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Sep 05, 2019 ConnectPay

When to Outsource Bookkeeping for Your Small Business | ConnectPay

When to Outsource Bookkeeping for Your Small Business | ConnectPay

When to Outsource Bookkeeping for Your Small Business

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Bottom lines, inventory, payday, new products. There are so many things that compete for attention in a business owner’s brain. Bookkeeping is one of those essentials that entrepreneurs struggle to find time for. It’s very rare that someone opens a business and says: The first thing I must do is hire a bookkeeper. More often, it’s a year (or two, or three) down the road that a startup founder decides it’s time to get their books organized and into professional hands.

That’s when they turn to someone like Lisa Tugal, founder and president of Bellwether Bookkeeping. We asked Tugal for a few tips on how small business owners can best handle bookkeeping themselves, and how to know when it’s time to hand things off to a pro.

New clients primarily come to Tugal at two points in the calendar year: around New Year’s, when everyone resolves that this is the year they’ll get organized; and at tax time, when people realize they just can’t get everything done themselves. The third most common impetus, Tugal says, is one that’s much closer to home: the business owner’s spouse. You know, the loving person who offered to take on the bookkeeping as the entrepreneur got things off the ground.

“It starts out great—‘Oh honey, I’ll do you books for you’”—says Tugal. But often the spouse can’t juggle working for free, managing a household, and doing their own job, too. As the business grows, they inevitably get overwhelmed. Tugal happily welcomes them in, no matter what state their financials are in.

“We’ve seen everything,” says Tugal, “including not one single stitch of data in a QuickBooks file.” Honestly, she says, unless they have an accounting background, a startup owner has probably been doing some of it wrong anyway. Chances are, your data file needs a good cleanup.

In addition to organizing your accounting, a good bookkeeper also supports better business management in the form of actual financial metrics. Many new entrepreneurs run their business by looking at their bank statements and asking: is there money in the account or not?

“So many business owners say ‘if I have money in the bank I must be doing okay, and if I don’t, I must have a problem,’” says Tugal. “It doesn’t give you a full picture.” Instead, you need to look at things like total gross revenue, net income, and profits and losses. Those numbers are a more accurate way to determine if you are succeeding or falling short of your business goals. If you don’t know all of these details, then it’s time to turn to a bookkeeper.

Another sign is when you find yourself running late on accounts receivables or invoicing.

“If I hire a tradesperson—a plumber, an electrician, a painter—to do work in my home and they don’t invoice me for six weeks, I know there’s a problem,” Tugal says. Pushing invoices out in a timely manner is a must, and unpaid invoices sitting in accounts receivable is bad, too. “Business owners shouldn’t be shy to remind customers that they owe money,” says Tugal. If you’re not organized enough to know which clients owe what and when, a bookkeeper can help.

For small business owners not quite ready to make the leap, Tugal has a few tips for keeping the books in order. The main thing, she says, is to separate your business books from your personal finances.

“So often,” she says, “we have clients come in and they are running the business through their own personal checking and credit cards, and they have to sit down with their bank statement and highlight business versus personal. That is not a good way to do business under any circumstances.”

Another key thing: make sure you’re managing your chart of accounts so your business financials are telling you what you need to know. If you sell multiple products and services—for example, water heaters and the services to maintain them—make sure they’re listed separately in your chart, so you can see whether one vertical is bringing in more money.

Those two things can help steer you in the right direction. But eventually, any business that continues to grow is going to need a good bookkeeper. Tugal sees part of her role as a guard dog on behalf of her clients—not only getting them organized, but picking up the phone to give them a heads up when she sees something like a month-over-month slip in a certain category.

“When you’re an entrepreneur, you’re flying on your own,” Tugal says. “There’s no possible way that everyone can know every single thing they need to know. That’s why it’s important to me that Bellwether functions as a business partner to these entrepreneurs. They may not have anyone else to lean on. I like to think that we are members of their business team in that way.”


Copyright 2019 ConnectPay

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Published by ConnectPay September 5, 2019