Small business owners have to be very resourceful and often take pride in doing things themselves.
This resourcefulness is helpful when starting a business. Still, as a business grows & a business owner’s time/energy starts to get stretched – a business owner continuing the do EVERYTHING themselves is a recipe for disaster.
When there are so many tasks to do and only a limited amount of time in the day, this resourceful business owner needs to start drawings on the people around them for help and delegate some of their responsibilities, so they don’t burn out or make mistakes.
One of the more manageable tasks to delegate is bookkeeping. This article will review the five common signs a business needs bookkeeping services.
1. The Books Are Always Outdated:
If the books are always outdated, this is a sign that the business needs bookkeeping services. On the surface, this might not seem like much of an issue; however, the problem with outdated books is that business owners can never really have a firm handle on their finances.
Tracking and managing cash flow becomes difficult & it’s hard to gauge the financial health of a business without up to date books.
A bookkeeper will help rectify this situation by recording daily/weekly transactions to help provide insight into the current financial position of the business & provide the information necessary to make informed business decisions at all times.
2. It Always Feels Like There Isn’t Enough Time
A growing business means more work, high-billing volumes and more paperwork. The to-do list only increases as a business starts to grow. For business owners working with a DIY bookkeeping solution managing the books is often a task that is neglected when there isn’t enough time in the day to get everything done.
When there isn’t enough time in the day to get everything done, it makes sense that bookkeeping falls to the wayside, but it is critical to have up to date financial information to operate a successful business long term.
Deligating bookkeeping services is an easy solution to this issue, and when there isn’t enough time in the day, it is a sign that bookkeeping services are needed.
3. The Books Are Only Reviewed Or Updated Before Tax Time
A common strategy business owners have for dealing with tax time is scrambling to update their books at the very last moment & then sending their bank statements and an Excel sheet with expenses and income to their accountant.
The accountant reviews the documents, let the owner know how much tax to pay, and files the annual tax return.
While this may seem like a great way to deal with a tax every year, there are several problems with this approach:
Firstly, the business owner never has up-to-date books, including critical financial statements, to guide your business decisions throughout the year, making it almost impossible to make informed decisions about how to best move forward.
Secondly, the annual costs of managing taxation obligations are also higher than they could be because this strategy requires an accountant to do a large volume of work that they are overqualified for. They’ll be required to make the necessary adjustments and assign expense categories to deducations & this is all work that a bookkeeper could’ve done for less.
This approach also causes unnecessary stress as it compresses 12-month’s worth of work into a short period.
If a business’s strategy for taxation is to address it once a year and have their accountant handle everything, then this is a sign that this business could use bookkeeping services.
4. Tax Deduction Opportunities Are Being Missed
Many business expenses are tax-deductible, and these allowable deducations can be used to reduce the business’s taxable income and the amount of tax owed.
If a business’s expenses are not being tracked & recorded regularly, then there is a high likelihood that tax education opportunities are missed.
While it is understandable with the demands of operating a business, the records of some allowable deducations fall through the cracks, and it’s easy to miss things if the current taxation strategy is scrambling at the last minute to get things done.
The DIY approach costs the business money because more tax is being paid than is required.
When working with a bookkeeper, they will establish a system to record both income and expenses regularly, assign these expenses to the correct expense categories & ensure that nothing slips through the cracks resulting in the lowest possible tax bill. They’ll likely even identify tax-deductible business expenses that the business owner didn’t know.
It would be a safe bet to say that using a DIY bookkeeping approach for a growing business is COSTING the business more money than it would be to get the holds of a professional bookkeeping service.
5. The Business Is Paying An Accountant To Handle 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 bookkeepers, meaning they charge more for their services, even if they’re only doing the books.
If a business is in this position, they’re overpaying for a service that a bookkeeper could do for less. This is another sign that a bookkeeping service should be hired and that it would be an investment for the organisation.
Small business owners pride themselves on a DIY approach. And why wouldn’t they? It served them so well when we started their business. And it’s no surprise that many choose to do their books themselves.
But this DIY approach to bookkeeping becomes counterproductive as a business grows. With growth comes new responsibilities and an ever-growing list of to-dos. Something has to give, and one of the most manageable tasks to delegate is bookkeeping. This post provided five signs that show a business may just have reached that point where they should hire a bookkeeper. If help is needed with bookkeeping, The Accounting Centre can help with our bookkeeping services.