Why hire a bookkeeper? It’s a question every small business owner comes across once they pass a certain threshold. If you run your own business, you know just how overwhelming everything can be - you have to quickly become a financial analyst, web designer, search engine optimizer, graphic designer, social media guru, and more. And that’s on top of selling your own products and services!
Maybe you’re reading this because you’re thinking about starting your own business venture, only to realize you’re a little out of your depth. Incorporation, financing, business plans - the list goes on! An expert bookkeeper will be able to walk you through the motions of starting or running a business and keeping your financial records organized as you do it.
Bookkeeping is the process of tracking every financial transaction that a business makes.
A bookkeeper organizes your financial books, receipts, and other records to ensure that you have up-to-date information to drive your business forward, as well as supporting documentation for tax compliance purposes.
For example, let’s say you purchase a $20 license for Xero or QuickBooks. There is now a record on your business credit card that needs to be coded to an expense account (ie. “accounting fees” or “computer software”) so that the $20 is reflected on your financial statements. Your receipt should be linked to this transaction, so that if there is any doubt - or the Canada Revenue Agency (CRA) decides to audit your business - you can easily prove that the license was, in fact, $20, and that it belongs in the specified expense account. Simple, right?
While bookkeeping is easy enough for almost any business owner to do, it is very easy to get overwhelmed. Inexperienced bookkeepers can cause a snowball effect if they make a series of small errors. Problems can even compound over several years if your business is carrying balances that should have been written off at year end. An experienced, external bookkeeper helps to avoid problems like this. They bring knowledge and experience to help you make the right business decisions using accurate financial data.
Bookkeeping tasks vary between businesses, bookkeepers themselves, and many other factors. However, the most common things that bookkeepers do for businesses are typically:
Bookkeepers often make recommendations based on your business processes to save time and money. They can also consult on technology related topics, such as migrating from QuickBooks Desktop to QuickBooks Online. They are also well equipped to perform cost-benefit analyses and other financial analysis for your business.
Some payroll and human resources functions are often done by the bookkeeper as well, depending on the size of the organization and business need.
Accounting firms can sometimes charge exorbitant fees for straightforward bookkeeping work. This is in part because of the investment into education and training of their Certified Professional Accountants (CPA) on staff. There is also due to the scope of their liability for year end tax filings.
Depending on the size, complexity, and nature of your business, formal accounting firms can be very beneficial in ensuring complete financial, legal, and tax compliance.
With all that in mind, business needs vary and things are rarely this black and white. Bookkeepers often rely on the information they receive from business owners alone. Accounting firms and professional accountants are often engaged to perform audit services to ensure that financial information is accurate and it’s categorized correctly into your financial records. CPA’s can also help you establish proper financial controls, policies, and procedures that will hold up to scrutiny as you grow.