9 Signs Your Business Needs Bookkeeping Services
- February 12, 2020
- Posted by: admin
- Category: Tax & Accounting
On the fence about hiring a bookkeeper? Here are 9 common signs you may just need bookkeeping services.
As small business owners, we’re resourceful and take pride in doing things ourselves. This resourcefulness is helpful when we start our business as we can minimize costs and run a tight ship.
But as our business grows, so to do our responsibilities. With so many tasks and limited time in the day, A DIY approach becomes unsustainable. Nowhere is this unsustainability more apparent than with DIY bookkeeping.
The Limitations of DIY Bookkeeping
Managing your books yourself may be easy at the start. You merely use Excel, an online template or even better—accounting software. But as your business grows, so too does the paperwork and your financial needs.
Eventually, the time arrives when managing the books is the last thing you want to worry about. To help you decide if that time is now, here are 9 common signs your business needs bookkeeping services.
Common Signs You Need Bookkeeping Services
1. Your books are always outdated
Do you have a backlog of paperwork, with a shoebox of untracked receipts, payments you haven’t reconciled and unassigned income and expenses? While tackling anything “accounting” may feel daunting and cause resistance to managing your books, chances are there are also other reasons for having outdated books.
Perhaps it’s due to siloed systems that don’t talk to each other which means you have to do a lot of manual tracking that invariably causes data entry errors. If you’re invoicing in one app, recording expenses in another and tracking your time in even another, then you know what I’m talking about.
The problem with outdated books is that you never really have a firm handle on your finances. Tracking and managing your cash flow becomes difficult. It’s even harder to gauge the financial health of your business.
A bookkeeper helps rectify this situation by recording daily transactions to help you better understand your financial situation.
2. You don’t have enough time for everything
A growing business means more clients, high-billing volumes and more back-office paperwork. And this to-do list only increases as your business continues to grow.
If you can’t find time in the day to get everything done, reprioritize and focus on what’s important in your business. You may discover that outsourcing tasks like bookkeeping frees up time to finish all your work.
3. You’re only updating your books before tax season
I recently scrambled to update my books to prepare for the tax season. I sent my bank statements and an Excel sheet with my expenses and income to my accountant. He then reviewed the documents, let me know how much tax I had to pay, and filed my return. Sound familiar?
While this may seem like a great way to deal with a cumbersome task, there are several problems:
- You never have up-to-date books, including important financial statements, to guide your business decisions
- You pay more for bookkeeping services. Only attending to your books at the end of the year means you have to send an accountant all the financial information (remember: only accountants file taxes). They’ll then need to make the necessary adjustments and assign expense categories that your bookkeeper could’ve done for less
- You’re always scrambling come tax time which can cause unnecessary stress
4. You missed out on tax deductions
Many business expenses are tax deductible including digital downloads, cellphone bills and online subscriptions. You can use these deductibles to offset your total business income and reduce the tax owed.
But chances are you’ve likely missed a few tax deductibles over the years because you never tracked them. It’s also easy to miss obvious tax write-offs when you’re scrambling to update your books at the last minute.
Thankfully bookkeepers record transactions and assign the right expense categories to reduce your total tax bill. They’ll likely even identify business expenses you didn’t know were tax-deductible.
5. You feel like you need a break from the grind
Are you overworked and tired? Is the cumbersome task of maintaining your books draining your creative energy and affecting the quality of your work?
If you feel like this, consider outsourcing your bookkeeping to free up time and headspace so that you can rekindle your passion for the work and reconnect with why you started your business.
Focus on a passion project. Invest in training, which forces you to improve your skill-set. Or, pivot to concentrate on coaching. Not only does coaching validate your expertise, but it gives you energy that feeds into all facets of your life—whether business or personal.
6. You’re not confident in your bookkeeping skills
You may be an expert at what you do—whether that’s designing websites, writing copy or taking beautiful photographs. But, you cannot be an expert at everything.
If you have doubts about whether you’re managing your books properly—maybe you feel like you’re always missing out on tax deductions—hire a bookkeeper for peace of mind.
7. You have unpredictable cash flow
Have you ever been unable to cover your expenses at the end of certain months because you don’t have cash?
While many factors can cause this scenario—insufficient client work, large unforeseen expenses and late payments from clients—the bottom line is that your expenses have outstripped your income. You now have a cash flow problem.
Bookkeepers track your accounts payable and accounts receivable and follow up on overdue invoices, so you’re on top of cash flow at all times. The right bookkeeping software even helps you create cash flow statements, so you know exactly how much money is flowing in and out of your business over a specific period of time.
8. Bookkeeping is removing you from high-growth areas
If you are doing your own bookkeeping, you may be removing yourself from tasks that will help you grow your business. These include all tasks that have an impact on your revenue such as marketing and client work.
Of course, if you’ve only ever managed your books yourself, you may not even be aware you’re removing yourself from these crucial areas. So, consider time tracking to get a better understanding of exactly how much time you spend on bookkeeping. Then, think about the crucial business areas you could focus on if you freed up that time by hiring a bookkeeper.
9. You’re overpaying an accountant to do your bookkeeping
Bookkeeping and accounting are not the same. Bookkeepers record financial transactions and accountants analyze and interpret this financial data. Accountants plan. They forecast. They offer financial and tax advice.
They’re more qualified than a bookkeeper, meaning you pay more for their services, even if they’re only doing your books. If you’re in this position, you’re overpaying for a service that a bookkeeper could do for less.
As small business owners, we pride ourselves in a DIY approach. And why wouldn’t we? It served us so well when we started our business. And it’s no surprise that many of us choose to do our books ourselves.
But this DIY approach to bookkeeping becomes counterproductive as our business grows. With growth comes new responsibilities and an ever-growing list of to-dos. At some point, something has to give, and you’ll need to hire a bookkeeper. This post provided 9 signs that you may just have reached that point.
Have you reached that point yet?