How You Know It’s Time to Hire a Bookkeeper
That first client is the most exciting. They sign the contract, you are ready to begin working, and that first check hits your bank account - yay! You are not able to begin recouping some of those startup costs and hopefully begin making a profit.
Tracking the ins and outs of your finances can be fairly simple at first but over time you are going to need to bring in a bookkeeper…. but what exactly does a bookkeeper do?
A bookkeeper is essentially there to track and organize the various transactions within your business. However, they are not just holding onto store receipts of things bought and entering them in a spreadsheet by date. The process is a bit more complex.
They are there to help a business keep all of its financial records in order, certify that deductions are compliant, and prepare companies to survive meticulous audits. Typically, they are responsible for keeping up with and preparing four key financial statements. These include the income statement, balance sheet, cash flow statement, and statement of retained earnings.
Bookkeepers also do other important tasks that a business owner might not even be aware of.
For example in a therapist’s office, the therapist should focus on their clients and facilitate changes to help improve their client's way of life.
A therapist might not have the time or resources to understand or focus on the financial aspect of their business. They may also not have the background education to appropriately manage their books, tax, and accounting tasks. This likely indicates it is time to hire a bookkeeper.
A bookkeeper can step in to create efficient organization based on their experience the therapist does not have - and understandably so!
In the following article, we highlight some of the signs you will know it is time to hire a bookkeeper.
Sign 1: You do not keep up to date books
Maintaining books is not a luxury for a business, it is a necessity! There are many reasons a business owner may need financial statements. If you have failed to stay on top of your bookkeeping or haven’t done it all together, you risk financial challenges. Here are just a few reasons you will want to keep updated books and financial reports:
Taxes: You will need complete financial statements to submit tax payments. Failing to do so can cost you deductions and risk overstating or understating your income.
Audit: Whether it is an audit from the IRS or you are applying for funding, you may discover the need for an audit. In which case your bookkeeping will be evaluated on a deep level.
Loans: Depending on your business structure you may need financial statements when applying for a mortgage or simply to take out a loan for your business.
Decision Making: This is the most important reason to have updated financials. Having up to date books is essential to making informed decisions in your business.
Without updated books, you risk these main challenges. They may not be challenges you are concerned about on day 1 but over time they should certainly be on your mind.
Sign 2: You have trouble making financial decisions
As mentioned in our previous point, some of the biggest value in bookkeeping is the information it can provide. When you understand how to read your financial reports, they can be used to help you do things like:
Assess profitability
Know how much to pay a new employee
Determine how much to invest back into your business
Understand how much to pay yourself as the business owner
And so so much more!
The financial reports are going to be the starting point for understanding how to move forward with these decisions
SIGN 3: YOU ARE NOT CONFIDENT IN YOUR FINANCIAL REPORTS
While a bookkeeper can save you time and you understand financial reports are important, you equally want to make sure the information in your reports is accurate. This is about more than making sure everything is organized, technology plays a huge role here too.
If we consider our earlier example with the therapist, let’s say that same therapist is setting up her QuickBooks account. She connects her bank account and PayPal account. As revenue is received she marks it as income.
But wait! Is she marketing deposits into PayPal and her bank account as revenue? If someone were to pay via PayPal (and then it was marked in QuickBooks as revenue) then the deposit was sent to your bank account (and again marked in QuickBooks as revenue) then you have now recorded a deposit twice!
It is little errors like this that can dramatically affect your financial reports. Which can lead to you thinking:
Your business is doing more sales than it really is
There is more in the budget than there really is
You have a higher income than what there really is and report it on your tax return, causing you to pay more in taxes
The consequences trickle throughout all areas of your business and a seemingly small mistake can cost your business big bucks.
If you are interested in learning more about whether it is time to hire a bookkeeper, consider sending us a message. We want to ensure you begin working with one when you know the time is right and not a minute too late!
