When a Small Business Should Hire a Bookkeeper
May 3, 2017
Bench is an online bookkeeping service for small businesses
When you’re just starting out in business and your monthly transactions are minimal, it’s easy enough to handle the books yourself. But as your business grows and your time is split across a long list of To Dos, you’ll need to decide when to bring on additional bookkeeping support.
When and how you engage the services of a bookkeeper will depend on how much time you have to spare, the size of your business, the volume of your monthly transactions, and how comfortable you are overseeing the books (and not making mistakes).
How much you can afford to invest in bookkeeping support will also determine which option works for your needs.
To help you decide when to hire a bookkeeper, let’s run through all of the ways you can get your books done each month, and investigate the pros and cons of each method.
When your business is just starting out, doing the books yourself is a smart, cost-effective solution. The DIY method is generally the best approach to bookkeeping when:
• Your business uses cash basis rather than accrual accounting; cash basis is simpler
• You either have experience with bookkeeping, or you’re willing to learn quickly
• You have the time and money to secure your financial data against threats
Tracking your expenditure and managing your books using basic accounting software or even a simple spreadsheet will help keep overhead cost to a minimum.
But the biggest advantage of self-managing the books during the early stages of your business’s growth is that you’ll build an innate understanding of where your business is spending money, and learn how seasonality and other trends affect your business’s financial progress.
The catch is that if you don’t know what you’re doing and you make a mistake (by incorrectly reporting revenue, not tracking the right expenses, or incorrectly categorizing expenses) DIY bookkeeping can end up costing you.
Bench is offering a webinar for clients of CDFIs who want to learn more about bookkeeping. They can sign up for Bench’s webinar, Bookkeeping 101 for Small Businesses. We’ll show them the right way to manage their books, keep records, and play by the rules come tax time.
Outsource Your Bookkeeping
As your business grows, you’ll reach a point where time constraints, or the sheer volume of your monthly bookkeeping, make it no longer feasible to do the books yourself.
This is when outsourcing the task to an online bookkeeper or online bookkeeping service is a good idea. It’s common for companies see their costs decrease after they hire bookkeepers; the cost benefit is such that it’s more effective to pay a bookkeeper or bookkeeping service than it is to occupy your personal working hours with bookkeeping tasks.
Outsourcing your books to a firm or an online service is a good option when:
• You don’t have the time to self-manage your books
• You don’t have the budget to hire an in-house bookkeeper
So, who should you outsource to? You have a few options:
1.Online Bookkeeping Service
An online bookkeeping service typically marries a cloud-based software interface with the assistance of professional bookkeepers who do your bookkeeping for you (in the interest of full disclosure, Bench is an online bookkeeping service). Often this option is less expensive than hiring a freelancer or a firm, and because it’s a monthly online subscription, you don’t have to worry about dealing with the same paperwork you’d need to hire independent contractors and employees. Generally, online bookkeeping services are a good option if you’re ready to move beyond DIY, you’re comfortable with secure cloud accounting, and you want to be able to chat with your bookkeeper and monitor your finances closely from your computer or smart device at any time.
2. Freelance Bookkeeper
A freelance bookkeeper is typically engaged with either an hourly or a fixed rate. They may work remotely or online. Local freelancers can visit your office to deal with paperwork in person. They can be found online through freelance sites such as Upwork, or in local business listings.
3. Local Bookkeeping Firm
Bookkeeping firms are typically more expensive than freelancers or online services. They may guarantee their services, including a certain amount of minimum experience among their staff. Bookkeeping firms can also be based remotely, or locally.
Your best bet is to find a reliable bookkeeping firm that has prior experience servicing clients in your niche. A firm that only has experience doing the books for landscaping companies, for instance, may have difficulty transitioning to bookkeeping for ecommerce clients.
Prices will vary for each of these options listed above, so shop around and compare packages.
Also remember that f you choose to use an outsourced bookkeeping option, you should never hand over control of your treasury functions. That is, when it comes to investing, signing checks, or making online payments or wire transfers, you should be the sole authority.
Hire an In-House Bookkeeper
If your business grows so large that its bookkeeping needs are more than a freelance bookkeeper can handle, you’re probably ready to have a bookkeeper to join your staff. This can be on either a full-time or part-time basis.
According to Entrepreneur.com, hiring an in-house bookkeeper is a smart approach when:
• Your annual revenue exceeds $1 million
• You have more than 30 employees
You should also do the math and confirm that hiring a full-time bookkeeper is within your means. In 2012, projected annual earnings for bookkeepers ranged anywhere from $35,700 to $50,050.
If you want in-house support, but your business’s bookkeeping needs don’t quite warrant the attention of a full-time bookkeeper, a good approach is to bring someone on part-time, and increase their hours to full-time when the workload justifies it. Some business owners combine part-time bookkeeping with an administrative role to create one full-time position.
Even if you’re one of those rare business owners who enjoys doing their books, focusing on bookkeeping may not always be the most strategic use of your time. With bookkeeping stricken from your to-do list, you’ll have more time to focus on the big picture and your company’s growth.
Whichever option you choose, remember: even if you decide to hire a pro to handle the books, you should always maintain some level of involvement with them. Read your monthly reports when they come in, be aware of how money is flowing into and out of your business, and keep up-to-date on cash flow, seasonality, and other trends that affect your finances. Manage that, and you’ll have a much better shot at making moves that help your business succeed.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.