How to find a great bookkeeper for a small business
So you made the decisions to step out into the marketplace and put up a sign that reads “Open for Business!” Building a successful business is an incredibly rewarding experience. But there’s a lot to do and there’s a lot to learn. Here’s what you need to know about how to find a great bookkeeper for a small business.
Do I need a bookkeeper?
There’s some differences of opinion about when you will need a bookkeeper, but there is zero disagreement that you will need one.
Look at it like this:
Say you work for somebody else while learning a marketable skill. After a little while, you get pretty good at that skill and decide that more of the revenues should go into your pocket than into the pocket of your boss. So you strike out on your own.
Now 100% of the revenues come into your hands. But at the same time, now you’re responsible for all the other parts of the business that your boss used to take care of. Sales, marketing, and accounting being the very least of these.
The bootstrapper in you might advise you to tackle these all on your own to keep all the revenues to yourself.
Now it’s true that you will need to understand the fundamentals of business. But there is a trade off. There are only so many hours in a day - and most of the working hours should be spent doing the thing that makes you the most revenue.
So now it’s simple math.
Economists like to use the expression “Opportunity Cost”. Doing one activity for an hour comes at the expense of doing something else for an hour. So ask yourself, do you make more money by selling your skill for seven hours and then doing the books for one? Or do you make more money by selling your skill for eight hours a day and paying an expert to do the books once a week?
The wonderful thing about the “numbers” part of your business is that you can outsource it. When you’re getting started, you can hire somebody to do that work for you a handful of hours a month. Many new businesses start with a bookkeeper from day one to make sure it’s done right the first time, every time.
Double entry accounting can be very confusing, and it’s easy to make mistakes. Starting with a bookkeeper early means you don’t have to pay someone down the line to fix bad records. Learning how to find a bookkeeper can be a lesson in learning how to delegate - something new business owners struggle with.
So… what’s the difference between a bookkeeper and an accountant?
Strictly speaking, “Accounting” is a set of rules to track all the transactions in a business. When done correctly, you’ll have an accurate snapshot of your business on paper.
There’s two main reasons to do this:
- For External Users: You need to do this to pay your taxes. You’ll also need to do this if you want to, say, take a loan from a bank. You need a no-nonsense record of your business that is standardized.
- For Internal Users: How much did you make this month? How much did you spend? Are you carrying too much debt? Is it worth while to take on more debt to open a second shop?
Accounting lets you know what’s going on in your business in the most boiled-down way possible and make smart choices about what to do next. Think of the financial statements like the dashboard in your car - they give you everything you need to know to run smoothly.
The field of accounting has people with different training and skills in it. Bookkeepers are trained to efficiently do the bulk of the day-to-day tasks that are largely repetitive. They range from people who’ve earned certificates, to people who’ve learned completely by experience.
A CPA, on the other hand, is a person with a degree in business/accounting who then went on to become accredited in a professional association. They have to spend both time and money to maintain the CPA title.
Put simply, for the person starting their business from scratch, you’ll need to work with a bookkeeper every month. A CPA on the other hand, you might only need to see once a year (tax time).
How to find a great bookkeeper for a small business
CPA is a legally protected title - meaning that you have to go through certain steps to obtain and maintain it. Bookkeeping, on the other hand, is not a legally protected term. Meaning that a person can call themselves a bookkeeper whether or not they’ve had any formal training.
So it’s not about how to find a bookkeeper, it’s about how to find a great bookkeeper.
There are many different schools that will train people to become bookkeepers that issue certificates upon successful completion of the program. It’s advisable to only work with professionals that have completed one of these programs.
There are a few places to find someone who can provide bookkeeping services. There are bookkeepers that will work directly for CPA firms, there are bookkeeping businesses, and there are freelancers who work with multiple clients.
Consult several bookkeepers first
For most new business owners, it makes sense to start small. Arrange for consultations with a few bookkeepers to discuss your business model and your needs. New businesses are all a little different; some have relatively few transactions to record, others will have a large volume. They will offer you a quoted price (either an hourly rate or a fixed monthly/quarterly rate) and you can select the professional that you like.
Next, your bookkeeper will walk you through what information to send them. Some will require paper documents, but increasingly you can submit electronic copies.
Learning how to find a bookkeeper is only the first step. As your business grows, so too will your reliance on the bookkeeper. You may get to the stage that you may wish to hire one outright.
As a rough rule of thumb, you could start thinking about hiring a permanent employee if/when the person you outsource your bookkeeping to is keeping busy for at least three full days a week. A new employee could possibly fill some of your other administrative needs.