In the early days of your startup you are bound to ask yourself, do I need a bookkeeper? You will likely be surrounded by strong opinions on all sides. You certainly don’t want to make any big financial blunders during the early stages of your business. However, you don’t want to be throwing money away on accounting services you don’t need. So, what is the answer?
For a small sole proprietorship without much complexity, many owners are certainly capable of staying on top of their books. Now, there is a big difference between capable and willing, but more on that later. For most new sole proprietorships, including LLCs, all that is needed is a basic understanding of financial concepts, a bit of time invested in learning bookkeeping fundamentals, and a subscription to some solid bookkeeping software, such as QuickBooks Online (QBO). Do you understand the difference between income and expenses? Do you understand the flow of money into and out of your business? For a basic new business, don’t let anyone tell you that you must have a degree in business, or an expensive CPA to perform your day-to-day bookkeeping. It is simply not true! That being said, you must also be realistic about your strengths and weaknesses. We all have our natural gifts, but we must also be honest about our shortcomings. You may be a true craftsman as a carpenter or stone mason, but maybe finances are just not your thing. You need to make a realistic assessment of whether doing your own books is something you have the aptitude for.
That brings up to the topic of whether you are willing to do your own bookkeeping. Perhaps you have the knowledge to do it yourself, but the thought of sitting at the computer working with numbers is like nails on a chalkboard. Maybe your business keeps you busy with long grueling days out in the field. You started a business so you could control your own destiny and have more flexible time for the things you love. Do you really want to come home and handle the bookkeeping at night? In these cases, you may be capable of doing your own books, but the luxury of not having to worry about it is definitely worth the cost of paying for a bookkeeping service.
Another angle to examine as a business owner, is whether it a good use of your time to do your own bookkeeping? This gets into the concept of opportunity cost, which I won’t bore you with. But essentially, are you further ahead investing the time doing your own books to save $75/week? Or could you take that same amount of time and be out selling, tracking down new customers, or doing a couple of extra jobs a week? If investing time growing your business will yield greater results, then saving a little money doing your own books may look like a poor choice.
Now, all of the above is based on the understanding that your business is small without too many “moving parts”. Once you start adding complexities such as employees, payroll taxes, collection of sales taxes, invoicing, multiple bank accounts or the intricacies of e-commerce, you are starting to get into some deep water. A professional bookkeeping service will likely become not just a time saver, but a necessity. Spending a modest amount of money will actually save you money in the end and keep you in compliance with the government.
If you make the decision to start off doing your own books, there are a few important steps to take. Firstly, ensure that your books will be clean with no co-mingling. This means opening a business bank account that is only used for the business. If your business uses a credit card, get a business card or at the very least, dedicate one of your personal cards to be for business use only-no exceptions! In my experience, the number one way business owners create messy books is by co-mingling of personal and business activities. Just say no!
Secondly, choose an easy-to-use bookkeeping software platform that offers great support, such as QuickBooks Online. QBO is cloud-based software that charges on a monthly subscription basis. You can access your books from any computer, or even your cell phone. It has great features such as receipt capture, where you snap a photo of the receipt and it is instantly entered into your books, and mileage tracking through a simple phone app. Another great advantage of QBO, is that if you ever decide to have your bookkeeping done by a professional service, there will be no conversion to another system, as it is one of the most widely used programs among bookkeepers. They will simply pick up from where you left off.
Lastly, if you have the aptitude to do your own bookkeeping, dedicate some time to learn the basics about bookkeeping and QBO. This does not involve signing up for classes or even spending any money. There are a lot of high-quality resources available on platforms such as YouTube. QuickBooks even has their own YouTube channel which is chock full of easy-to-follow tutorials, from beginner to expert.
So take stock of your business and ask yourself, do I need a bookkeeper? To find the right answer for you, be honest about your business, its needs, and your capabilities.
May your business thrive!
Rich Demmler is the owner of Sunny Bookkeeping, a professional full-service bookkeeping firm designed to help small and medium-sized businesses achieve their goals. For a free consultation and custom quote, schedule an appointment by calling 843-712-4400 or visit Sunnybookkeeping.com for more information about how we can help your business.