Do you really need to hire a bookkeeper? If you’re a small business owner, the short answer is usually “yes”. Having access to accurate, up-to-date financial information is the only way to make informed business decisions.
Newer business owners sometimes keep their own books—usually as a way to save money. But many of these entrepreneurs drop the ball on their bookkeeping when:
- Their business begins to grow
- Their focus shifts to other priorities
To really dig into why you should hire a bookkeeper for your business, we need to take a closer look at what these professionals do—and how outsourcing your bookkeeping can save time, keep you on top of your business finances, and help do away with numbers-based stress.
What does a bookkeeper do?
A bookkeeper is responsible for recording, reconciling, and reporting your company’s day-to-day business transactions. Every business needs a bookkeeper. Not only does keeping accurate books offer visibility into the financial health of your business, it helps you stay compliant with various tax authorities.
Their tasks typically include:
- Recording your daily sales and expense activities
- Performing monthly credit card and bank reconciliations
- Generating monthly and annual financial statements like balance sheets, income statements, and statements of cash flow
- Ensures your financial records are managed properly
- Keeps you apprised of your cash flow situation
- Helps you feel confident making decisions involving your business finances
Professional bookkeepers know how to use both accounting software and proper accounting methods to organize and track your financial data. Because they use a data entry system to manage the financial transactions attached to sales, purchases, payments, and receipts, a bookkeeper’s core tasks typically include:
- Recording daily sales and expense activities
- Reconciling credit card and bank accounts
- Generating monthly financial statements like balance sheets, income statements, and cash flow statements
Depending on your business needs and the professional you hire, your bookkeeper may also manage and process your payables, receivables, and/or payroll. In this case, their duties would include:
- Recording purchase invoices and making payments to vendors
- Sending out client invoices, following up on outstanding amounts, and reconciling payments received
- Calculating employee pay and deductions
A highly experienced bookkeeper can even assist with accounting software setup, sales tax filings, and end-of-year reporting—and can liaise knowledgeably with your accountant.
Every business needs a bookkeeper. Not only does keeping accurate books offer visibility into the financial health of your business, but it also helps you stay compliant with various tax authorities. While some small business owners choose to do their own bookkeeping, most eventually recognize the benefits of hiring a professional.
Appreciating what a bookkeeper can do for your business ultimately frees you to focus on other priorities—like managing your inventory, your team, and your company’s growth.
Difference between bookkeepers and accountants
Although people often use the terms bookkeeping and accounting interchangeably, the responsibilities (and rates) associated with each role are quite different.
Bookkeepers manage the data that shows where your business stands financially at any point in time. Accountants have the expertise to interpret and leverage that information.
In addition to reviewing your books, for example, an accountant can see where your business is headed growth and profit-wise, allowing them to advise you in areas like:
- Forecasting
- Budgeting
- Tax preparation and planning
However, you’ll pay a significantly higher price per hour to have an accountant handle your bookkeeping every month than you would a professional bookkeeper.
That’s why most businesses stay on top of their financial data throughout the year by partnering with an experienced bookkeeping organization—and reserve working with an accountant for when they need specific financial advice (like during tax season, for example).
Why hire a bookkeeper—instead of just doing it yourself?
There are several excellent reasons why hiring a professional to manage your books will benefit your business.
1. Bookkeeping takes up too much of your valuable time
Unless you’re a bookkeeping consultant, there’s a good chance bookkeeping isn’t your main responsibility—and an equally good reason why it shouldn’t be.
All the valuable time you spend:
- Doing data entry in your accounting system
- Verifying your cheques have been cashed, or
- Splitting out and filing taxes for your accounts receivable and accounts payable transactions
… is time that could be better spent running your business!
If you’re spending more time than you’d like doing bookkeeping, it’s probably time to bite the bullet and hire a good bookkeeper. By outsourcing your accounting tasks, you can free up more time to market your business, improve operations, or better manage your work-life balance.
2. Keeping your books up to date can be challenging
With so many priorities vying for your attention as a business owner, staying on top of your financial activities can be tough.
Without proper and timely bookkeeping, however, transactions can pile up and go unrecorded until the end of a financial period. Not only can this lead to mistakes, but key details can also be lost or forgotten.
One of the most important parts of a bookkeeper’s job includes:
- Setting up and managing an organized document storage system
- Categorizing and recording receipts and invoices based on expense type
- Ensuring access to source (supporting) documents for all your transactions should the CRA ask to see them
Hiring a bookkeeper will keep your business audit-ready, and you won’t have to worry about unpaid bills, late fees, or damaged vendor relationships.
By ensuring all your incoming and outgoing transactions are kept up to date, a bookkeeper can also help you build up your business credit, making it easier to secure a loan when you need one.
3. You are not a numbers person
It isn’t unusual for a business owner to be a jack-or-jill of all trades—or for the complexity of their bookkeeping to grow alongside their business. What is unusual is for a small business owner to also be a trained bookkeeper or “numbers person”.
Taking on the role of DIY bookkeeper typically means having to track and understand:
- Debits and credits
- Inventory costs and business expenses
- Invoices, payroll, tax returns, budgets—and how to do double-entry bookkeeping
The knowledge and commitment required to manage tasks like these can overwhelm even the most enthusiastic entrepreneur!
Professional bookkeepers, on the other hand, are trained or educated to handle all your high-level financial details, from setting up and customizing your business’s chart of accounts to calculating your sales tax liabilities. Good bookkeepers can even help you interpret your numbers.
You might not need to hire a bookkeeper full-time. However, investing in a part-time bookkeeper—or outsourcing to a professional bookkeeping firm—will help you avoid costly bookkeeping errors while making it easy to stay on top of your financials.
Benefits of hiring a bookkeeper
There are plenty of good reasons to either hire a bookkeeper or outsource your accounts to a professional bookkeeping service.
As we’ve discussed, the most important of these is to ensure you always have a complete, up-to-date set of books you can use to generate accurate financial reports, and make more informed business decisions.
Here are two other important benefits of hiring a bookkeeper.
Spotting (and avoiding) potential financial problems.
Because a bookkeeper regularly keeps tabs on the transactions surrounding your company’s expenses and income, they usually have a pretty good idea of what’s going on with your:
- Cash inflow and outflow
- Spending habits
- Sales tax-related activities
This makes them indispensable for keeping you informed about financial issues that may be looming on the horizon—and giving you time to take corrective measures (like reducing or delaying non-essential expenditures, for example).
Equally important, a good bookkeeper can save you from costly record-keeping and tax-filing oversights and mistakes.
Keeping your books organized for year-end
By making sure your books are correct and complete at the end of the year—and that your financial information is ready to share with your accountant—a good bookkeeper also ensures:
- You’ll experience less stress come tax time
- Your financial data reaches your accountant in plenty of time to both take advantage of any relevant tax deductions and get your returns filed before the deadline
- Your business remains audit-ready
How Cloud Technology is changing the role of Bookkeepers
Accounting is steeped in tradition and can sometimes seem resistant to change, particularly when it comes to new technologies. In fact, the impact of new technologies and the ability to adapt to a rapid pace of change are the two biggest challenges facing accounting professionals today, according to a recent Accounting Today survey. However, technological transformation in accounting is really nothing new.
Bookkeeping practices have undergone many transformations over the centuries, driven predominantly by technological advancements like adding machines and personal computers.
Desktop accounting software introduced a new way of keeping financial records and running reports. Instead of having to painstakingly transfer information into physical ledgers, businesses could input all their data into a computer and let the software do the heavy lifting involved in balancing the numbers.
Now, with the proliferation of cloud technology, the bar has been raised even higher. Are traditional bookkeepers at risk of being left behind once and for all?
Cloud Technology Has Already Transformed Bookkeeping
Unlike desktop accounting software, cloud-based software is hosted on remote servers. Instead of having all your data on-site in a local server maintained by the business itself or siloed on a single computer, the data is accessed through the internet using web-based cloud computing accounting software and housed in shared data centres. There are plenty of benefits when accounting data and applications are hosted in the cloud.
Collaboration with team
Collaboration becomes easier as the business, the bookkeeper and any other accounting team members can access records and reports in real-time from any location, even through mobile devices. Remote access also makes it easier for businesses to outsource their bookkeeping, as the entire accounting process can be shifted online, including all document processing and internal communications.
Improved Security & Back-ups
With greater access also comes better security and control, which is an important consideration for compliance. Typically, cloud accounting applications use encrypted connections, which ensure that data is secure as it travels between a business' devices and the cloud data servers.
Similarly, software updates for cloud applications are rolled out faster than updates for desktop applications, which can sometimes take years between updates, so bug and security fixes can also be deployed quickly in the cloud. Not only do you always have the most up to date version of any given cloud application, but also the most secure version.
Digital Storage
Cloud-based document storage has also created efficiencies for bookkeepers. Instead of having to hang on to countless files filled with paper receipts, invoices and expense forms, documents can be stored securely in purpose-built apps online.
Not only does this free up physical storage space in the office, which is almost always in demand, but searching for those documents is streamlined. Bookkeepers can save hours that would otherwise be spent shuffling papers on higher-level tasks.
Integration with Third-Party Apps
Customization is another key factor, as business-line applications, all working in the cloud, can integrate with other apps and sync seamlessly with data sources like banks. The right mix of integrated apps can create a powerful workflow, shifting the bookkeeper's role from data entry to quality control.
With these integrations, businesses can automate certain bookkeeping tasks like recording expenses, reconciling payments, and collecting timesheets. Cloud-based bookkeeping technologies reduce, and sometimes eliminate entirely, the need for manual data entry. Instead, these applications will allow businesses to sync bank and credit card accounts so that financial transaction data is automatically downloaded.
Bookkeepers Adapting to New Processes
But even as cloud technologies can help bookkeepers, by introducing efficiencies into their routine accounting processes, there is a danger that some traditional bookkeepers will get left behind. We’re already seeing how cloud technology is changing the way many businesses run their back offices, with the expectation that financial data should always be up-to-date, readily accessible, and accurate.
Gone are the days when small and mid-sized businesses could rely on a mad scramble at tax time to bring their financial records up to date. Now, smart businesses want that financial data available on-demand for forecasting and strategic planning. Bookkeepers need to be aware of these expectations and able to adapt.
We’ve seen how, in many industries, new technologies can replace human jobs with automation, but machines can’t replace the analytical human mind. Instead, new technologies can make life easier for accounting professionals by reducing repetitive tasks like data entry, manual filing, and routine calculations and allowing them to take on more complex and strategically relevant roles within the business.
By learning to use technology like cloud accounting tools, traditional bookkeepers will not only keep up but stay ahead of the curve as the profession continues to undergo transformation.
Whether you’re considering hiring in-house or leveraging external bookkeeping services, you should view the value a bookkeeper provides as a long-term investment: an upfront expense that ultimately saves time and money. Just make sure the person you choose to work with is someone you can rely on. Entrusting the financial details of your business to anyone is a big step. So do your research carefully before you hire a bookkeeper—and remember that Enkel can help.
