5 Signs It's Time for Your Startup to Hire Its First Bookkeeper
Every day your company is making money and spending money. Keeping track of this is fundamental to your company’s success.
DIY bookkeeping may not be the best option. You should be spending less time on your finances and more time on sales and development.
If you have a stack of invoices and receipts to record, it may be time to hire a bookkeeper.
Here are five signs that you need to hire your first bookkeeper.
1. You find yourself making several small mistakes.
If you’re the CEO and bookkeeper, you’re probably awesome at one and not so great at the other.
Have you paid rent twice, submitted payroll late, or missed paying suppliers? If the answer is yes, then you’re ready to hire a bookkeeper.
Bookkeepers will keep your financial house in order. They literally keep your books. They will record financial transactions correctly, process payroll on time, invoice your customers, and pay your bills.
Gathering, organizing, and recording information is where bookkeepers excel.
An experienced bookkeeper can help streamline procedures too. They can help standardize how documents are retained or create a calendar to manage due dates of bills.
2. You need to switch to accrual-based accounting.
Congratulations! Your company is thriving. Your revenue is growing and customers love your product.
However, the Tax Cuts and Jobs Act requires businesses with average annual revenue of $25 million over the last three years to use accrual basis accounting.
Accrual basis accounting requires you to record revenue when earned and expenses when incurred regardless of when cash is received or paid.
You’re probably more familiar with the cash basis of accounting. That’s when you record revenue and expense when you receive or pay the cash.
A good bookkeeper will be able to invoice your customers. This invoicing of customers is accrual basis accounting. You’ve earned the revenue by providing the service, but your customer hasn’t paid you yet.
Prepaying for an annual insurance policy or acquiring expensive equipment also requires accrual basis accounting. An experienced bookkeeper will know how to record transactions using the accrual basis of accounting.
3. You dread tax time.
Death and taxes…the two unavoidable things in life. Unlike death, taxes are more dreadful because they come around each year.
If you’re like most people, you wait until the last minute to compile the data your CPA needs to prepare your taxes. Or you ask for an extension every year.
And if you’re “one of those clients,” you bring a shoebox full of receipts to your CPA. Your CPA likely charges you a fee to organize your receipts and financial transactions. And most CPAs will remind you each year to do a better job organizing your books.
This is where a bookkeeper can really pay off. Your bookkeeper will be recording all your transactions throughout the year. This means that producing the financial statements your CPA needs will be just a few mouse clicks away. You can have your taxes filed on time and with minimal headache. Wouldn’t that feel good?
4. You have trouble managing cash flow.
Every business needs to manage cash flow. You need to invoice customers regularly to collect cash so you can pay yourself and your bills. You need to know how much you’re spending on office supplies, marketing, or computer expenses. If you’re “keeping track of it in your head,” then it’s time for a bookkeeper.
You’re focused on production, sales, or growth. This leaves little time for administrative functions like invoicing customers, paying bills, and filing paperwork. Let your bookkeeper invoice your customers on time and pay your bills. They will be able to categorize your expenses properly, so you know how much you spend on marketing each month.
Because bookkeepers are detail-focused, they will be able to identify irregularities and communicate them to you.
5. You’ve never produced a balance sheet or income statement.
The balance sheet and income statement are the two most important financial statements.
The balance sheet will show a snapshot of your assets, liabilities, and equity. It shows how much cash you have in the bank, how much money your customers owe you, and how much you owe your suppliers and vendors.
The income statement will show your revenues and expenses.
If you’ve never produced or looked at a balance sheet or income statement, it’s time to hire a bookkeeper. A bookkeeper will record your financial transactions timely. This will allow for the timely production of financial statements.
Hiring a great bookkeeper may be the best investment you can make. Make sure you do your due diligence though because a bad bookkeeper can make your life a nightmare.