In the early stages of running a business, it’s easy to get away with a hobbled together, spreadsheet-based bookkeeping system. But once your operation starts to expands, the financials tend to get more complicated or you have less time to manage all the administrative stuff. At that growing pain point, you’ll realize you’re in over your head and that it’s time to hire a professional bookkeeper.
There no set point that determines exactly when you should hire a bookkeeper. But the following symptoms will present themselves, making it more obvious that it’s time for you to bring on professional help.
You’re Always Behind on Your Bookkeeping
You’re always behind on your bookkeeping, so you never actually know the state of your business finances. It’s stressful and mildly infuriating that you don’t have this information. You’re discouraged from getting caught up because it feels like an impossible task. And if you’re never known the beautiful glory of not being behind, you can’t truly understand why this is important.
With proper bookkeeping, you know how much money your business made last month and all the months before it. You know how much your business spent and if you’re even making a profit. With a great bookkeeper, you receive your monthly financial reports on a regular basis.
Being and staying caught up on bookkeeping is literally a whole new world of clarity and understanding.
You’re Freaking Out At Tax Time
Tax season doesn’t have to be fraught with multiple, confused emails fired off from you to your accountant at 2 am. It also doesn’t have to be you printing out 200 pages of bank statements, using six different color highlighters and a calculator to figure out your profit and loss statement on your office floor. I promise you, it doesn’t have to be this way.
In fact, it should be a pretty smooth process. I know your accountant wants that too. Here’s how it should go down:
If you’re like most businesses, your accounting period will close along with the calendar year on December 31 and you close out your bookkeeping for the prior year sometime in January.
You send your financial reports and all your other tax documents to your accountant and they file your taxes for you.
If you owe taxes, you already knew you would because you were keeping your books all year long and you saved for taxes as you earned income. Or you get a refund, yay!
Tax season isn’t stressful if you go into it being prepared. And being prepared is something totally within your control.
Your Accountant Does Your Bookkeeping
You might think you’re a genius for forgoing monthly bookkeeping and having your accountant haphazardly put together your books right before tax time, but here are the pitfalls of this strategy:
You aren’t watching your business finances month to month, so any business decisions you’re making aren’t rooted in actual data. For example, can you really afford to hire someone? Or does it make sense to stop offering a particular service because it’s not as profitable as other services?
You’re probably spending more having your accountant do your bookkeeping since accountants tend to charge more per hour.
Your bookkeeping probably won’t be done in as much detail. This is fine, until it isn’t. Meaning, sometimes when you realize you need the data, you realize you don’t have it - like during a small business loan application or when you’re trying to understand the value of your business because you’re going to bring on a partner or investors.
What To Look For
So now that you know you need a bookkeeper, what are the qualities you should look for in a bookkeeper or bookkeeping firm?
A good bookkeeper can effectively communicate with your accountant and you. They should be able to explain your financials to you in plain language.
Accurate and Timely Delivery
You should be receiving your financial reports in a timely fashion so you can use the data to help you make decisions. A timely delivery is receiving your financial reports no more than two weeks after the close of the month. If you don’t receive reports for months at a time, you’re flying blind.
Your bookkeeper should work with you to make sure your reporting and categorization is accurate. They should make sure your bank balances match and they’re taking your accountants advice into consideration.
When it’s time for you to upgrade your from DIY to a professional bookkeeping solution, check out our guide to help you understand your options.