Small Business Financial Article

After spending most of their waking hours conceiving, planning, and preparing for the launch of their business, most new business owners never imagined themselves ever being tied down to a desk or a computer, shuffling receipts, logging transactions, reconciling accounts, or tracking receivables. Even the least business-minded entrepreneur knows that a business requires financial management. Yet, very few business owners are prepared for the arduous and time-consuming task of keeping the lifeblood of the business flowing.

The stark reality is that most businesses cannot survive past the launch stage without a structural approach to cash flow management and planning. It’s certainly not the most glamorous part of running a business, but even from the beginning, it is essential for a business owner who envisions a successful and profitable future.

Why Your Business Requires Solid Bookkeeping

• Your books tell you where you’ve been, where you are, and where you are headed. Young businesses rely on daily decisions that will significantly impact short-term cash flow. Without a current bookkeeping system, you are flying blind.
• If you seriously think you will require any kind of financing, capital investment, or essential business credit in the future, your bookkeeping and accounting need to be flawless from the beginning.
• Don’t expect to win government audit challenges with shoddy bookkeeping or poorly kept records. You are much less likely to maximize legitimate business deductions without airtight books and records.
• You can expect your accounting expenses to double or triple if your bookkeeping is not in order. You do not want to pay accounting prices for bookkeeping tasks. Solid bookkeeping will reduce your business accounting costs significantly.

Why a Bookkeeper is Critical to Your Success

It is understandable why new business owners initially want to do their own bookkeeping. First, it is usually fairly easy, and second, it gives them a feeling of control over their finances. But as the business grows and the owner begins to wear more hats-sales, marketing, operations, and IT-the bookkeeping function soon takes a back seat.

For a growing business that constantly needs to know its cash on hand, it’s only a matter of time before control is lost. Daily reporting is the only way for the owner to anticipate cash flow problems and respond quickly while staying focused on critical business issues.

Another hidden cost of poorly kept books and records is the premium you will likely pay when filing your taxes. The likelihood of overpaying taxes increases due to missed deductions, and you are almost guaranteed to overpay your tax professional, who must spend additional time organizing and compiling your books and records.

Selecting a Bookkeeping Service

The best source for identifying compatible bookkeeping services is a referral from another business owner, especially in similar circumstances. Ideally, the recommended providers have established relationships with many businesses in your area. Your vendors and suppliers can also be a source of recommendations. Trade associations are another source of provider recommendations, either from the association itself or through the network of members.

Questions for your Prospective Bookkeeper

• How long have you provided your service?
• How many clients do you have?
• How big is your staff? (You are looking for the ratio of staff to clients)
• What are the hiring qualifications?
• How many businesses do you work with in my specialty?
• Will you provide me with references?
• Tell me about your technology.
• Do you have a dedicated IT staff?
• How often do you update your technology?
• What is your standard response time?
• Will I be assigned a representative and a direct call line?

Qualifications and service quality are very important considerations; however, in the long term, compatibility will determine the success of the relationship. You would look for the same in any employee you hire, and you should expect nothing less from your bookkeeping provider. In addition to conducting several in-person or phone interviews with the provider, speaking with other clients about their service is essential.

Summary

Hiring a bookkeeping service does not have to be an expensive proposition. Most small businesses contract with bookkeeping and accounting services that are paid in proportion to the amount of work they complete for the business. Compared with doing the work yourself or even hiring an employee, the costs of a bookkeeping service are relatively minor. Whatever the cost, it would have to be a far better investment than the cost of your valuable time, which will likely produce inferior results.