As a small business owner, you’re resourceful and take pride in getting things done yourself. When starting out these are essential characteristics. But as your business grows, so does the ‘to-do’ list, with an ever-increasing number of tasks and responsibilities.
Most people go into business because they are great at something. No matter whether it is a trade, professional service or baker, very few people go into business because they love paperwork. While it is possible to learn the basics of bookkeeping, your time is best spent on growing the business.
You are likely reading this blog looking for confirmation of something you already know. But before we go further into the signs you need to look out for, let’s first look at why you might not have taken that step yet.
I have spoken with a lot of business owners. One of the big reasons they don’t hire a bookkeeper is because they think they can save money by doing it themselves. My question to you then becomes – at what cost?
What is the true cost of doing the bookkeeping yourself? How many hours are you working on that each week? You probably don’t have enough time as it is because you are working in the operations of your business. What is falling through the cracks? As your business grows and you take on more clients, it means more paperwork. Is it taking up more time in your life than you can actually afford?
Don’t take your time for granted. Time is a valuable asset that you cannot replace or top up.
Here’s a little exercise. Start tracking how much time you spend on bookkeeping. Then, identify how much your time is worth. Using those two numbers, figure out how much you are really spending on bookkeeping. If you don’t know how much your time is worth, download this little worksheet to help you out.
Or better yet track an entire day – download the Day In Your Life Worksheet here.
Like many small business owners, when you first started out you might have had the time to look after every part of the business. You are probably used to always being the first point of contact. But if you’re getting bogged down doing everything, then you won’t be able to grow your business in a sustainable way. Worse still, if you stop working, then everything stops.
Despite what you might think, bookkeeping is actually one of the easier functions in business to delegate or outsource.
So let’s look at the 5 signs that it’s time that you need a bookkeeper in your business.
1. No time for your core business
There’s only so much that you can squeeze into a single day. Now your core business is that thing you do that makes you money. When you are growing you need to focus on what you do best. If you’re spending a large part of your time managing paperwork, you’re not contributing to the growth of the business. Even worse, if you are sitting up at night or doing paperwork on the weekend, that’s a clear sign you need some help.
A recent Quickbooks Business Growth Survey showed that 65% of respondents said that they would be better positioned for long term growth if they could take a step back and look at the bigger picture of their business.Source: https://quickbooks.intuit.com/accounting/bookkeeping/business-growth-survey/ accessed 24/9/20
Doing the books shouldn’t keep you from working ON your business. Having a good bookkeeper means your books are accurate and in order. They can provide real-time data from which you can make decisions about your business.
2. Invoicing is irregular
Let’s face it, cash is king.
Is doing the work is more important than invoicing? Is it an afterthought that you squeeze in around other commitments? Then you definitely need a bookkeeper. Regular invoicing is essential for smoothing out your cash flow. It helps reduce the incidence of bad debts as you’re less likely to be carrying money owed for long periods of time (either as a debtor OR work in progress).
3. Books are never up to date
As an accountant, I have seen a few clients in my time whose books were only done to prepare their EOFY taxes. That means we are recording transactions that might be up to 18 months old. How do you run a business like that?
Are you looking at a growing pile of documents sitting on your desk? Trying to keep up with paperwork, invoicing and reconciliations after working all day can be frustrating. Especially because this time should be used for rest and time with the family.
With outdated books you’ll never have a firm handle on your finances. You might also have a lot of manual systems. A bookkeeper with App Advisory experience can streamline your systems. They can help you set up software and systems specific for your workflow.
If your accountant is doing your bookkeeping, then you may be paying more than you need. Among other things, bookkeepers record regular financial transactions. Accountants analyse and interpret periodic data and offer financial and taxation advice. These are very different skill sets. An accountant is usually more qualified and will generally charge you more.
Having a bookkeeper means having someone whose sole job is to help you manage the books. They keep your records compliant and organised.
That’s leads us directly to the next sign.
4. You’re behind on your taxes
If you are behind in your taxes, or have a few statements outstanding, then you probably need external help. The Tax Man can be nasty and they don’t care for excuses about not lodging, filing or paying taxes on time. There can be major penalties for not getting this done.
Managing compliance and tax matters is becoming more and more complex. Have you lodged your Workcover, Payroll Tax, Activity Statements, End of Year Tax Returns, Annual Payments Summary and your Superannuation? Do you have a clear understanding of what records or documents you need to keep in case you get audited?
When you rush trying to put together your books you might miss out on some of the legal tax deductions you could claim. A great bookkeeper who understands your business can help guide you on what you can and can’t claim. Part of their job is to take every expense you incur and categorise it properly. Because they look at every transaction, they can spot deductible expenses. Identifying these means you can then chat about claiming them with your accountant.
Being proactive means you reduce the likelihood that you’ll miss out or get left behind.
5. You have unpredictable cash flow
When the month seems to run out before the bills do, it is definitely time to get professional help. Managing your bill payments properly means you can take advantage of early or on-time payment discounts. You can also avoid incurring any late fees.
Lumpy cash flow is a direct result of irregular invoicing, so these two go hand in hand.
A growing business is generally a good thing as it often means more money in the bank. But growth sucks cash. Having up to date books means that you can make spending decisions you can afford.
It means that you can have confidence behind answering questions like:
- Do you invest in that new piece of equipment?
- Can you afford to take on a new employee?
- Should you buy in that new container of inventory?
Stock decisions become clearer as you have a better handle on what inventory you are carrying.
Most small business owners I meet are time poor. They’ll often leave the bookkeeping until they absolutely have to do it. But if you don’t have up to date records you might run into financial problems that could have been resolved if found early.
Personally, I have found cash flow issues fall into this pot more than any other. It is also one of the leading causes of business failure in Australia.
According to ASIC – 51% of the nominated causes of business failures in 2019 was inadequate cash flow or high cash use.Source: https://asic.gov.au/about-asic/news-centre/find-a-media-release/2019-releases/19-363mr-asic-reports-on-corporate-insolvencies-2018-19/ accessed 24/9/20
These are the big signs you need to hire a bookkeeper. Don’t get me started if you’re running a business and the accounts are done by spreadsheet using a template from the internet. There are so many good and cost effective software programs available to help you look after your books. The investment in software is a no brainer. Most programs are cloud-based too which makes getting help a breeze. The inbuilt security measures mean you are less likely to lose years of financial data if you have a computer crash or security issue.
When there two or more of these signs in your business, then it’s more than a sign. It’s a flashing warning. You need to get bookkeeping help or you could be throwing money away.
The longer it takes to chase someone up for money owed, the more likely it will become a bad debt. The time you have to spend chasing it also whittles away at the profit you would have made.
You might think we are pushing having a bookkeeper for your business. At least someone doing those books that isn’t you. And quite honestly, we are. We don’t want you to waste time on tasks that aren’t growing or sustaining your business. We recommend using our Ultimate Bookkeeping Task List to take control and delegate critical functions. You are then freed up to focus on the hidden sources of money in your business. You can create a strategy that will increase your income. You can write your own paycheque and build the business that supports the lifestyle that you want.
It is my belief that unless bookkeeping is your skillset and area of expertise, it is best outsourced. One of the best things you can do for your business is hire someone to help you in this area. Business and investing are team sports – so the question then becomes – Who’s on your team?
Still not sure whether you should hire a bookkeeper? Then let me ask you these two questions:
What would happen if you don’t get a bookkeeper?
Will you carry on the same old way that you are now? Overworked, overwhelmed and not making progress towards creating the business that you want?
If you’ve read this far I’m sure that you are looking for something better than that. So the next question is:
What would happen if you do get a bookkeeper?
Think of the time you can then spend working ON your business. You’ll have access to accurate reports, be able to make real-time decisions, and get back your time to focus on the things you really want to do.
Thanks for reading,
P.S. Here’s some extra resources to take a look at.
How to discover positive cashflow in your small business without drama by developing a cash flow strategy. Does your business make money but for some reason there never seems to be enough cash on hand at the right time? We have put together a free video and report showing you the 3 secrets to improving your cash flow.
If you want to manage or outsource your bookkeeping, then this Checklist is an absolute MUST. It covers 72 points you need to work through to assign, delegate or do when looking after the bookkeeping in your business. Did we mention, it’s FREE! Go and grab your copy right now.