What is Bookkeeping?
The books of a business are all of the transactions that occur, including every sale and expense the company makes. A bookkeeper is someone that inputs (usually into some time of bookkeeping software) all of this information. When done correctly, the business owner can use the information in the company’s books to make financial decisions. The information in the books also is what is used to help secure loans, file taxes, and show the financial health of the company, so it is important to make sure the books are up to date and accurate.
Why should I hire an outside bookkeeper?
One of the main reasons that you should consider when deciding to hire an outside bookkeeper is the amount of time you are currently spending on maintaining your books. For companies with a small amount of transaction, this may not be a necessary expense.
Example 1: I own a sole proprietorship with no employees in a service industry and I only have a couple dozen expenses and invoices, I may only spend an hour a month doing bookkeeping.
Example 2: I sell a product online through an E-commerce store. I buy and sell around 200 products a month. This would take vastly more time to input because there would be at least 400 transactions (200 to record the purchase of the products and 200 when you sold them). I may find myself taking 8 hours a month to input these transactions
There is no magic number of hours that should require an outside bookkeeper. The biggest indicator is if keeping up with the books is taking time away from running the operational side of your business. If you find yourself getting bogged down with bookkeeping and it is resulting in you spending less time creating your revenue stream, hiring an outside bookkeeper is a great option.
Other reasons are that bookkeeping can become confusing. Not all business owners have a background in accounting. Without that background, bookkeeping can become difficult if you are in an industry that has complex transactions or accounting requirements. A bookkeeper will have that accounting background and can make sure the books are accurate and all of the accounting requirements are met.
There are many aspects of a business that can increase the complexity of a company’s books. Here are some of the most common aspects that can increase the amount of time needed to maintain the books.
- Payroll (having employees)
- Manufacturing a product
- Fixed assets (Cars, buildings, equipment, furniture)
Benefits of hiring an outside bookkeeper:
The largest benefit is that you can now spend the time you used to maintaining the books, by running your business. Bookkeepers have a specialized knowledge that allows them to make sure that the books are not only accurate, but that you (the business owner) can rely on the information and assist you in making financial decisions. Bookkeepers can help automate the process to increase efficiency. While paying someone to do the bookkeeping will be an additional expense, there are non-monetary benefits like peace of mind and stress release that can help make this change vastly beneficial.
The SmallBizRising Blog is designed to be an educational content hub pulling information, best practices and practical advice for the small business owner and features topics including accounting, marketing, technology and more. Be sure to subscribe to stay up to date with new content as it is posted. The blog was created by The Neat Company and receives contributed content from a group of contributing companies that provide technology, services and solutions to small businesses.