhile, accountants take the data generated by your bookkeeper and analyze it. Whereas the nature of a bookkeeper’s role is transactional, with accountants they deal more in trying to make sense of the numbers.
An applicable demonstration of this is your bookkeeper provides a cash flow statement. From there, they hand it off to your accountant who will examine the data for trends. Once they made determinations from the report, they meet with you to help you understand your company’s real profitably, expenditures, and supply suggestions to improve your financial situation.
Another important distinction concerns taxes. Bookkeepers will organize all your transactional data. But when it comes to understanding tax laws that impact your business, you need an accountant, as they are well-versed in understanding all the ins and outs of taxes.
Altogether, it might seem like you’re paying two people for similar services. In reality, each works together to complement the other, with the result being your company maintains accurate records and you receive real-time insight into how your company performs.
Now that you’ve considered both options, let’s move on to how bookkeepers make a positive impact on your business.
The Benefits of Hiring a Bookkeeper
To begin, bookkeepers focus on the daily financial transactions, freeing you from this responsibility. Instead of having to spend time juggling between other aspects of your company’s operations and its financials, you have a trusted resource that organizes all of your financial data for you.
This has numerous benefits too. By having accurate, up to date records, you have a better idea of how well your company is doing financially. Armed with this information, you can make sound decisions that will impact your business’s budget in a powerful way.
Another benefit concerns taxes. Since you have accurate records from your bookkeeper, your company is less likely to undergo an audit from the IRS. An audit is a time-consuming process and an expensive one as well–if the IRS finds you underpaid on taxes.
The added expense of a bookkeeper might seem counterproductive as it pertains to cost-effectiveness. Yet, small businesses who hire a bookkeeper end up saving money because they receive insight into their company’s finances, which they use to better manage their budgets.
Lastly, bookkeepers provide you with a fresh, unbiased perspective on your company’s finances. This can prove to be invaluable as they lend insight you might not have received otherwise.
How Much Do Bookkeepers Cost?
There are a variety of factors that go into how much bookkeepers charge, which includes the complexity of the work–are they merely involved in recording transactions or do they play a more integral role in day-to-day operations?
Moreover, how long do you require their services? Some bookkeepers charge per hour whereas others charge per project. If you only require their services for a few hours monthly, they might charge a minimum fee (between $100-$150 monthly) to retain their services.
Another aspect to consider is in what capacity do you want a bookkeeper? You could hire a bookkeeper to be on staff (which is by far the most expensive option), use one remotely, or hire a virtual bookkeeping service.
Pertaining to costs, the average salary of a bookkeeper is over $41,000 annually, according to ZipRecruiter. Keep in mind this salary will fluctuate based on the person’s experience and location.
Meanwhile, hourly rates for bookkeepers range from $20 to $50. This is a smart option to consider if you don’t want to put someone on staff full-time. Another option to ponder is using a virtual bookkeeper.
What are Virtual Bookkeepers?
A virtual bookkeeper does work remotely. How this works is your company uses software to upload its transactional data. From there, the bookkeeper accesses it from their office, where they can conduct the same job functions as being on-site.
Similar to in-person positions, a virtual bookkeeper charges based on the complexity of the project, the location of your business, and whether you pay them hourly or by the project.
Another virtual option to consider is working directly with a bookkeeping service like Bench, one of the best online bookkeepers. How this works is you’ll use its intuitive software to sync all of your company’s transactional data to the platform.
Once uploaded, Bench provides you with a dedicated bookkeeping team who will answer all of your questions. What’s more, you’ll receive interactive financial statements monthly which help you make sense of where your money is going. Since they work with tax experts to assist you in filings, it’s one thing off your full plate.
Additionally, what makes services like Bench beneficial is its ease of access. You can access financial statements and visual reports on the go through its mobile app.
They scale their pricing based on your expenses. To demonstrate, if your company has monthly expenses ranging from $1,000 to $7,500, you pay $125 monthly, which can be much more affordable than the traditional bookkeeping option.
All told, bookkeeping services allow you to focus on addressing the other needs in your business while supplying you up to date information on your company’s financial health. This allows you to play to your strengths and make accurate decisions that can impact your company’s bottom line.