We discussed earlier what system to use for your bookkeeping. Today we’ll look at who is actually doing the work.
The DIY Approach
Most small business owners start off doing everything themselves. Sometimes this is because they know the business best, but usually they just don’t have the budget to do otherwise. If your business is small enough, bookkeeping doesn’t usually take too much time.
However, as the business grows, this “inexpensive” option means you’re taking time away from growing your business, something you’re best suited to do (or you’re just not doing the bookkeeping).
Contract Bookkeeping
Once your business has grown sufficiently, most businesses will start by working with a part-time bookkeeper.
This person has their own business bookkeeping for a variety of businesses, and will charge an hourly rate. The schedule you set up with them will depend on your needs and volume of business. Usually this will be a day on a regular schedule that fits your needs. They will enter banking activity and receipts, prepare cheques and payments, run payroll, and reconcile bank statements. You should also get access to interim reports to see how the business is doing.
Bookkeepers require no accreditation or designation, so ask about the specific experience your potential partner brings to the table. Speak to some of a potential bookkeeper’s current clients and discuss their experience, especially people in your industry before you start working with them.
Determine what you need to have ready when they come in, and meet those obligations. Not being ready for them is inconsiderate of their business and costs them money.
Hiring In-House
A business that has grown sufficiently should look at hiring someone part or full time as a bookkeeper. If your bookkeeper is coming in frequently, hiring someone may actually lower costs.
Having a bookkeeper on staff provides a few benefits:
- Information can be entered on a near daily basis, allowing for timely reporting,
- Urgent concerns can be addressed right away (for example if a supplier calls demanding immediate payment before releasing a shipment),
- Cash flow can be improved by having them follow up with customers with outstanding invoices.
As with any other hiring decision, ensure the person you are hiring for this role is properly qualified and understands your industry and accounting software.
Concluding Thoughts
Ensure that you regularly evaluate whether the current option you’re using is the right fit for your business. The DIY option seems less expensive, but contract bookkeeping usually isn’t particularly expensive, and frees business owners to focus on growing their business.
Ian Edmonds is a CPA, CA working in Toronto with small and medium sized businesses in Canada to provide personalized, approachable tax and accounting advice and services. He also provides a variety of bookkeeping solutions for his clients.