Entrepreneurs thrive on a DIY mentality: Do everything you can yourself and don't pay for anything new until you have absolutely have to. It's especially difficult to justify hiring financial help like a bookkeeper.
With user-friendly software such as QuickBooks available, many business owners feel they should be able to do keep their records on their own, even as they wrestle with finding the time and wonder if they're doing things correctly.
Deciding about "hiring a bookkeeper is something I struggle with all the time," says Randy Mitchelson, owner of National Web Leads, an Internet marketing company in Estero, Fla. While he finds basic accounting easy to do, it takes him away from working on his business. Meanwhile, his accounting and tax planning have become only more complicated in the six years since he founded his business.
Entrepreneurs who hire accounting help usually discover they weren't doing nearly as well on their own as they thought they were.
Zalmi Duchman, chief executive of The Fresh Diet, a meal-delivery company based in Miami, lasted five years without a bookkeeper then hired one three months ago. The new employee cleaned up records that incorrectly mingled expenses and assets, reviewed employee purchases for duplications, and took over the mundane but critical task of paying bills. Duchman estimates his company is saving $500 to $1,000 in late fees every quarter. "I definitely have been able to make better and more educated decisions," he says.
So what are a small-business owner's options for professional help with financial tasks? Here is a primer:
Do I Need a Bookkeeper or an Accountant?
Actually it's a trick question. You may need both.
Aaron Sylvan, a serial entrepreneur who lives in New York, compares the situation to needing to hire both a carpenter and an architect when building a house.
An accountant can analyze the big picture of your financial situation and offer strategic advice. He or she produces key financial documents, such as a profit-and-loss statement, if needed, and files a company's taxes.
After tax season is over, an accountant can also act as an outsourced chief financial officer, advising an entrepreneur on financial strategies, such as whether to secure a line of credit against receivables when introducing new products.
In contrast, a bookkeeper does the day-to-day hands-on tasks: making sure new employees file all the right paperwork for the company's payroll, submitting invoices (promptly) and following up on them, and paying the bills. The bookkeeper also tracks company expenses and can assure that every cost has been entered -- and recorded correctly -- into software like QuickBooks so that the business is ready for tax time along with filing any other reporting to, say, creditors or investors.
"I don't keep receipts; they're a pain," says Sylvan, who runs Sylvan Social Technology, an ecommerce-services company. "Every month I get a bank statement with a gazillion transactions," such as taxi rides, meals, conferences and other expenses he has placed on his company's debit card.
His bookkeeper spends a few hours a week sorting it all out. As a result, Sylvan has a better idea about how his expenditures stack up against his budget. He knows he won't bill clients incorrectly or miss important payments.
"Knowledge is power," even when it comes to the small details, Sylvan says. "If you don't have a bookkeeper, you're probably not being as strategic as you could be in how you spend your money."
When to Bring in a Bookkeeper
In his running a half-dozen businesses the past 15 years, Sylvan has typically hired a bookkeeper for a few hours a week within a few months after starting a new venture. For the first six to nine months, he's usually too busy to focus much on recordkeeping, then "things begin to stabilize," he says. "Then you can see trends and you can start to think strategically about where your money is going and where you can save." And this is when a bookkeeper becomes valuable. Since Sylvan has fewer than a dozen employees at each new company, the bookkeeping takes about one day a month, he says.
The rates for hiring a bookkeeper on a part-time basis in the U.S. can range from $15 to $60 an hour, depending on location, the workload and whether work is done at the company's office or from home.
Sylvan typically sees his accountant once a year, at tax time. But business owners requiring capital or frequently negotiating credit with a bank are likely to contact their accountants more often.
When to Hire a Staff Accountant or Bookkeeper
Many small entrepreneurs can probably stick to outsourcing accounting or bookkeeping services for quite some time. The typical service business can often outsource its chief financial officer tasks and bookkeeping until its revenues rises well above the $1 million mark -- or until it has about 30 employees. Until then, most businesses usually don't have enough work to keep a full-timer busy every day.
It's time to hire full-time help, though, when you're calling your accountant often enough that you wish he or she were in the office all the time. Bring in a full-time bookkeeper when your part-timer is spending two or three full days in the office and still falling behind.
Most new business owners find a staffing solution somewhere along the continuum that ranges from trying to go it alone and paying for full-time help.
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Comments:
Well for those who are really interested in Bookkeeper or Accountant, they should required to be update with the current information and technology. I usually read blogs which help me to understand better all things which are difficult.
It is difficult to get a reliable help on accounting. And even if you do find someone good, they are going to cost much more than $10 an hour. That's why it's always better to outsource this service. It is possible to find a bookkeeper for less than $10 per hour if you hire someone from lower income country like the Philippines and India. It is scary to hire someone offshore but it’s worth it since there is a good chance you’ll be able to hire an accountant who is competent, willing to work hard, who’s got the brains and is ready to learn new things. I've bumped into an awesome blog that have some great tips on looking for the best bookkeeper possible. You might find it helpful. https://www.staff.com/blog/accountant-at-6-dollars-an-hour/
Have to say that some of the things in this article is a little dated. Truth is, the accounting landscape is shifting quickly in the last few years thanks to technology changes as well as paradigm shifts among entrepreneurs and the new generation accountants. Outsourced accounting department is now a feasible choice for companies between the $1 to $10 million mark (sometimes bigger) when they are growing out of the DIY or part time bookkeeper mode. Cloud technology today also facilitates the outsourcing of an entire department that is completely off-site but still connected to the business on a real time basis. Pretty soon, the idea of having your own in-house accounting department will be seen as obsolete as they traditionally have provided less than desirable value to the business. Outsourced accounting is being redefined. As are the role of bookkeeper in accounting which was primarily invented by QB some 20/30 years ago - technicians who are tasked with inputting numbers without putting much thoughts into it. Their role are being changed/shifted by technology that are automating many of the pure data entry work - leaving accountants to make judgement calls and facilitate in the processing of the data. Just my 2 cents.
Another reason to use these services is they are fairly accurate. Many of these services are accurate to the point that an owner will not have to worry about an audit. However, the owner does need to ensure that all the figures are put into the system properly to ensure that the service remains accurate.
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This is quite comprehensive and should be helpful to small businesses. I want to add one thing. For those businesses who really can't afford to hire help, I recommend you find the funds for at least 1 hour of consultation with a CPA at least once per year. This is especially important if you are new to the business field. There are many compliance issues with the IRS, states, and local governments, which you won't know just because you have started a business. The CPA will be able to tell what is required, and this advice can save you a bundle. Penalties for non compliance can be very high, and governments do not accept the excuse that you did not know. One mistake that many new business owners make is to think that their company's tax return, like the individual return, is due April 15th. By the time they get around to it they have incurred late filing fees since that return was due march 15th.
As a CPA I find that my clients run into trouble when they don't know what they don't know. Sometimes it can be costly. We are in an information age and the more information at your finger tips the more informed your decision making is.
Great post! I think it's also worth mentioning that a good accountant or bookkeeper is an investment, and can actually save a business owner a good deal of money over time. Thanks! - JB
As a professional bookkeeper/QuickBooks consultant, this is a very ambiguous take on things that a small business owner can actually seem to "skip" actually having to keep copies of receipts, keep it down to just a few hours a month (which is a fallacy for a number of small businesses well below the financial and employee benchmarks noted above), as well as the the price range. You get what you pay for, if you're paying next to nothing, either in the hourly rate or amount of time someone is spending on the business financials. This is a reason why I walk away from potential clients who feel that they can dictate how much time and the price it should take me to handle their work before I even see it. Because I've worked with clients who have been audited before, I make sure they keep copies of their receipts, because just using statements is not an acceptable form of documentation during an audit. Nor is shoddy bookkeeping because the client was too cheap to keep it up in an orderly and easily readable format during the period(s) in question. Most all business owners feel they have a valid price point for their service/product they're selling, so why short-change who handles the financials since without that information, you have no business?
Hire someone who can do both... it will save you money because you don't have to hire two people
Your article mentions "user-friendly" software such as QuickBooks for a DIY approach to business bookkeeping. Unfortunately, many businesses head down the wrong path almost instantly by thinking just that - that they can (or should) do their own books. As I've seen it over the last 25 years, QuickBooks is quite "user-friendly" to those who have some background or training in bookkeeping or accounting. It works very well for them. For many others who don't have that type of training, QuickBooks can be a headache-inducing experience. It is often set up incorrectly from the start - and these errors can easily snowball into hefty fees from the outside accountant to fix them at year-end. After all, when does an "easy-step interview" to get started with something contain over 20 questions where many of them talk about mind-numbing concepts like fiscal year, chart of accounts and form of organization? Even worse, within the DIY bookkeeping concept is the DIY payroll idea. The stakes get higher here when mistakes are made - then the business has taxing agencies politely reminding them of penalties and interest due them because of mistakes made. They don't often accept an "I didn't know" as a valid excuse. Smart businesses have a good bookkeeper welded into their business processes from the beginning and they opt for getting help to get their QuickBooks or other accounting software set up properly from the outset. These actions pay huge dividends for them on an ongoing basis - they become proactive in managing their business finances instead of reacting to the problems caused by using it incorrectly. Bad books = bad business decisions.
Thanks for mentioning QuickBooks’ ease-of-use. My name is Ian Vacin, and I lead the QuickBooks ProAdvisor team at Intuit (maker of QuickBooks). I’d like to point out our network of 45,000 ProAdvisors and 15,000 Certified QuickBooks ProAdvisors as a resource for small business owners, to help them with QuickBooks setup, training, reporting and customization. Our group of Certified QuickBooks ProAdvisors are independent CPAs, accountants, bookkeepers, computer consultants and trainers who have completed a comprehensive QuickBooks curriculum and have passed a rigorous exam developed by Intuit. Certified QuickBooks ProAdvisors understand the challenges your readers face and can offer guidance on everything from complex accounting and payroll questions to mastering advanced features of QuickBooks. In fact, many QuickBooks customers say their QuickBooks use is enhanced and their business decisions are better when they work closely with a Certified QuickBooks ProAdvisor. If your readers are interested in learning more or finding a local QuickBooks expert, they can visit www.FindAProAdvisor.com and answer a few basic questions that quickly search our database of Certified QuickBooks ProAdvisors for locality, expertise, certifications, and ratings by clients. Regards, Ian Vacin Leader, QuickBooks ProAdvisor Program Intuit
Always raises the question: Do you get what you pay for? It's tough to step aside from the work but you need to see what your time is worth. If you can generate 3x the revenue it's costing you to pay the bookkeeper while he/she is present then it should be a no-brainer!
Thanks Judy! Ironically, we had a meeting with our accountant today and he has someone in-house who we decided will come to our office for a few hours a week. This should be fine for now and we're even more excited that he already works with our accountant. Stars aligned!
Hi Rhea! Some great places to go are your local Chamber, CPA firms, Twitter, or by way of searching blog post based on topics that interest you. Example, do you have questions about how to pay yourself as a business owner or how to handle Owner Draws? Google search your questions and I'm sure you'll find responses from US based bookkeeping firms or CPAs. I like to tell clients or prospects that it's important to take time to evaluate exactly what you need, your personality type and what is important to you. Do you care if they are not in the US? Do you need someone in your office or will remote work for you? Do you need someone that has extensive Quickbooks experience or are you not quite yet at Quickbooks and need someone who can help you find a program that best fits your needs? Hope this helps!
Craigslist is a great resource, but we've found that many of our best clients haven't come from them. The best way to fine a bookkeeper that works with your style and needs is to go where the best go ;-). For instance, Mercantile Circle, your business colleagues, networking groups, you can even try teaspiller .com. Another awesome way to find someone that is affordable yet effective is to go to a CPA firm! Not that you will hire the CPA firm (if cost is an issue) but many of them associate with freelance bookkeepers or bookkeeping firms such as ours and outsource their bookkeeping needs to these companies. We're US based and focus on helping micro business owners find solutions they need. If we can be of any help, please let us know.
Great post! It's very important to find a bookkeeper that fits your personality and style as a business owner. Example, while you may not enjoy your bookkeeping, if you are a very hands on, detailed business owner, then you need a bookkeeper who has exceptional communication (that should be standard) and one that is extremely proactive and that enjoys providing weekly updates. We have some clients who appreciate the fact that we offer them a Financial Summary report that gives them a narrative overview of their numbers versus just handing over financial statements. Outsourcing could be good, but having an accountant that is in your city or maybe even in-house may be good. If you are the type of business owner who wants nothing to do with the books, then you STILL need a great communicator but you may be best fit outsourcing your bookkeeping to a firm who is capable to handling your books with little involvement from you. They should still be proactive :-)
Hi Rhea! Very timely indeed. I've found that clients of ours (Your Simple Bookkeeper) find our company by way of searching blogs post on topics that interest the business owner, of course direct referrals from business colleagues, twitter, mercantile circle and networking groups. For example, our newest client from Louisiana found us by way of a blog post we did in 2010 on Owner's Draw for Outright.com. They were searching for help with understanding Owner's Draw and found our post to be the most simplest and thorough explanation they've ever seen. That made them call us. If you need help identifying a bookkeeper, please let me know I can be of help. We focus on helping business owners find the right solutions THEY need so feel free to schedule an appointment (no obligation and of course free) at http://yoursimplebookappt.setster.comBased on what your needs are we can either help you find a bookkeeper that best fits your needs (do you need to have someone in-house or is outsourcing a better fit) or even see if our services meet your current needs.
Hello Judy and Rhea, I can understand the Craigslist side, I have seen both good and bad come from there. But in terms of looking for part-time accounting and finance, well I do not want to be a self promoter here, but that is what we do at CFO Xchange. The idea is not new by any means, but if you search for "fractal accounting or CFO" you can usually find great quality accounting and bookkeeping part-time help. Just saying... Thanks.
Hello from Montana, I advertised on Craig's list, but wanted someone that would be around for a long time. Have used too many interns set up files and then leave and no one can figure out what they did. Judy H. Wright
What timely advice. Just interviewed two local women today. One was from Craig's List and one from networking. I checked references and web sites. Choose the one from networking. She will be around a lot longer. Judy H. Wright http://www.bouncebackperson.com
This article is spot on! Working as a business bookkeeper for Balance Financial, I can say that there is definitely a fine line between when a business can do their own books in house and needing to outsource the task. A lot of our business clients do a good job trying to keep up themselves, but as their businesses grow, they aren’t able to give the attention deserved to the chore. Most of our clients found it difficult to have a complete and accurate grasp on all aspects of their short and long-term finances. As Duchman estimated, his company is saving $500-$1000 in late fees each quarter. This demonstrates huge value as his company is able to save a few thousand dollars each year after making the choice to hire a bookkeeper. By working with a professional bookkeeper as well as an accountant who can oversee taxes and reporting, a company can finally feel confident that their finances are being recorded with precision while still saving money in the long run. To learn more about our bookkeeping services for personal and business books, go to www.balancefinancial.com. -Carrie Balance Financial, Business Account Manager
Do you have any advice on how to locate a part-time staff accountant or bookkeeper? We know we need to hire one, but we're not sure what the best way to do that is! Really informative and timely read, thank you.
Great Post Here! We have seen this quite a bit that when we take on a new client they very rarely are doing as well as they thought they were, and even in the case of gaining a client from a CPA firm. One point not made here is do your research, there are a ton of CPAs and Bookkeepers out there, but who is really handling your finances??? Usually just a minimum wage clerk. This may be fine, but then again it may not. Thanks for this post, Jon