Entrepreneurs who start a business have this mentality of doing everything they can by themselves without the need to pay for anything new. Until of course, it is necessary. Sometimes it becomes too much, and they end up juggling far too many responsibilities, often at the cost of their business.
Deciding about hiring a bookkeeper is a critical task and entrepreneurs often think they can manage on their own. But it can be a huge mistake.
According to the U.S. Small Business Administration, of the 80% of businesses that fail within their first five years, poor bookkeeping—or the absence of a bookkeeping system—deserves much of the blame.
But hiring a bookkeeper is not a dreadful task when you find out that it costs very little when compared to the risks associated with not hiring one. Following are five things that you need to know about hiring a bookkeeper –
1. Cost Is Relative
If you analyse the big picture, you will find out that the cost of hiring a bookkeeper represents a minor expense, compared to a booking error. And there is high chance that you will overlook something or the other when you do it yourself.
It is true that most small businesses don’t need a full-time bookkeeper. A part-time or a freelance bookkeeper will work just fine for a business that has just started. So rather than cutting the cost of booking, find out other areas where you can trim costs.
2. Time Is (More Than) Money
Are you really getting any thrill from managing the book yourself? The answer is definitely no unless of course, you are in an accounting business. Entrepreneurs do it because they think it will save them money. But that’s not true.
When you are not doing the bookkeeping yourself, you have more time in your hand to focus on revenue generating activities such as sales and marketing for your business growth. You also have time for relaxation. With that in mind, ask yourself, are the financial savings really worth the sacrifice?
3. Tax Prep Shuffle
Managing your own books means doing the financial work from the start to finish which means during tax time you can pay heavily for any missing receipts or invoices. If you leave reconciliation to your accountant, he or she will be billing you at a much higher hourly rate than any bookkeeper would charge.
So you need to ask yourself: How much will a last-minute scramble for missing paperwork cost you in time and money, and how will this split in focus affect the operation of your business?
By letting your bookkeeper manage your books, you can be rest assured that appropriate paperwork will be ready to go to your accountant at the correct time. And any tax savings can be reinvested in your business or used to pay debts.
4. Accounting Is Not Your Business
No matter how good you are at keeping records, a bookkeeper can do their job in a much-synchronised way as they are skilled and experienced in keeping financial records.
And it is much more than that. Beyond cutting checks to vendors and accounting for income, expenses, liabilities and assets, they can help identify tax credits and money owed, as well as business strategies that you may be overlooking.
5. The Foundation You’ll Build Upon
One important thing to keep in mind is that the bookkeeping system you’ll put in place when you launch your business will lay the foundation for your company’s financial health going forward.
If you think any paperwork issues will be solved automatically once cash flows starts in or you can hire someone later to scrub accounting errors, think again. A lax booking system will affect your cash flow, and there is a very less chance of your business survival.
In the U.S., for example, accurate business records are vital to the preparation and filing of federal and state income taxes, as well as any sales tax and payroll taxes that must be filed on time. There’s nothing IRS auditors like more than discovering a small business with sloppy records because it means they can disallow deductions and slap you, the business owner, with draconian fines and penalties that vastly exceed any underpaid tax assessments—possibly wiping you out in the process.
Although your primary focus and attention right now is to get your business off the ground, but taking a lenient approach when it comes to bookkeeping is a dreadful idea.
A professional bookkeeper can maintain all your records, your tax information will be ready to go when needed and you’ll benefit from another set of eyes scanning for tax credits, money owed and cash-saving business strategies that you may have overlooked.
Founder of BusinessBoost.xyz
Award winning author | Serial entrepreneur | Business coach