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Oct 25, 2023 Drew Schildwachter

ANSWERED: Does my Small Business Need a Bookkeeper?

ANSWERED: Does my Small Business Need a Bookkeeper?

You’ve put your heart and soul into building and managing your small business. Amid all the late nights you’ve spent burning the midnight oil to keep things organized and afloat, you may have found yourself wondering: Does my small business need a bookkeeper?

Imagine a life where you get to focus all your energy on the part of your business you love the most — the reason you started it in the first place! Instead of drowning in invoices and payroll reports, you can focus on growing your business, providing your customers with an incredible product or service, and taking your business to the next level. 

That dream can become your reality!

In this post, we’ll discuss the reasons you may choose to hire a bookkeeper for your small business. We’ll also cover the costs of hiring a bookkeeper, compare it with what it might be like to hire a CPA instead, and more.

Does my Small Business Need a Bookkeeper?

The short, and perhaps frustrating, answer is: It depends.

First, what is bookkeeping? It’s the day-to-day tasks related to tracking and organizing your financial transactions. From recording sales and expenses to reconciling accounts, tracking payroll and taxes owed, and producing financial statements, bookkeeping quickly becomes a full-time job!

Bookkeepers with formal training in bookkeeping or accounting take care of these crucial financial tasks on an ongoing basis. You can hire a bookkeeper to join your in-house team or hire externally.

When you first open your business, perhaps with low transaction volumes and manageable processes, you might get away with handling bookkeeping yourself using basic accounting software. But as you grow, it can become overwhelming.

Related: When to Outsource Bookkeeping for Your Small Business

It’s easy for errors, omissions, and disorganization to creep in. Without proper oversight, finances can become a tangled mess, important tax filings and payments could be missed, and compliance issues could jeopardize your entire business.

At some point, you’ll want to bring in a bookkeeper.

What Does a Bookkeeper Do?

Bookkeepers create foundation systems for financial management and reporting.

  • Day-to-day financial transactions: They take on activities like recording sales, tracking invoices, processing bills and payments, and documenting all income and expenses.
  • Reconcile accounts: Bookkeepers compare internal company records to bank statements and credit card statements. This catches any discrepancies or issues.
  • Financial statements: They’ll put together the income statement, balance sheet, cash flow statement, and other reports that summarize finances.
  • Ensure compliance: A bookkeeper ensures that all financial reporting and payments comply with federal, state, and local regulations. This includes payroll taxes, sales taxes, income taxes, and other filings.
  • Manage aspects of payroll: Some bookkeepers will calculate pay and deductions for employees as well as submit payroll tax payments.
  • Oversee accounts: Bookkeepers track who the company owes money to and who owes money to the company. This includes sending invoices and following up on past-due accounts.

Benefits of Having a Bookkeeper for Your Small Business

Bringing on a bookkeeper can bring various advantages.

With a skilled bookkeeper managing your finances, you can trust that they’ll accurately record transactions, reconcile accounts, and that reports reflect reality. It’s unlikely they’ll make errors. With the time you get back, you can focus your time on sales, operations, customer service, and growing your business instead of becoming buried in administrative finances.

They also see the bigger picture. Bookkeepers can provide oversight and accountability — catching errors and preventing threats like fraud. They’ll also make sure all taxes and regulatory filings happen on time and accurately. This prevents tax penalties and gives you peace of mind.

Finally, you can align on the depth of reporting you need. Bookkeepers can create reports on profitability, liquidity, cash flow, debt levels, and other key indicators — giving you full visibility into your company’s financial health.

Signs You Need a Bookkeeper

There will be telltale signs that it’s time to hand over financial management to a bookkeeper. 

Do you find yourself searching in vain for important financial records? You might have a messy pile of receipts and struggle to make heads or tails of your accounts. A bookkeeper can bring order and structure.

Likewise, managing billing, payments, and payroll might be overwhelming. Invoices, vendor bills, and payroll easily slip through the cracks, creating compliance issues and hurting cash flow. Also, do you struggle to understand financial statements? Bookkeepers can assist with all of these.

Related: How CPAs Can Help Clients with Payroll Compliance in 2023

Finally, making accounting mistakes and missing tax deadlines and payments can have dire consequences for your business. Minor slip-ups turn into major problems, and late filings can result in penalties and interest charges.

If these issues resonate, it’s a sign you could benefit from handing over the financial reins to a professional.

How to Find the Right Bookkeeper

Finding the right person to handle your business’ finances is key.

  • Budget: Define your needs and budget. Determine the scope of work and the hours your require. Every business is different, and you only want to pay for the services you need. Bookkeepers with more experience will rightly charge more, but you can still set realistic expectations.
  • Reputation: Ask for referrals from your trusted network and check sites like Yelp to find reputable bookkeepers in your local area.
  • Credentials: Do your due diligence and look for credentials and experience. Look for 1-2 years of recent bookkeeping experience and formal training.
  • References: Check references carefully — is their work accurate and timely, and do they meet compliance standards?
  • Communication: Look for strong communication skills. Bookkeepers should be responsive, willing to explain financial reports, and collaborate with you.
  • Needs: Consider whether you need a bookkeeper to be local, or if you’re OK with a remote option. Likewise, do you need someone 20 hours a week, or would you like them to work on demand? It all depends on the complexity of your business.

Vetting thoroughly for qualifications and fit, as well as monitoring work closely at the beginning, sets your business up for a great ongoing finance relationship.

The Cost of a Bookkeeper for Small Business

Hourly rates can range from $15-$100+ per hour. Why the big gap? Entry-level bookkeepers cost on the lower end of that range — perhaps they’re trying to build up clientele — while experienced bookkeepers charge higher rates. Location can also affect prices.

The specific rates you pay will be based on qualifications, scope of work, and local labor costs. Some bookkeepers work on a project-by-project basis and charge fixed monthly fees for clearly defined workloads. Others charge hourly.

Experienced bookkeepers require an investment, but they pay off in terms of time savings, accuracy, financial control, and compliance. For cash-strapped small business owners, viewing it as a fixed operating cost with clear benefits can make the decision easier.

What About A CPA?

While a bookkeeper handles day-to-day finances, you may also benefit from the services of a CPA (Certified Public Accountant) for your small business. Their role is to oversee and advise financial processes. In addition to advising on best practices, they can ensure that your bookkeeping, accounting, and financial reporting are accurate.

Key Differences:

A bookkeeper handles the daily financial transactions and record-keeping of the business. They provide regular financial statements. A CPA typically provides a higher-level review of finances and advises on taxes and compliance.

Think of it as the bookkeeper maintaining the financial books throughout the year, whereas the CPA comes in to audit and analyze the records prepared by the bookkeeper and leverage that information for tax filings and strategic business accounting advice.

Many small businesses have a bookkeeper handle their daily finances and work with a CPA annually for tax preparation and accounting guidance. The combination provides both day-to-day financial management and high-level financial strategy.

Related: Enrolled Agent vs. CPA: Understanding the Key Differences for Your Tax Needs

Do You Need a Bookkeeper?

A bookkeeper can provide ongoing financial tracking, reporting, and compliance activities. There is some overlap between CPAs and other professionals, but a CPA generally operates at a higher strategic level to audit finances and provide tax advice.

Small businesses typically benefit from having both a bookkeeper and a CPA for day-to-day financial management. The bookkeeper provides regular oversight and financial statements. CPAs use this information for tax filings and accounting recommendations.

Every small business owner needs the insight and confidence that this financial team provides. A proper financial process, reporting, and strategy free up your time to focus on growing your business.

At ConnectPay, we work with CPAs to give small businesses the help they need. We refer small business owners to a trusted CPA within our connected network model, and CPAs can get to work on their taxes!

Do you need more help? We have two great next steps! First, check out our free resource, The Connected Guide to Small Business Payroll, to help optimize your payroll processes.

Second, check out this FREE WEBINAR: Watch along as ConnectPay COO Drew Schildwachter sits down with Bookkeeping expert Lori Coleman to unpack the basics of bookkeeping for small business owners. 
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Published by Drew Schildwachter October 25, 2023