Every company, regardless of size, has a need to manage their finances. Larger companies may have an accounting department that works with an in-house accountant. This department will take care of daily, monthly, quarterly, yearly transactions, and reporting. The owner may be free to guide the company, using the data that is provided to them.
A small business owner, however, is still required to manage their finances and reporting but may be working with less resources. The idea of having an in-house accounting department is very attractive to the small business owner, but may not be economically feasible. So how does a small business owner handle this responsibility? Typically the small business owner acts as the bookkeeper and tax preparer. This is often a temporary solution, but not sustainable in the long run.
When should you hire a bookkeeper?
Many small business owners start with the goal of producing the best product or service. Bookkeeping is often an afterthought or a nuisance. They may launch their businesses with little thought put towards who will keep their financial books or file their taxes. Often times they sign on with a SaaS company like Xero, Freshbooks or Quickbooks Online with the intention of managing their daily transactions. While these programs appear easy to use, the small business owner can end up struggling or even failing because they may not have accounting experience to back up their good intentions.
It’s estimated that the average small business owner who does his or her own books spends 10 hours a week on the task. This is time that is taken away from the actual business and may not generate new revenue for the company. It is essential that the small business owner ask themselves the following questions prior to performing their own bookkeeping:
- Do I have the skills necessary to establish a bookkeeping system on my own?
- Do I have the time to maintain the bookkeeping system on my own?
- Is my time best spent managing the bookkeeping system?
- Am I able to keep up to date on new tax laws in order to avoid legal trouble?
If you find yourself answering ‘no’ or even ‘not sure’ to these questions, it might be wise to investigate using a professional bookkeeper from the outset of your new business.
How will your bookkeeper will save you money?
Typically, in-house bookkeepers and outsourced accountants are much more expensive than an outsourced bookkeeper. When you hire in-house it is important to remember that you are responsible for payroll taxes and benefit programs. A typical in-house full charge bookkeeper commands a salary of $40,000 per year. For a small business owner, this may be a difficult pill to swallow. Hiring an outsourced bookkeeper is usually 1/4 of this cost and does not come with the obligation to pay payroll taxes and benefit programs.
In addition to this, a qualified outsourced bookkeeper should be an expert in their field. This means that your finances are always managed by someone who knows how changes in tax laws and regulations will affect your company. As a small business owner it is impossible to run every aspect of your business. Once you start your business, you should hand over the bookkeeping to a professional who has your best interests in mind. It is essential to form a partnership with an expert who will guide you in the right direction.
Are you ready to outsource? Let us take this off your plate so you can focus on the tasks that will propel your company forward. We look forward to serving you!
Article by Cristina Garza for Accounting Prose
