Keeping your costs under control can be crucial when you start a business. That leads many to query whether they need the extra expense of a bookkeeper.
Many entrepreneurs believe they can keep track of all the financial movements themselves, removing the need to pay a bookkeeper. They think that will help them keep costs down as they launch their business.
But is it that simple?
Why a Bookkeeper?
Keeping track of your finances and accounts can be key to a successful start-up.
If you attempt to do this yourself, you face two risks.
One is not having the knowledge and expertise of a professional bookkeeper to do it correctly
Even if you do, shouldering this responsibility comes at a cost. It can become extremely time-consuming, meaning your valuable time is monopolised by maintaining your books rather than tending to your business.
Additionally, this is yet another responsibility to add to the burden of being a business leader. If controlling costs is a priority, you are probably already taking on multiple roles that could have been delegated.
If acting as the bookkeeper is another to add, the workload will soon take its toll on you – physically, mentally, and emotionally.
Yes, when you launch your start-up, you might be able to handle the bookkeeping initially. However, hiring a professional will ensure your accounts are done correctly and on time. That will lighten your workload so you can keep your focus where it needs to be – establishing and growing the company.
Bookkeeping Matters
You should not underestimate the importance of bookkeeping for your business, especially when you are just starting out.
This is how you keep track of your financial performance. It is how you fully understand the state of your finances.
That comprehension and information allow you to plan and strategise with certainty.
It is essential to be timely, consistent, and accurate with your bookkeeping.
What Does a Bookkeeper Do?
If you are still questioning whether you need the expense of a bookkeeper and querying whether doing it yourself will really take that much time, here’s something to think about.
Here are a few tasks that could be involved:
- Keeping an eye on business cash flow by keeping track of every purchase
- Ensuring your business is meeting all relevant tax obligations
- Making payments on behalf of your business, including expenses, petty cash, and supplier invoices
- Preparing and issuing invoices for clients so you receive payments quickly
- Managing the account receivable ledger and following up on late payments
- Keeping track of all sales or purchases daily
- Producing inventory reports so that any discrepancies are reported back to the business to ensure the problem can be addressed quickly
- Monitoring the balance of revenues and expenses and advising if the business needs more available cash to operate
- Ensuring that the accounts are up-to-date and valid, especially when the accountant needs them
While managing a start-up, do you really have time to do all of this, on time and correctly, as well?
When to Recruit
If you take on the bookkeeping duties, there will come a time when it is too much for you or you are too busy elsewhere.
At that point, you need to recruit a bookkeeper, either salaried or as an outsourced service provider.
How will you know when you are at that point? Here are some clues:
If your bookkeeping fails to reflect your actual financial situation: without updated books, it cannot be easy to know just how much income you are making and how to increase cashflow. In addition, if your books are not in order, you will have lots of bookkeeping during the tax season, which can be stressful and much more challenging. However, when you employ a bookkeeper, you can be sure to receive monthly financial statements so you are sure of where your money is going.
When your sales start to increase, but your profit doesn’t: when you notice a decrease in your bottom line but an increase in your revenue, it means you need to increase your profit margins. This is when a bookkeeper should come in: they provide tax-ready financial statements so you can know where to cut costs in order to generate more profits.
When cash flow is unpredictable: if you are not sure how much payment you’ll receive from a client or just how much you’ll pay a freelancer, it only means one thing; you need a bookkeeper to handle your cashflow. The cashflow statements enable you to see how much other people owe you and how much you owe other people. Your bookkeeper can give you an update on your monthly cashflow.
Conclusion
When you are starting out with a new business, it is important to keep costs under control. Often, that means you, as the boss, will take on additional responsibilities until you can recruit and delegate.
Bookkeeping may be one of these.
That is understandable, but do not lose sight of how vital the role of a bookkeeper is. When finances are your priority, having a clear understanding of income and outgoings, debt and cashflow, is crucial.
Getting this done correctly and in a timely fashion could be just as important to your future success as keeping the wage bill low when you launch.
