Your business operations are running smoothly, but your monthly transactions seem to be swelling and you are unable to keep up. Initially, it was easy enough to keep the financial books without needing a bookkeeper. Now your business is growing and you are finding that your time is split across a long list of tasks. The level of stress is increasing. It becomes obvious that a decision needs to be made to bring in some bookkeeping support.
New year, new outlook!
The right time to invest in a bookkeeper for your business depends on multiple factors:
- the amount of time you have to spare,
- the size of your business,
- the volume of your monthly transactions,
- how comfortable you are maintaining the books (with minimal to no mistakes), and
- how much you can afford to invest in bookkeeping support.
To help you decide when to hire a bookkeeper, let’s review two (2) options to get your books done each month, and analyze the pros and cons of each method.
DIY Bookkeeping
Starting out, doing the books yourself can be a 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 decided to start out with single-entry bookkeeping vs double-entry bookkeeping. It works best if the company is relatively small with a low volume of transactions. Single-entry bookkeeping is much like keeping your check register. You record transactions as you pay bills and make deposits into your company account
Tracking your expenditures and managing your books using basic accounting software or even a simple spreadsheet will help keep overhead cost to a minimum.
An advantage of DIY bookkeeping during the early stages of the business’s growth is that you build an innate understanding of where your business is spending money. You learn if/how seasonality and other trends affect your business’s financial progress.
Biggest and most costly disadvantage is that if you are less experienced in keeping the books and mistakes occur (i.e. incorrectly reporting revenue, not tracking the right expenses, or incorrectly categorizing), the DIY work will leave the books in a huge mess! The financials begin to be inaccurate and the data will mean nothing. Expensive mistakes—forgetting to track tax-deductible expenses, incorrectly categorizing income, and recording a loan or liability wrong—are easy to make when you become too busy and/or you hurry through the monthly bookkeeping tasks just to complete them.
The biggest question: is the time spent DIY bookkeeping a wise, efficient, and productive use of YOUR time?
Outsourced Bookkeeping
As your business expands, you’ll reach a point where the sheer volume of your monthly bookkeeping isn’t feasible or accurate to do on your own anymore.
This is where outsourcing the task to a bookkeeping firm proves most advantageous. It’s common for companies see their costs decrease after they hire bookkeepers. It is more cost-effective to pay a knowledgeable and experienced bookkeeper than it is to occupy your productive, more revenue generating hours.
Outsourcing the record keeping of your books to a firm specialized in this service is a good option when:
- You don’t have the time or tolerance to post the numerous daily transactions and monthly, reconcile various general ledger accounts.
- You don’t have the budget to hire an in-house accounting position.
The best advice is to find a reliable bookkeeper who has experience and know-how servicing clients in your industry and is proficient with accounting software. Most importantly you want a bookkeeper who regulary communicates with you and who understands and values you, your business, and what your goals are.
The #1 reason why a small business fails is due to finances and it’s not necessarily because they don’t make enough money, but because of poor financial management.
If you are in need of some bookkeeping support, please reach out to Lean Ledgers for the concise, lean, efficient, accurate, and necessary (C.L.E.A.N.) services require and deserve.
