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Do you need to hire a bookkeeper? If you are asking the question, the answer is yes!
Most commonly bookkeepers are brought in due to lack of time, lack of financial expertise, or growing business complexities. Whether a bookkeeper is freeing up time for an owner to engage in revenue driving activities or providing deeper financial knowledge, this professional role can be a crucial hire at a growing business.
When you are looking to hire a bookkeeper for your small business, will any bookkeeper do? Or do you need a bookkeeper that specifically works with small businesses? And, what can a small business bookkeeper offer that you cannot do yourself with QuickBooks or another accounting software?
Small businesses are more likely to use free accounting software or basic accounting plans, which tend to be severely limited in the type and volume of business functions that they can accommodate. Therefore, small businesses cannot simply rely on software to do it all and should not assume that what is available on these versions is everything that they need. Instead, they should lean on an experienced professional to keep their books.
Find out what makes small business accounting unique and how a small business bookkeeper can be a benefit to your business.
Understanding Small Business Bookkeeping
Startups and small businesses differ from their bigger and more established counterparts in numerous ways, especially when it comes to their finances. What makes small business bookkeeping different?
Small businesses tend to have more cash transactions, including petty cash, as a part of their accounts payable along (AP) with other common AP like supplier invoices and equipment expenses. Therefore, frequent bank reconciliations are even more important.
They also often have loans that must be accounted for correctly, which requires knowledge of standard small business loan terms and payback periods. Small business loans can vary significantly from traditional loans, especially if they are a part of a government incentive plan or stimulus package and a small business bookkeeper will be accustomed to handling these.
At small businesses and startups, owners and other key employees are also more likely to receive non-traditional forms of compensation such as equity in the business. This compensation must be treated differently than regular payroll and may also affect benefits calculations.
Additionally, small businesses are more likely to need adjusting journal entries if invoice payment terms are longer or payments to vendors are being delayed. In these cases, revenue that has been recognized and expenses that have been incurred may be shifted to different reporting periods.
As a result, small business bookkeepers often wear more hats in their roles, making them responsible for additional tasks like stock level inventory reporting and processing employee payroll.
Unique Business Considerations
Individual small businesses may have other unique business components to consider also.
How you keep your books may dictate the kind of bookkeeper you will need. If you use a less common accounting software to manage your business, you will want a bookkeeper that already has experience with this platform, so he/she does not need to learn a new system. Even if you use a more common accounting system like QuickBooks, you will want to verify that the bookkeeper you hire knows how to use the specific version that your businesses utilizes, like QuickBooks Desktop Pro.
Your method of revenue recognition will affect your bookkeeping needs. Businesses that use cash versus accrual accounting will likely want a bookkeeper with experience that matches this approach.
Additionally, certain industries have special accounting considerations as well. As an example, businesses in the apparel, restaurant, property management, skilled trades, health, and medical industries have distinct accounting needs that necessitate a bookkeeper with relevant financial experience to draw on. In these instances, while finding a small business bookkeeper is important, finding a bookkeeper that has formerly worked in the same industry is just as crucial.
Do You Need a Small Business Bookkeeper?
Hiring a small business bookkeeper has a bevy of benefits, including:
Remember, bookkeepers are typically only responsible for maintaining the books and providing ad hoc financial reports. However, an accountant can also prepare, and file business taxes based on the financial records supplied by a bookkeeper. Working with a small business accountant is especially beneficial for businesses that are filing as sole proprietorships, partnerships, or LLCs to ensure that the right tax regulations are being followed.
If the job requirements for your bookkeeper role keep growing, you may need a small business accountant instead. Find out more about how to hire an accountant fast if you find yourself in this situation and need help right away.