Starting a business usually means wearing multiple hats and taking on multiple key roles – including accounting and bookkeeping– at the start. But when is the right time to stop DIYing these roles and hire a bookkeeper or accountant for your business?
The best time to get an experienced person in these roles is most often as soon as you can afford it. Not only can hiring a bookkeeper and accountant help free up some of your time– let’s face it, every minute counts– but having someone with experience in this area of your business can help you forecast better, avoid crucial mistakes, and most likely save you money.
In this blog, we’ll break down everything you need to know about what bookkeepers and accountants do, when hiring them just makes sense, and the difference between hiring them in-house vs. outsourcing these roles.
Already know you want to outsource your small business’s accounting and bookkeeping? Book a free consultation with us today to learn if we could be the right fit for your business.
Table of Contents
- What Is The Difference Between Bookkeepers And Accountants?
- When Should You Hire A Bookkeeper?
- When Should You Hire An Accountant?
- In-House Vs. Outsourcing Accounting And Bookkeeping
- Start Your Finances Off On The Right Foot
What Is The Difference Between Bookkeepers And Accountants?
To keep it simple:
A bookkeeper manages and tends to a company’s books. This includes money coming in and money going out.
An accountant uses this information to forecast, make business decisions, and provide financial advice.
A financial team is usually composed of both these roles, although a really small team could have one person doing them both– although we usually wouldn’t advise this.
In this article, we will start by focusing on bookkeepers, what they do, when you need them, and how hiring someone for this role just makes sense.
Then we’ll dive into accountants, how they are different, and five points when hiring them just makes sense.
When Should You Hire A Bookkeeper?
First, we want to say that regardless of whether you have a dedicated bookkeeper or record all the transaction details yourself, you need to track your money going in and out. This will be used for tax purposes, as well as to make financial business predictions and decisions, plus provide insight into how your business is doing and what you can afford.
What Does A Bookkeeper Do?
As we mentioned above, a bookkeeper’s main responsibility is to record financial transactions and prepare four vital financial statements. These, include:
- Income Statements – shows your revenues and expenses
- Balance Sheets – shows your financial position
- Cash Flow Statements – a record of “cash” leaving and entering the company
- Statements of Changes in Equity – how your retained earnings, reserves, and shared capital have changed in a period.
Other vital roles bookkeepers manage include:
- Processing payroll
- Preparing financial statements for tax time
- Maintaining the annual budget
- Flagging any financial issues or discrepancies
- Making sure everything gets paid on time
- Collecting and paying sales taxes
- Plus many more!
Why Are They Required For Your Business?
There are many reasons why you need a bookkeeper on your team. One of the biggest reasons is that, as a business, you are required to file your corporate taxes every year (if you don’t, you could get a hefty fine or be prosecuted!).
In order to file your taxes, you need a record of all the money going in and out of your business– this is where your bookkeeper comes in. Without someone “balancing your books” and keeping a record of everything, it’s pretty much impossible to file your taxes.
Not to mention bookkeepers do plenty of other vital tasks that help you run your business and plan for the future.
When Is DIYing Bookkeeping No Longer Good Enough?
The right time to hire a bookkeeper instead of DIYing this role will depend on:
- The amount of accounting knowledge you– or the person temporarily doing your bookkeeping– has.
- How busy you – or the person temporarily doing your bookkeeping– is.
Since those two points are very subjective, we’ll break them down in a bit more detail.
Accounting Knowledge
Some of you may already be waving your arm in the air yelling, I know nothing. I’m drowning. Please send help.
Others probably may not consider themselves experts but feel like they’re not quite beginners either. So how does one classify their level of accounting knowledge? Without sitting down and talking to you, we can’t say for sure if you’re crushing it or not, but here are some telltale signs you probably have at least basic knowledge in this field:
- You have worked in finance or have had budgeting as part of a past role
- You know what you don’t know and have someone to ask these questions to
- You know how much the business owes people and how much others owe you
- You’re aware and are already noting some tax-deductible expenses
- You understand how to use accounting software to save you time and make these tasks easier
- You feel confident in this role, and could decently train someone on what you are doing.
If this sounds like you, that’s amazing! That doesn’t mean a bookkeeper couldn’t still come in and make a world of difference. It just means that you may be able to get away with a DIY solution for a little bit longer. That being said, after running with this for 3-6 months, you’ll probably want to bring in an expert. If not because you’re too busy, then most likely because they’ll be able to give you better financial statements, keep your books up-to-date, predict cash flow, plus many other benefits.
If you’re totally new to bookkeeping and already falling behind, you need to get help ASAP, or at the very least, get someone in to set up your system so that you can work to maintain it in the interim.
How Busy You Are
This one is a little easier to come to terms with. Simply put, if you’re struggling to get all your tasks done plus keep up with bookkeeping, you’re too busy. It’s so much easier to keep bookkeeping up than go back and try to fill in gaps. So if you’re struggling to get everything done, it’s time to bring in help.
We know giving up a task may be hard, especially when you’re business truly feels like your child, but trust us when we say it will save you in the future. We get a lot of people’s books when it’s time for tax returns and have to redo everything. This means they spent time bookkeeping when they could have been using this time more effectively, and it means that they now have to pay for someone to go back and redo all their work.
When Should You Hire An Accountant?
Regardless of if you want to hire someone to carry out the tasks of an accountant, these duties need to be done to run a successful business. We recommend that if you don’t have experience in this area, hiring someone to do these tasks is probably worth it. However, that doesn’t mean you must hire someone full-time or pay a classic salary. There are other options out there, like outsourcing your accounting needs.
Outsourcing helps you save money by allowing you to only pay for the time and services that you need. Plus, they’ll help you make better strategic decisions which can end up saving your business money.
What Does An Accountant Do?
Accountants are responsible for many vital roles at your company. They are the ones that look at your financial statements and help forecast, plan, and make business decisions based on how things are looking.
Some of the key tasks they manage are:
- File corporate tax returns
- Prepare financial reports and statements
- Forecast and do risk analysis assessments
- Make sure you’re abiding by tax laws
- Offer financial guidance on how to maximize profits, reduce costs, and increase revenue
Pretty much before any big business decisions are made, such as adding a new role, and new offering, or changing manufactures an accountant should be advised. They will help you look at the numbers, determine if something is a strategic move, and what financial implications it may have.
Why Are They Required for your Business?
Accountants are vital for the success of your company.
They help make financial plans, analyze your financial standings, and help make better business decisions. Not to mention, they have a big role in filing and preparing taxes– something all businesses need to do.
Although you may be able to DIY some of these tasks well enough at first, having someone with experience in these areas will not only take a load of stress and time off your plate but can help you avoid potential business-ending errors.
5 Points When Hiring An Accountant Just Makes Sense
When you start your business – starting on the right foot will save you time and money down the road. Accountants help you do just that. Money planning is important, especially when you’re starting off and don’t have much of it. Making wrong decisions and not spending enough time doing financial planning can seriously hurt the future of your business. On the other hand, some smart financial moves early on can significantly help you increase your revenue down the line.
When you no longer have time – this happens pretty early in the business starting process. As a business owner, many things are competing for your time. Think about where your specific mind could be best used. Is your time better spent on overall business strategy, product development, or tracking expenses and doing financial data entry? Also, if you’re not an accountant by trade, there’s no doubt that these accounting tasks will take you WAY longer than someone who is, so the question comes down to, how much is your time worth?
When you need to do financial planning – hiring an accountant doesn’t just mean you save time, it also means getting someone with past business knowledge that can help your business make better financial decisions. Plus, if they are good, they can also help you get accounting software that can save you even more time and money.
When you need to prepare your taxes – a task that most people put off as long as they can. Not many people outside a select few (hello, it’s us) actually like or enjoy filing their taxes. Not to mention, if they are done wrong, it can cause you to get in trouble or pull out your hair. Done right? It can save you thousands, if not hundreds of thousands, in money.
When you’re applying for a loan or funding -if you’re a newer business, applying for a loan may be crucial in keeping your business operational. Finding what loans or grants to apply for and proving your company has creditworthiness can be even more challenging. Having someone on your team with experience and expertise here can put you ahead of the game tenfold.
When Do You Need A Chartered Accountant?
Not all accountants are Chartered Professional Accountants (CPA)– but all CPAs are accountants. To become a CPA, an accountant must:
- Have a Bachelor’s Degree,
- Complete the CPA PEP Program (30 months)
- Have 30 months of work experience needed under a CPA
- Pass a Common Final Exam.
So getting designated is tough, which is why some accounting professionals choose not to do it.
A company usually doesn’t need to have a CPA on their team. The benefit of having a CPA is that you’re more likely to get a higher quality of work and get someone with more knowledge in the field.
So even though you don’t need a CPA on your team, at minimum, we recommend seeking out a CPA when filing corporate taxes. Almost always, the tax strategy savings surpass the costs.
In-House Vs. Outsourcing Accounting And Bookkeeping
So now that we’ve gone over what accounting teams do, the question becomes, when should you hire someone in-house, and when should you outsource?
As we’ve hinted earlier in this post, you don’t need to hire or have an in-house accounting team to get all the amazing benefits a dedicated bookkeeper and accountant offers. Actually, unless you work in a large-scale company where you’re making 10M+ in revenue (and even then), we highly recommend you outsource these jobs.
With all the incredible accounting software out there, these roles are way more seamless (with the right people managing them). So filling a person’s day just with accounting and bookkeeping is tough. This is why you’re better off outsourcing your accounting and bookkeeping needs to a company or person who knows this field well.
If you want to learn more about all the benefits outsourcing accounting and bookkeeping can offer, check out our blog post, 5 Benefits of Outsourcing Your Accounting and Bookkeeping Services.
So When Should You Outsource Accounting, And When Should You Hire In-House?
- Company is trying to reduce costs and increase profits
- High turnover for bookkeeper position
- The owner is unsure of the duties the bookkeeping is doing
- Company has an outdated accounting system.
- Owner feels this department can be handled better
Outsourcing your accounting team needs doesn’t make sense when:
- Company is so large they need to consult with their accounting department daily
- The company can’t wait 24-48 hours for a response from their accounting department
- You’re making around 10M+ in revenue, but not always
- The accounting needs are so high they need a team of dedicated (3+) accountants
Finding the Right Fit For Your Business
If you’re considering outsourcing as your long-term solution but not sure where to start or how to find the right company, don’t worry. We’ve got you.
We’ve outlined a few key things to look for when picking the right firm:
- Look for a firm with a least few members with a CPA designation
- Ask if they have other clients in your industry
- Look for testimonials/reviews
- Make sure you can trust them– These people will have access to important and confidential information. For them to do their job well, they must have access to many confidential documents.
- Find out what software they use and make sure it’s easy to share account information; for this, we recommend cloud-based software.
- Discuss your expectation (response time, communication, core values) and make sure you’re aligned. Setting up both boundaries and expectations early on will make it more likely that you’ll have a successful business relationship.
Not sure where to look? Start by chatting with us! We love talking about business financial strategy and love saving companies money even more. If we’re not the right fit, we’ll help you find a solution that is.
Start Your Finances Off On The Right Foot
Hiring a bookkeeper and accountant is usually the right call. You started a business because you’re the expert in your field and want to help people reach their potential– let us help you do the same.
Most small businesses don’t need a full-time accounting team. With so many programs and accounting software out there– these tasks rarely take 40 hours/week to complete.
That’s where we come in. A team of certified accountants and bookkeepers. We help you get the most value out of your accounting budget by only working (and charging for) the time your business needs. Plus, we can help you use your finances to make better business decisions so you can keep doing what you love for a long time.
What are you waiting for? Book a free consultation to find out how outsourced accounting services can provide better value, reduce costs, and give you peace of mind.
