Do you need a bookkeeper?
As an accountant, I would love to tell you that you always need a bookkeeper–it keeps my profession alive. However, it’s simply not true. Here are several things that you need to ask yourself to determine if you need one.
1. Do I understand basic bookkeeping?
Can you balance your personal checkbook? Do you understand what is an asset compared to an expense? Do you feel comfortable with numbers? If the answer to all of these is no, there are a couple of options: you can take a class in accounting at your local community college or online. You can get advice from a bookkeeper and pay them to teach you how to prepare your own books. Or, the easiest, but not the cheapest option: you can hire a bookkeeping company.
2. Do I understand financial statements?
All of us want to build a successful business. Why else would we be in business? Financial statements are important: banks will require them for you to get a loan, you’ll need them to prepare your business taxes, and most importantly, you need them to determine how well your business is doing. A lot of people get along just fine without them, but there might come a time when you really need to have some financials prepared. Having an accurate set of books is important–it opens up your options for financing, your flexibility on determining how to run your business, and allows you to determine quickly what you have available for cash and credit and what expenses are coming up. (And it’ll save on your tax preparation bill.)
3. Am I comfortable with new software?
Quickbooks is a wonderful product. My colleague and I use Quickbooks regularly for preparing financial statements. It’s very user-friendly and can answer basic accounting questions. If you feel that you can take on Quickbooks and have some understanding of accounting, go for it. However, if you answered “no” to all the questions listed above, then you might not want to take the leap. Not only that, but if you really don’t understand bookkeeping, go to a professional–you can really screw up Quickbooks and it will cost you more when you tax preparer has to figure them out.
4. Do I want to do my own bookkeeping?
This is probably the biggest question of all. If you don’t want to do it, don’t. Leaving bookkeeping until the very end of the year can cause days of frustration as you enter all your information and possibly miss something. I know that I tend to put off things that I don’t want to do until the very end. Putting off you books is just asking for trouble because you can easily miss something that would have been obvious with regular entries. (Entering parking or toll expenses, for example.)
5. Do I have employees?
Employees = payroll taxes. That simple. Quarterly filings need to be completed, regular paycheck amounts need to be calculated. If you’re comfortable with this, go for it. Personally, I leave payroll clients to my colleague because she’s more comfortable with it. Sure, I can do it, but I really don’t like to. Payroll is a great reason to hire a bookkeeping service or payroll company. It can be a lot to handle.
By no means is this a comprehensive list of questions, but it’s a starting point. If you understand basic bookkeeping and financial statements, don’t mind keeping your own books and have no employees–go for it! There’s nothing stopping you.
Unfavorable answers to most of the other questions can be mitigated. If you need help with basic accounting, try taking a class–it’ll also help you understand financial statements. Quickbooks can be set up by an independent bookkeeper and you can just run it after it’s all set up. While I was in college, I temped through an agency which sent me to clients’ offices to get their books in order and teach them how to use Quickbooks. It was a great service which is still offered through large temporary agencies.
Hire a payroll company if you have employees–they don’t charge a lot and payroll is their area of expertise.
There is one question that can’t be overcome. If you don’t want to do your bookkeeping–don’t. Being forced to do something you really don’t want to do is awful. Bite the bullet and pay someone.
Up next: How to choose a bookkeeper.