Essential Bookkeeping Services New Business Owners Must Consider
Bookkeeping errors won’t just hurt your company’s finances, they’ll also hurt your business’s reputation with vendors and customers. Whether or not to to hire bookkeeping services is a critical decision that all new business owners must make at some point, preferably before the business suffers painful mistakes in its accounting department
Do you need a bookkeeper?
Business owners often play the role of HR manager, customer support, CEO, and money manager. The problem is that sometimes these roles demand more attention than a business owner can really give them. Your business finances need dedication and constant involvement.
A bookkeeper will:
- Keep the financial side of your business organized
- Track sales and expenditures
- Handle employee payroll
The big question is whether you need an in-house bookkeeper, or if you can outsource their services. Let me explain:
Essential Bookkeeping Services
Every new business has certain services they must complete regardless of industry or size. This includes sending out invoices, making payments to vendors, collecting payments and making deposits to a bank, and paying taxes. These are all essential functions of any business, and they can be time-consuming.
As a business grows, it must manage other bookkeeping functions. These include the following:
- Tracking invoices and collecting on accounts
- Payroll deductions and tax payments
- Reconciling bank accounts
- Creating financial statements
- Handling customer questions about payments and invoices
- Creating financial reports, such as balance sheet, income statement and cash flow statement
When a business applies for a loan, one of the requirements is to provide specific financial records to prove the solvency of the company. Maintaining accurate records is essential to being approved for these loans.
Organized financial records helps a business owner recognize where and when the company is making money and when changes must be made. It also helps the owner predict cash flow to ensure adequate income to pay expenses. A bookkeeper or accountant can maximize deductions and reduce taxes as well as ensuring all obligations are met on time. They can also create reports that give a picture of the company’s financial standing.
Hiring, Outsourcing, or Software?
A business owner has three options when it comes to hiring a bookkeeper. They can either hire someone as a part-time or full-time employee, they can outsource the work to a bookkeeping service, or they can invest in one of many impressively built software services that . Each option provides its own benefits and disadvantages.
Hiring an employee
When you hire your own bookkeeper, you have the advantage of teaching someone the details of your business. They will learn about your customers, and you can work together to ensure all financial goals are met. They have a vested interest in your business and your financial records are their sole concern. Rather than managing the books of multiple companies, they are focused only on your business.
Not all businesses just starting out can afford to hire a full-time employee. Having a part-time bookkeeper has its risks – the person in question is not as vested in your company because they won’t be getting the traditional full-time benefits from it. Many people work part-time because of other commitments – childcare, other positions, etc. – and those infringe on their time available to work for you. Even more prevalent is the fact that part-time employees experience more turnover than full-time experience, meaning you might find the perfect person only to see them leave for a better opportunity, leaving you to start over again.
Outsourcing your bookkeeping to a professional service company can be beneficial to new business owners. You pay only for the work that is done with no additional costs of having an employee. You aren’t responsible for training the person or overseeing their work. All you are concerned about is the results.
Of course, outsourcing has its own downside as well. While most bookkeeping services try to maintain transparency, you aren’t in control of how they work. You won’t be able to tell them to let Mr. Jones slide on his payment this month because you know he will double the payment next month. It will be more difficult for customers to come to you with payment issues or vendors to negotiate terms with you when the bookkeeping is being done by an outside company. This isn’t to say exceptions can’t be made when you outsource, but it’s often much more complicated.
Even if you weren’t a math or accounting major in college, you can still handle your own books with little fear of error by purchasing software such as Intuit Quickbooks which can be purchased on a monthly or yearly basis. The software comes with tech support available 24/7 and there are plenty of other companies who make their money by selling guides to using the software for specific industries. Best of all, with the advent of Software as a Service (SaaS), you never have to buy a new version of the same software.
Like all other software however, the biggest concern remains user error, and since you’re the user, it’s your problem. But with so many small businesses in existence and more coming down the funnel every day, software companies are wise to the fact that the more intuitive they make their product, the more likely you are to buy it.
Originally published in SmallBusinessTalk.ca.
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About the Author
Lendified is Canada's premier online lender for small businesses. The company was founded by former bank executives dedicated to provide businesses with fast, easy, and affordable financing. The Lendified team regularly produces blogs and guides to help small business owners succeed.