The U.S. Small Business Administration statistics state half of all small businesses fail within the first five years. The number one reason is financial mismanagement. With statistics like this, you can’t afford to avoid using a bookkeeper. Having a bookkeeper on your team as important as any other role in your business.
It’s easy to get caught up in buying promotional materials and advertising, bringing on team members, equipping and furnishing your office, and all the other things needed for operating a business. Money can fly out faster than it comes in if you’re not watchful of the bottom line. This is especially true when you’re a small business owner wearing many hats, doing it all yourself.
Without knowledgeable eyes on the ledger it can be challenging to make sense of the story the numbers are telling. A colleague who raves about a particular course/product they bought or is excited about the progress being made with their coach can make you feel compelled to want this, too. If you are unsure of your balances and incoming funds, jumping onboard the shiny object train can set up you for a quick derailment when a bill arrives. It can be tricky to know which reports to run monthly, quarterly, and annually if you hardly ever think about reports. When you’re too busy chasing new clients to bring in sales, face it, accounting is typically the last thing on your mind. There are too many other things vying for your immediate attention.
Running your own business shouldn’t mean you must continue wearing all the hats. Use these signs to let you know you need for a bookkeeper:
Sign #1: Is your business profitable today…and tomorrow?
Having cash in the checking account—in this moment—isn’t a reliable gauge for being profitable at year’s end. If you haven’t been paying attention to your cash inflow and outflow you don’t truly have an accurate picture of your business’s profitability. It only takes the loss of one big client to start a declining spiral. But, if you’re working with a professional dedicated to watching the bottom line, this person will use calculated projections to clue you in before it’s too late. You can’t make sound financial decisions if you don’t know what’s coming and where you need to course correct.
Sign #2: You’ve made the tax man angry.
Businesses must pay taxes without exception. Without accurate bookkeeping records, it is hard to know how much is owed for estimated quarterly taxes or the year-end taxes, let alone if you’ve saved enough by the due dates. No one wants to start off a new year owing the IRS.
Sign #3: You’re not always sure if you can pay yourself or if the funds are needed to pay something else.
If you don’t have systems in place to track your payables and receivables, you can run out of cash quickly. What if you pay yourself but a large invoice needs to be paid? Do you have enough funds held back should your customers be late in paying their own invoices to your company? Your bookkeeper will guide you in having sound practices in place ensuring everyone gets paid on time, every time.
Sign #4: Your bank statement seldom matches your ledger numbers.
Reconciling a bank statement to your expenses and client payments is what a bookkeeper does. Accurate bookkeeping makes reconciling bank statements much easier, but also makes it much easier to apply for a business line of credit or term loan. When your business is growing and you’re ready for expansion, having accurate and organized accounting evidence is exactly what a bank will want to see. Proper bookkeeping will make generating the reports the lender requires a matter of generating a report instead of rummaging through a shoebox of random receipts. A well-organized accounting system is a sign of a financially sound business—the type of business a bank wants to partner with.
If you feel you can’t quite afford a bookkeeper because you’re barely skimming by, I encourage you to schedule an appointment today to discuss your bookkeeping needs. Chances are the funds are there but you won’t know for sure if your records are jumbled!
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.