BREAKING: Bookkeeping is far more than simple data entry.
Sure, in the earliest stages of starting a business, a solopreneur can carefully tread the waters of managing their own finances, but there will hopefully come a time when your business has grown beyond the bounds of your grassroots bookkeeping capabilities.
But your books – and the fact that they squarely shoulder the financial health of your burgeoning business – can’t be left for your spouse to tackle late at night after work, family, kids, dinner, baths and bedtime are done.
Simply put: Bookkeeping can’t be an afterthought, as tempting as it may be when all of life’s other demands come calling.
But you hem-and-haw at the prospect of paying someone to do something that, until this point, you felt comfortable handling yourself, and you hem-and-haw at the prospect of doing it yourself because, well, it’s not your passion or your calling.
It’s a catch-22.
Ask yourself: Can you afford your own hourly rate if you were to take time away from other pressing matters to handle your own bookkeeping? Can you afford to correct mistakes made year after accruing year?
You may not have considered it from that perspective – but it warrants some thought.
Because while you may think you can’t afford to hire a bookkeeper, you’re technically costing yourself whatever your hourly time is worth every time you sit down to handle a task that could be delegated to someone – often surprisingly – more affordable than you. And let’s not even get into how they’re more qualified, dedicated to handling bookkeeping and nothing else and – GASP! – really enjoy doing it.
So let’s start with everything that can go wrong.
Where It All Goes Wrong
Businesses of all sizes – and at every level – are at risk of making bookkeeping mistakes. Keeping the books and preventing blunders are the financial equalizer.
For example, more than half of all business owners surveyed by TD Bank said they view bookkeeping as their most-loathed responsibility. Specifically, only 15 percent reported enjoyment from bookkeeping.
See? You’re not alone.
Though few are fans of the actual work involved in bookkeeping, startups, small businesses and solopreneurs may be at an elevated risk of committing significant errors in managing such tasks. Given their lean staff, limited capital, and learning curve, those who are newcomers to dotting their financial I’s and crossing their numerical T’s could be making blunders without realizing it.
So, here’s a quick-and-dirty shortlist of the top five biggest bookkeeping mistakes …
1. Mixed finances.
Business owners, new and veteran alike, sometimes blur the lines between personal and business finances. They blend expenses, pay bills out of both accounts and build a case for writing off a personal discretionary expenditure as a business deduction.
2. Misclassifying employees.
There’s been much written in recent years about the IRS and Department of Labor cracking down on companies that classify contributors as independent contractors when, in reality, they’re actually employees. The IRS offers guidance on what constitutes an employee or an independent contractor relationship.
3. Missing deductions.
You don’t know what you don’t know – and that includes applicable business deductions. These could include professional development classes, matched funds contributed to employees’ retirement savings accounts, home offices, hardware, supplies, repairs and more. And who wants to miss an opportunity to deduct, well, anything?
4. Absent oversight.
Merriam-Webster defines oversight as, “... an inadvertent omission or error.” And as something that has plagued human endeavors since the dawn of time, this essential human frailty merits closer examination.
Small businesses so often do more with less, but this is an area where being agile and lean may not prove optimal. Failing to exert governance and maintain internal controls can cause finances to fall flat. This is especially possible in businesses with a – likely inexperienced – person serving in a bookkeeping capacity who doesn’t know how to identify concerns, clarify and reinforce policies, help develop newer, better practices, and perform reviews of legacy data to spot gaps and opportunities.
5. Open records.
Open records dangerously include confidential data and protected information – when it should be removed from employee or public access. It’s a critical step for safeguarding your books, maintaining the integrity of your business, and keeping the spirit of competition.
How It Can All Go Right
Deciding to do – or finally not do – your own bookkeeping is much like deciding whether to change your own oil or hire a mechanic.
You could do it yourself and save some money – that is, if you know what you’re doing – or you could end up making a huge mess and, potentially, some costly mistakes.
But herein lies our Goldilocks catch-22: Hiring an in-house bookkeeper is too expensive, but your time is too valuable for you to be able to afford your own hourly rate as a makeshift bookkeeper.
So, now what?
ANSWER: Hire a virtual bookkeeper.
By outsourcing your bookkeeping, you save money by not paying full-time or part-time employees and only paying for what you need – nothing more, nothing less – such as …
With an unbiased third-party, you get expert opinions and advice on the financial health of your business, empowering you to make informed business decisions.
Outsourcing your bookkeeping provides you with educated professionals who have worked with many different industries giving them an advantage on how best to serve you.
Whether you’re looking to grow your business or cut down on spending, virtual bookkeeping can help you reach those goals by scaling to meet your needs, without having to hire or train additional staff.
Cash Flow Management
Your bookkeeper can closely monitor the following, making your operating activities easier and more efficient. To learn more about this and the two other mission-critical bookkeeping reports, check out this free resource.
Your virtual bookkeeper can manage your bank feed transactions, such as matching deposits for accounts receivable or outgoing transactions as payments against vendor bills.
From creating and sending invoices, to providing statements, to assisting in collections, to documenting those payments, your bookkeeper will manage all the moving parts.
A virtual bookkeeper can handle all of your vendor bills, and schedule and manage the payments accordingly.
Your bookkeeper can manage your payroll, assist in processing paychecks and/or liability payments and returns, and enter payroll data into your accounting system.
Your remote bookkeeper is available at your convenience to work around your schedule. All the bookkeeping you could ever need or want – and nothing you don’t!
A virtual bookkeeper can make sure your financials are accurate so that you can keep your CPA, the IRS and banking institutions happy.
Time For Self-Reflection
Still unsure? Ask yourself …
- Do I need accurate financials?
- Wouldn’t it be nice to sleep soundly without waking up in a cold sweat wondering if I’m ready for tax season?
- Does doing literally anything else sound better than doing my own bookkeeping?
If you answered ‘yes’ to any – or all, if you’re being honest – of those questions, it may be time to treat yourself. Talk to the BELAY team today and never lose sleep again.