Bookkeeping Software has become an integral part of any small business.
The ease of use and popularity of software suites like QuickBooks allows most small business owners to have some degree of bookkeeping regardless of their accounting knowledge. At best, this works well for businesses as they are growing. At worst, a business owner only thinks they’re properly entering in the financial information and records. In either case, as business grows, so does the complexity of the tax planning and accounting needs. Eventually, there comes a critical time when a business owner must consider outsourcing all or part of their bookkeeping needs.
For example, imagine the following:
- You realize that you are spending more time dealing with bookkeeping instead of with customers and vendors.
- You find yourself questioning whether or not you’re entering items in the right expense account…a very common error.
- You end the year thinking you made a profit only to find out you have less in your bank then when you started and do not understand why.
- You want advanced reports that you are unsure of how to produce/may not be available by default from your off-the-shelf bookkeeping program.
- You overstate your profits, and as a result pay in higher taxes on incorrect numbers.
If you can relate to any of the above situations, it may be a good time to begin considering the short term and long term benefits of having a bookkeeping professional, like WeDoBooks, take this time consuming task off of your plate. It’s very easy for most small business owners to fall in the trap of trying to do everything themselves in an attempt to keep costs down.
We know that most business owners dread bookkeeping and would prefer focusing on the aspect of their business in which they are most passionate about, and most profitable. That profit center is not the bookkeeping. It’s important to maintain the vision that inspired them to start their own business to begin with and bookkeeping can definitely distract from this.
Is it better to hire a bookkeeper or an accountant. What’s the difference?
Ideally, you would like to hire a firm or professional with both bookkeeping and accounting capabilities. What’s the difference exactly? An accountant can identify the big picture of your financial situation and ensure you legally comply with the IRS by filing your required documents and payments on time. In addition, a good professional accountant will also be able to work with you well beyond tax season. For example, a CPA can notify you of newly implemented or impending tax laws (State and/or Federal) that will affect your business. Also, a CPA can advise you with your business and financial strategies. For example, is securing a line of credit against your receivables a good idea before launching a new product? That is why all WeDoBooks clients receive unlimited consultations with a Certified Public Accountant!
On the other hand, a GOOD bookkeeper handles more of the day to day accounting tasks including paying bills, tracking expenses and making sure they are entered correctly, payroll services, etc. Bookkeeping may sound boring and tedious, but it is the accumulation of these details that paint the big picture so that business owner (with the accountant’s help) can make sound business decisions. We have found most anyone who worked with some aspect of QuickBooks will now consider themselves a bookkeeper, and this is not correct.
Remember - Accounting = Knowledge and Knowledge = Power... Power to better run your business.
Many businesses view bookkeeping as a necessary evil and something that only needs to be done in order to meet IRS requirements. However, the need for up to date and accurate bookkeeping extends well beyond tax filing purposes. Before being issued any line of credit from a financial institution, expect them to request up to date accounting records. The same will apply for any merger, sale or acquisition. The real value of good, up to date bookkeeping is having the ability to make clear business decisions based on accurate data presented in your bookkeeping reports. By having all of the transactions of your business neatly organized into your chart of accounts, you have a better chance to make clear, educated business decisions. The reports your accountant provides you with will give you a quick snapshot of where you are making money and where you may be spending too much.
When making the decision to use a professional bookkeeping service or to bring in a bookkeeping consultant, it is recommended that you consider:
- Their past experience
- Their qualifications
- If the firm or person is experienced with any possible bookkeeping software you have already been using
There are actually a couple of ways in which you can choose to hire a professional bookkeeper. You can choose to outsource the whole process and allow them to do all of your data entry and filing. This allows you to allocate your time and resources to the aspects of your business that you are strongest in. Many times your accountant will prefer the fact that your records are being kept by a professional and therefore more confident that all items have been properly entered.
The other option is to bring in your accountant or bookkeeping consultant to ensure your bookkeeping systems are properly set up. After the chart of accounts and bookkeeping system is established, the consultant can then train an employee on proper data entry procedures.
Whatever options you choose, the main factor is always to correctly determine the financial health of your business. Bookkeeping may bring what appears to be a small added cost to the business bottom line, but one that can ultimately give you more time to grow the business and ultimately grow the bottom line.