If your small business is growing and you feel overwhelmed keeping track of your books, it may be time to hire a bookkeeper.
If you don’t have the time or experience to properly do your bookkeeping, mistakes are bound to happen. The easiest way to avoid them is by hiring a bookkeeper.
Bookkeepers can take reconciling, invoicing, running payroll and more off your plate. That helps you focus on the more important aspects of your business — and makes tax season a lot less stressful.
However, there’s a lot of thought that should go into hiring a bookkeeper. You need to identify exactly what your business needs and learn exactly what a bookkeeper does — because you might not be at the point where you need one yet. But if your business is growing and bookkeeping is eating up too much of your time, it’s probably the right time to get a bookkeeper.
What does a bookkeeper do?
A bookkeeper for a small business is responsible for many day-to-day financial operations. That includes recording and categorizing bank transactions, reconciling those transactions and preparing financial statements like balance sheets and profit and loss statements. They can also set you up with and teach you to use payroll software and accounting software.
In other words, the stuff you probably don’t have time to do.
Bookkeepers aren’t the same thing as accountants. Accountants will typically handle your small business’ higher-level financial tasks, like tax planning and business structuring. So bookkeepers track your numbers, while accountants often interpret those numbers to analyze your business’ performance.
Not every business has a dedicated bookkeeper, but every business should be doing bookkeeping. If you fall behind on your books, that could cause you a lot of stress — and even penalties — during tax season.
Types of bookkeepers
Every small business has different needs — which is why there are different types of bookkeepers. See which type of bookkeeper might be best for you.
This is what most people think of when they hear they should hire a bookkeeper: Having someone on your staff solely dedicated to your books. A full-time bookkeeper is one that can handle a large amount of transactions and more complicated businesses.
Hiring a full-time bookkeeper can be expensive, because you’ll pay for their services in salary and benefits for years to come. You should have a large or overwhelming number of transactions each month to warrant a full-time bookkeeper.
Best for: Businesses with a lot of transactions each month and a complex structure
Online bookkeeping services, like Bench, allow you to work with a bookkeeper remotely. They’re affordable and can get your basic bookkeeping needs done. These may be good options for small, simple businesses that don’t have a lot of transactions per month, but want the responsibility off their plate anyway.
If you have a straightforward bookkeeping situation, this could be the best option for you in our remote-friendlier world.
Best for: Small businesses with few transactions and who prefer a remote option
A third-party bookkeeper is one that you would hire from a firm, like us. A bookkeeper from a firm can regularly check in with you either remotely or in-person. Firms are a popular option for people because you can access bookkeeping, tax and business advisory services from the same place. With a third-party bookkeeper, you can work regularly with someone and develop a working relationship without the price tag of hiring someone in-house.
Bookkeepers from a firm, depending on your location, can also accommodate business owners who would rather have a face-to-face conversation about their books.
Best for: Businesses looking for a one-stop-shop for bookkeeping, tax and business advisory without having to hire someone full-time
Pros of hiring a bookkeeper
Hiring a bookkeeper can be one of the most relieving and rewarding investments your business can make. If your business is growing and you’re at the point where your finances are becoming too overwhelming to handle on your own, a bookkeeper can provide you with these benefits and more.
1. Bookkeepers give you more time to run your business
As a small business owner, you likely have a lot on your plate: working with your customers, marketing your services, growing your team — the list goes on. Those are the things most business owners get excited about, because they can grow and improve your business.
What small business owners are less excited to do is run payroll each week or create a bunch of reports during tax season. Having a bookkeeper to handle those tasks for you gives you back hours of your week — and in a year, those hours can add up quickly. You can focus on doing the tasks you love without having to slug through the tasks you dread.
2. Bookkeepers can track your finances more accurately
If you don’t have experience in bookkeeping or accounting, it can be difficult to learn all the jargon associated with it. Learning how to create a profit and loss statement or reconcile your bank statements correctly can take a lot of reading and practice.
By hiring a bookkeeper, you can hand off your finances to someone who already knows all the jargon and processes. It’s important to accurately maintain your finances because they’ll help make tax time easier and give you a real insight into your business. Investors and lenders will also often ask to see certain reports before doing business with you. A bookkeeper can give you peace of mind knowing your reports are correct and improve your chances of securing funding.
3. Bookkeepers can coach and empower you
A bookkeeper can be someone who does more than just keep track of numbers for you. They can walk you through certain processes and explain why those processes are important so you don’t feel left in the dark when it comes to your accounting.
When you’re first starting your business, a bookkeeper can be especially helpful in this regard. Many of our own clients just want to talk to our bookkeepers to go through all the basics. Once our bookkeepers show them the ropes of their payroll and accounting software, they’re ready to take it over on their own.
So even if you don’t hire a bookkeeper for the long-term, a short-term arrangement can equip you with the basic, yet essential tools you need. Not sure which one sounds like a good fit? Schedule a free call with one of our advisors and we'll help you figure it out.
Cons of hiring a bookkeeper
While there are plenty of great reasons to hire a bookkeeper, there are some drawbacks you might want to consider.
1. Hiring a bookkeeper costs more than doing your own bookkeeping
Bookkeepers can be incredibly helpful resources — but they’re not free. Whether you want to hire an in-house bookkeeper, a third-party bookkeeper or an online service, you’re going to have to pay something.
The prices will vary depending on what option you want. If you’re hiring an in-house bookkeeper, your costs include their salary and benefits. You can save money by going with an online bookkeeper or a third-party bookkeeper. Online bookkeepers usually charge a monthly rate, while third-party bookkeepers usually charge an hourly rate. That means a third-party bookkeeper will likely charge you more than an online one, but that’s because they likely offer more services and resources.
2. A bookkeeper isn’t always necessary if your business is small enough
As beneficial as hiring a bookkeeper may be, it’s not always the right time to hire one.
If your business is fresh and you only have a handful of transactions each month, you’re likely better off saving the money and doing your bookkeeping on your own. This is often the case for small businesses that are just one person.
Many tax and accounting firms, including us, allow you to hire a bookkeeper just to train you on certain softwares and processes if you’re not comfortable doing it by yourself right away.
When to get a bookkeeper
So once you decide hiring a bookkeeper is worth it, when should you do it? If any of these apply to you, it’s probably the right time.
1. Your business is growing
If you’re hiring more employees and making more sales, then that’s a sign it may be time for a bookkeeper to step in.
When you start putting employees — including yourself — on payroll, the tax implications of that can make your books a lot more complicated. And when your sales start to grow, your books will take longer to manage. If you hand tasks off to a bookkeeper, that’s more time you have on your hands to grow and improve your business.
2. You’re too busy to do your books yourself
As your business does start to grow, that means you’ll be busier managing new staff and handling new customers. Reconciling transactions and running payroll shouldn’t take your time away from important things like that. Any bookkeeper could do that, but you’re the only one who could run your business.
You shouldn’t have to handle every aspect of your business’ accounting — especially not something that’s as time-consuming as bookkeeping. Delegating that to other people helps you focus more on the aspects of your business that you love.
3. You want someone to train you on bookkeeping
If you have the bandwidth to do your own bookkeeping but need a little extra guidance, a bookkeeper still might be a good fit for you.
A bookkeeper can teach you how to use payroll and accounting software, pull financial reports, reconcile your bank statements and prepare for tax season. And once you’re confident enough you can handle that on your own, you can part ways. This may be a good option for one-person businesses that are just finding their footing.
When not to get a bookkeeper
Bookkeepers aren’t the best fit for all small business owners. If one of these apply to you, then you may need to hold off on hiring a bookkeeper — or hire another type of financial specialist altogether.
1. You don’t have many transactions per month
If you don’t have enough transactions per month to the point where you’re stressing out about it, you probably aren’t at the point where you need to spend money on a bookkeeper. With a small amount of transactions, there’s simply not that much bookkeeping to do.
Small business owners can typically handle that amount on their own with the help of accounting software like Xero. They typically don’t get overwhelmed until they start crossing several dozens of transactions per month. Until then, you could spend that money on other start-up costs related to your business.
2. You’re looking for an accountant
You shouldn’t hire a bookkeeper if you want someone to review your business’ finances from a high level and give you tax planning and business structure advice. Instead, you should hire an accountant or another tax specialist.
It’s important to clearly define what you’re looking for in a bookkeeper before you hire one. An accountant can do many of the same things bookkeepers can, but they often cost more than bookkeepers. Understanding the roles of both accountants and bookkeepers can help you find what you’re looking for quicker — and save you money.
The bottom line
Hiring a bookkeeper could be one of the best investments your small business could make — or one that you don’t need yet.
You should consider your business’ needs and financial standings before you hire a bookkeeper. A general rule is if you have a low number of transactions per month, then it’s not the right time to get a bookkeeper. If your business is growing and your books are getting too overwhelming, then hiring a bookkeeper can save you time and relieve your stress during tax season.
There are several different bookkeeper options available, from online bookkeepers to full-time in-house ones. The right one for you depends on your specific business and needs. If you want to see which is the best fit for you, click the button below to schedule a free call with a DiMercurio Advisors team member who can give you personalized advice.