Should Your Business Hire a Bookkeeping Service?
Posted on July 4, 2022.
As a business owner, it’s important to understand the resources available to maintain your financial records. Bookkeeping helps businesses stay financially organized and prepared. Read further to learn more about bookkeeping, the benefits associated with using a bookkeeping service, typical roles and responsibilities of bookkeepers and determining factors that might mean you should hire one for your business.
What is bookkeeping?
Bookkeeping is the process by which someone records a business or individual’s financial transactions. This includes items like sales receipts, sales records or payments and purchasing (invoice documents). Bookkeeping is usually a part of a business’ accounting department’s duties.
Benefits of using a bookkeeping service
The following list outlines the potential benefits that using a bookkeeping service can have for your business.
Provides real-time overview of finances
A bookkeeping service helps you keep updated records of your finances so you can view the current state of your accounts and make quick business decisions. For example, updated balance sheets can help you determine how much cash-flow you have to spend on additional inventory.
Speeds up the auditing process
Having well-organized and updated financial records can make an auditor’s job easier and quicker. This is helpful for businesses that need to obtain financial help from one or more investors.
Makes business more appealing for bank loans
If your business needs a loan from the bank to help pay off debts, buy property or invest in new industries, having detailed financial records can add to your credibility and make you appear responsible.
Allows business owners to align their finances with goals
Without well-organized financial records, it might be hard to plan for the future of your business. Bookkeepers can help business owners make well-informed decisions within the limits of their budget. For instance, if you need a new employee, a detailed financial record could show you exactly when you’d have the money to afford one.
Gives businesses a strong foundation for growth
Because a bookkeeper helps businesses organize their financial documents, businesses have the resources on hand to make educated decisions for the future of their company. For example, if you want to cut back on operational costs by going from paper to digital documents, you could compare costs from your current financial records with quotes from digital record providers to determine which would save you the most money.
Acts as a substitute for limited accounting staff
For small businesses with a small accounting department or sole proprietorships with no accounting department, bookkeepers fill in roles related to financial recording and planning. This may be especially helpful if the business owner has limited knowledge about business accounting practices.
Roles and responsibilities of bookkeepers
Here are some typical roles and responsibilities of bookkeepers within businesses:
- Use knowledge of state and federal accounting policies and taxation rules to ensure legal compliance for businesses.
- Practice confidentiality about their clients’ financial records to uphold ethical accounting practices.
- Work with internal accountants to prepare business taxes.
- Plan and enforce a system for financial recording within a business.
- File financial transaction documents regularly.
- Review the general ledger, accounts receivable, accounts payable and income statement to check for errors and make updates.
- Prepare company balance sheets and update regularly.
- Review invoices and pay them accordingly.
- Monitor company liabilities and assets.
How to determine if your business should hire a bookkeeping service
Here’s a guided list of steps to help you determine whether your business should hire a bookkeeping service:
1. Determine how much time you spend on bookkeeping
You should consider hiring a bookkeeping service if you feel that you’re spending too much time trying to manage your finances by yourself. Keep track of how many hours a week you spend on bookkeeping to help determine whether you’re taking time away from other important aspects of your business.
2. Consider how much time you have to update financial records
Another factor that implies you should hire a bookkeeping service is if you can’t seem to find the time to update your financial records. Typically, you should update your financial records every month to stay organized and maintain an accurate depiction of your finances.
3. Calculate your budget
If you own a small business or sole proprietorship that requires you to outsource your accounting needs but you have a limited budget to spend, you should consider hiring a bookkeeping service. Certified Public Accountants (CPAs) typically cost more to hire, but an experienced bookkeeper can provide the same kind of help for a lower price.
4. Evaluate your ability to monitor cash flow
Having trouble remembering how much cash you have to spend on inventory or pay to outsourced professionals may imply a lack of financial organization. Hiring a bookkeeping service helps you maintain your balance sheets so you can review your current cash flow anytime you need to.
5. Think about your preparedness for tax season
If you get stressed out thinking about tax season, or are unsure of how to go about it, you might want to hire a bookkeeping service. A bookkeeping service can help you get organized ahead of tax season and guide you through the whole process.
6. Look at your ability to turn a profit
Another factor that implies you should hire a bookkeeper is if you discover your business fails to make a profit or increase its profit despite an increase in sales. This typically means you need to increase your profit margin, and a bookkeeping service can help you do so by organizing your financial records and reviewing your accounts.