If you’ve got a business, then you know how many hats you have to wear, especially in the beginning of your business. Bookkeeping is probably the last thing on your mind when you’re building your business. In fact, bookkeeping, record-keeping and all of that can be a major distraction because you need to focus first on getting money in the door and fulfilling on promises to your clients and customers. The back office can come later (or so you think.)
You’re caught in one of the beginning entrepreneurial traps. Bookkeeping doesn’t pay the bills. But, if you ignore it, you’ll end up paying more in taxes and expenses, being at risk from internal problems (like embezzlement) and miss out on opportunities within your business.
In the beginning, it can be very tempting to just have your CPA do the bookkeeping months after the fact just in time for filing your tax return. There are a number of problems with that:
- You’ll pay more for the bookkeeping if you pay your CPA or CPA’s firm to do it
- You’ll lose out on the planning opportunities from your financial statements throughout the year, and
- You’ll pay more in taxes because there was no chance to plan ahead of time with good numbers
Or you could do the bookkeeping yourself. There are even more problems with that:
- You’ll waste your valuable time doing something you probably won’t do that well
- The bookkeeping might not be done correctly (and you have to then pay your CPA to do it)
- You’ll still lose out on the planning opportunities for your business, and
- You’ll also lose out on tax planning opportunities
Last minute bookkeeping means lost opportunities plus either more cost (directly because you’re paying a CPA to do the work) or more indirect cost (because it’s taking you off your business focus.)
Having your own bookkeeper doesn’t necessarily mean you have to or should hire someone full-time. It’s a lot easier these days to hire top quality workers for a fraction of the cost when you consider having it done virtually. Some things to look for:
- Experience in bookkeeping
- CPA or degreed accountant oversight
- Turn around time
- A plan for how your current CPA and the bookkeeper will work together
- What the actual scope of the business will be, and
- Their commitment to confidentiality
A good bookkeeping firm should have background checks on employees and a system for back-up if your assigned bookkeeper isn’t available.
You can also hire a single bookkeeper to do the work, either working from his or her office or your own. You run the risk of ‘putting all of your eggs’ in one basket with this plan. If your bookkeeper gets sick or goes on vacation, who will cover for you? Get references and check them out. If you’re going to provide confidential information to your bookkeeper (like social security numbers) and there is no attorney or CPA associated with the firm, you should do a background check on the bookkeeper.
Unfortunately, most embezzlement comes from a sole bookkeeper. We’ve also seen small business owner become subject to identity theft by outside bookkeepers (not at a firm, individual) and making private financial information public when they get fired.
There are a lot of tough decisions you have to make as an entrepreneur, hiring the right bookkeeper is one of them.