Small Business Bookkeeping – Finding A Great Bookkeeper For Your Small Business

small business bookkeeping

Proper small business bookkeeping is an important aspect of getting your business running. It will also be a critical factor in helping you take the next steps in your business. Although small business owners may sometimes think that they can handle everything on their own, small business bookkeeping will prove to be a great way to save your time for bigger and better things. Any sort of successful business delegates tasks in order to be as efficient as possible. Bookkeeping services for small business owners are one of the best ways to keep your finances in check, helping you to usher in the next stages of your business with the right financial planning.

Difference Between Bookkeeper and an Accountant

small business bookkeepingRight off the bat, one of the most important things for us to discuss is that there is a difference between being an accountant and being a bookkeeper. When you first think of these two terms, you may think that they are the same type of job. However, the reality is that there are some pretty major differences between these two different types of jobs.

Accountants Compile the Bookkeeper’s Information

Although both of these jobs seem to be very similar, a bookkeeper can be very useful when you also want to hire an accountant. A bookkeeper will typically do all the hard work of compiling your daily expenses and helping to balance your monthly budget, whereas an accountant will take the information that was compiled by the bookkeeper and use it to notice trends, and ideally, help the business owners to make responsible and intelligent financial decisions which will better the business’ chance of continued success.

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Bookkeepers are More Relevant in the Here & Now

When you think of a what a bookkeeper handles, think about all the things which are most important today. If you are going out to lunch and putting it on the business card, your bookkeeper will know exactly where it was and how much it costs. However, when it comes time for an accountant to handle this data, they will much more likely miss the individual charge for lunch, and rather view it as part of a larger, monthly expense of going out to eat on the business credit card.

Accountants Handle Broader Financial Plans and Data

While you would trust a bookkeeper to handle the records for each of your daily expenses, the accountant will be tasked with inspecting the financial data from a larger scope. Typically, the accountant’s job will come into play when you have monthly or annual financial reports for them to look through. With this data, they will be able to offer you advice, notice unhealthy trends, and give you advice for increasing your income.

What are the Main Responsibilities of a Bookkeeper? Basic Job Description

small business bookkeepingIf you are certain that you want to hire a bookkeeper, and not an accountant, it’s important that you understand some of the usual parts of their job. This way, you know exactly what to expect when you start talking to qualified individuals who may end up serving your business for several years. If you are new to hiring someone who can provide bookkeeping services for small business operations, it’s important that you know what to look for or ask for. Ignorance of certain typical job responsibilities may result in you not getting the best employee that is as experienced and knowledgeable as possible. Here are 4 basic documents that they should handle for you, along with some other typical parts of a bookkeeper’s job.

Income Statements

Income statements are one of the main responsibilities of an effective small business bookkeeper. To describe them simply, an income statement will present all the revenues and expenses for a set period of time. The eventual goal of income statements is to demonstrate the exact profit or loss gained during the period of time, and to be able to clearly explain why. At the end of the day, the numbers don’t lie. The income statements that your bookkeeper provides you will be one of the most important signs as to how effective and trustworthy your bookkeeper will be. After all, small business owners should already have a general idea of how profitable each period of time is.

Balance Sheets

Balance sheets are one of the most important statements that an effective bookkeeper will be able to provide. In simple words, a balance sheet is your reference for determining your business’ total net worth. To calculate this number, the bookkeeper will list and account for each of your business’ assets, liabilities, and equity. When done for several consecutive years, a balance sheet will become a lot more reliable. When it is all said and done, a balance sheet will also be the statement that you reference first before you decide to pack up shop and sell your business.

Cash Flow Statements

How you use your cash is something which needs to be carefully monitored. This way, you don’t end up with unnecessary losses. Or, extra income which you fail to plan for. Although the former is clearly a lot worse of a situation than the latter, marking down each instance of cash flow will help you be organized. First, the bookkeeper will start with a delegated period of time. Then, they will prepare a statement which describes where each dollar of business money was received or spent. This includes any sort of income and expense.

Statements of Changes in Equity

Your business equity is the difference between the value of your assets and the value of your liabilities. Preparing statements of changes in equity is one of the most basic types of financial statements, and something which any small business bookkeeping service should be expected to handle. This document is also required to be readily available under the business laws of various countries around the world. In the USA, this document can also be referred to as the “statement of retained earnings.” If you hire a small business booking service or employee, be sure to ask whether or not they know how to do this for you.

They Can Also Handle Other Relevant Financial Documents & Actions

Outside of the four basic financial documents listed above that each small business bookkeeping candidate should be proficient with, at the very least. There are clearly other jobs which you can request them to do, especially if you want to hire your bookkeeper to work on a more full-time basis. When the bookkeeper is not preparing your financial statements, there are various other things that they will logically need to handle along the way.

    • Collecting and paying sales taxes.
    • Delegating funds for business taxes.
    • Sending out payrolls.
    • Sending out invoices to contractors.
    • Payment of invoices to contractors.
    • Sending out relevant financial statements each month.
      • Maintaining your annual budget.
    • The first line of defense when an issue comes up.

Since each of the main financial statements that your bookkeeper is expected to prepare requires them to be in contact with various actors, it is reasonable to expect your bookkeeper to handle some basic financial actions like payment of taxes, contracted services, ensuring your budget stays balance, and so on. Perhaps the most important (yet commonly overlooked) aspect of a bookkeeper’s job is that they will be the first person to notice if someone steals from the company, some form of leakage, and so on. This is one of the reasons why it is important that you trust the person who handles this job.

How Should Small Businesses Handle Bookkeeping? Basic Information

small business bookkeepingPeople who specialize in small business bookkeeping are very important when it comes to keeping your finances in check while your business continues to grow. They also save the owner and manager a considerable amount of time, since they handle most of the administrative financial tasks of a business that can be very time-consuming. However, since healthy finances and spending habits are a couple of keys to long-term business growth, proper bookkeeping is a great way to ensure that this will happen.

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Each Expense Matters

People who are wasteful spenders are also notoriously bad at handling the expenses of a business. After all, each instance of wasteful spending will quickly add up into a noticeable figure. When you hire someone to handle small business bookkeeping, they will be able to fully show the impact of this. When you have a picture of each of your business expenses, you start to really notice how important each expense is. Most importantly, it will help you to make more informed investments in the future when you understand the importance and impact of each individual business expense.

Always Spend Less than You Earn

Although there are clearly times where a particular investment will heavily outnumber the profit you make in a day, this is a general rule of thumb for you to follow and check for. As a business, if you are always spending less than you are earning, then you can ensure that you will never run into any sort of financial problems. When an investment opportunity comes around, make sure that you immediately calculate whether or not you are able to afford it using the extra money that you saved up from previous days. A bookkeeper will help you to calculate your daily expenses down to a profitable level.

Consistent Checks & Reports are Key

Having the best business model and ideas are only a few of the necessary ingredients for having the desired income and profit at the end of each month. The other side is ensuring that you are staying on this track. In order to give you the peace of mind that a business owner should have for generating new ideas for the next move, it’s important that you worry less about money. This is why it is so important that you have a trustworthy bookkeeper who is constantly monitoring your accounts and expenses. In order to share the information that they gather, they need to present detailed reports which demonstrate whether or not things are going well.

Most Important Aspects of Small Business Bookkeeping: 10 Crucial Factors to Check

small business bookkeepingNow that we have discussed some of the most important background information of small business bookkeeping, let’s go ahead and describe what it looks like when you have effective small business bookkeeping at your disposal. As you are interviewing candidates for the position, here are some factors to check for. Specifically, whether or not they understand each of the factors, and if they have a strategy for handling them. As a serious business owner, the last thing you need is an amateur bookkeeper which you need to train and constantly assist.  

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1. Monitor and Calculate Your Growth

Although you may be able to ensure that your business will be able to grow without a bookkeeper, this is one of the most important things to check for in a qualified bookkeeper. They need to be completely fluent with financial matters and quickly able to dive into your account and expense information and help place you on a sustainable financial path. Ask each perspective bookkeeper about the specific steps that they will take to monitor, calculate, and ensure your business’ growth.

2. Effective Expense and Deposit Tracking

Regardless of the exact means by which your bookkeeper prefers to track your daily business expenses and deposits, it needs to be done in a manner which can be quickly pulled up and referenced by both you (the owner) and them. After all, if you aren’t able to walk in on a moment’s notice and request real-time financial information, odds are much more likely that they aren’t properly doing their job. Be sure to know exactly how your new bookkeeper will track your deposits and expenses.

3. Consistent and Timely Financial Statements

As business owners know, the money is sometimes a much lesser concern than the actions you make handling business affairs each day. This is why it is important that you have an effective bookkeeper behind the scenes tracking all of the money-related affairs for you. A great bookkeeper will provide you consistent financial statements and updates without being prompted. However, if you need to have this information at a certain time each month, it’s important that you have the right small business bookkeeping employee to help you keep up with your latest financial updates and information.

4. Using Time-Efficient and Professional Tools

This isn’t the 19th century anymore, which means that any sort of small business bookkeeping service should avoid using pens and pencils when they are preparing their statements and recording each of your expenses and deposits. One of the most popular free software options that a small business bookkeeping professional might use is Microsoft Excel. However, there is an ever-growing list of different tools that your bookkeeper should already have at their disposal. Be sure to ask what kind of software and tools that your bookkeeper will use before hiring them.

5. Know the Tax Laws & Requirements

small business bookkeepingMany people who want to hire someone to handle their small business bookkeeping are doing so because of their limited knowledge in the legal procedures and requirements. Specifically, in terms of the sales tax and the necessary documents and actions that need to be handled. Since running a business can be complicated enough, having a bookkeeper who can handle your legal requirements, including taxes, will give you a lot more peace of mind. If you suspect that a particular candidate is completely new to the tax laws and requirements, you are best off finding another one who can handle these things for you without blinking an eye.

6. Put Sales Tax into Each Sale

As you may have discovered when you first started your business, nobody will physically force you to charge extra to account for sales tax on each of your business transactions. However, when tax season comes around, that is when the government will come to collect all the sales tax that you were supposed to be charging. An effective bookkeeper will include sales tax as part of each invoice and set aside money gained from each sale for taxes so that it can go straight to the government without creating any sort of unexpected expense when your business simply needs to act upon its responsibility to the state it operates under.   

7. Minimize Production & Labor Costs as Much as Possible

There are certain things which you may see as necessary expenses that somebody who is a little more proficient in financial matters will immediately be able to pinpoint as unnecessary or wasteful. If you pay $10 each month for hosting your website when another company provides the same benefits for half the cost, as an example, then there are not many logical explanations for sticking with the service which is more expensive. An effective bookkeeper will be able to quickly notice occurrences like this. Ideally, they will also be capable of talking with the proper authority and recommend a recipe for change when trends like this are noticed.

8. Automate All of Your Payroll

A bookkeeper can sometimes take on the role that a human resources professional may handle in larger businesses. Especially if you are dealing with limited employees in the first place. When you are hiring a bookkeeper, check to see if this is something that they will help you to handle. Having automatic payroll which requires little-to-no communication between all parties will grant stability for your business. If you have people who work for your business that still live paycheck-to-paycheck, an automated system will help them to budget their expenses each month and know exactly when they will get paid without asking questions.

9. Plan for All Major Expenses & Investments

As a small business, there are few times when you will be able to afford to make major investments in the first place. When these times come, though, it is important that you have taken all the proper steps for ensuring that you are able to do this without sacrificing the financial well-being of both you and your business. An effective bookkeeper will be knowledgeable of any sorts of major expenses and investments that are coming up, and constantly be in the process of delegating the funds for them long before the money is needed.

10. Constantly Considering Alternative Ideas & Having an Open Mind

Sometimes, it’s important to be able to release control and to let go of any sort of personal biases that you may have. Small business owners are likely already aware of the benefits that can come with taking a risk with no guaranteed results. On the other hand, a bookkeeper will more likely see things logically with numbers and charts as evidence. As the owner, it is your job to make final decisions. Sometimes, these decisions may even have no evidence-based financial logic. If you imagine that you will run into scenarios like these, having a bookkeeper who is open-minded and willing to try new things without any sort of emotional breakdown will be great.

Why is Bookkeeping so Important?

small business bookkeepingAs with many aspects of your life, ensuring that you have your finances in check is crucial. As a business owner, having bookkeeping services for small business at your disposal will take care of most financial aspects of your business so that you can focus on other things.

It Can Be Easy to Forget About Small Details

One of the most logical reasons that you should consider getting bookkeeping services for small business is that you simply cannot handle accounting for all the small financial aspects of your business. It is really simple to forget about the $50 tab that you racked up on a night out with your employees when it comes time to pay the bills. A bookkeeper, however, don’t forget small things like this. After all, it’s their job to remember.

Effective Bookkeeping is a Key Component for Growth

Although there are clearly many instances where people have been able to grow their small business without any sort of bookkeeping services for small business owners, having a bookkeeper will be a key aspect of your growth. With a consistent stream of sales and revenue coming in, a bookkeeper will help you to optimize your growth as much as possible while simultaneously giving you all the evidence and proof that this is happening every step on the way.

Irresponsible Financial Actions Will Ruin Your Business

If you get in the habit of wasteful spending and buying things that you can’t afford, you will soon find yourself without the capital to continue running your business. Many business owners are typically risk-takers, and are more prone to irresponsible spending since they know that it may come with a return in the future. Although risk-takers are clearly rewarded from time-to-time, having the common sense and financial logic of a professional bookkeeper will help you to stay grounded in the reality of each of your financial decisions.

Finding a Great Employee for Small Business Bookkeeping

small business bookkeepingOn this page, we have described all of the most basic pieces of information that you need to know about bookkeeping services for small business. However, finding a great employee which you can count on for the long-term isn’t always easy to do. In addition to the factors we described above, here are some steps and factors to account for to help to find the right person for the job.

1. Ask Your Circle of Professional Contacts & Friends

The best person for the job is sometimes hiding right in plain sight. As a small business owner, you likely have many different professional contacts and friends that might know a great person for the job. If you find a bookkeeper within your circle of contacts, they will likely be much more trustworthy of a candidate right off the bat. It will also save you a lot of effort that you would otherwise spend searching through applications and conducting interviews.

2. Trust is the Most Important thing to Check

There is absolutely no reason to ever hire a small business bookkeeping professional if they aren’t trustworthy. Thankfully, there are a million different ways to determine whether or not somebody is trustworthy enough to handle financial matters of your business. Remember that you will likely hand over most of the keys to your finances when you hire a bookkeeper. If you trust your bookkeeper both while they are supervised and when they are alone, then you know you have a great candidate for the job.

3. Experience Using Your Platform & Software

In some cases, those who are hiring a small business bookkeeping professional already have a system that they want new employees to follow. Unless they have a much better alternative to offer your business, it is ideal to have a bookkeeper who is experienced with your bookkeeping software and methods.

4. Prompt & Always Available to Talk When it Matters

When it comes to financial matters, hiring someone to assist you means that they are both completely aware of your current situation at any given time, and willing to discuss matters with you transparently. If you hire a bookkeeper, make sure to test to see whether they will communicate with you on a moment’s notice. This way, you can ensure that they will also be available for a discussion when it matters the most.

5. They Should Have Qualifications and/or the Proper Education

Although there are clearly cases where a candidate can be qualified for a particular job without the proper background, having a bookkeeper with a nice level of education and background qualifications would be ideal. It’s important to understand that although a degree isn’t required to work as a bookkeeper, there are still degrees and professional certifications that the most qualified individuals will typically have.

6. Will Be Clearly Organized & Confident in their Skills

small business bookkeepingIf you hire an employee that doesn’t entirely know what they are doing, it will show in their personality. Although it is clearly ideal to work with people who are humble and don’t presume to know all the answers for your business, there are certain things which you should expect from a bookkeeper. If they are exceptionally confident in their abilities and have the level of organization and promptness to back it all up, you have found a great bookkeeper.

7. Will Be Able to Work Without Constant Instructions

Remember that one of the reasons you chose to pursue small business bookkeeping services in the first place is that you need someone to save you some time and handle financial matters for you. However, you will never have the benefit of extra time if you find yourself constantly telling them what to do. Although there will likely be a period where they learn how to work with you, you should reach the point where they mainly work without any sort of instructions.

8. Strict Adherence to Deadlines

Although everybody can get behind on their work from time to time, there are certain instances where this simply cannot happen. Establish expectations with your bookkeeper right away so that they don’t get overwhelmed when tight deadlines come around. When it comes to matters like paying taxes, being able to meet a deadline is not an option. For this reason, the ideal small business bookkeeping professional will always meet your deadlines.

9. Above Average Technical Skills

These days, being an effective bookkeeper is much more than pulling out a pen and paper and recording financial data. In order to do the best job possible, bookkeepers will use the latest technology and steer away from old-fashioned methods for collecting and presenting data. Before hiring anybody, ask them about their technical skills and any relevant experience they have in this field.

10. Naturally Inquisitive and a Great Problem-Solver

There are many people in the working world who simply follow orders and conduct tasks without ever asking questions. Although there are clearly positions which are great for these sorts of personalities, a bookkeeper should feel like they are able to question certain expenses and business trends. Since your bookkeeper will likely be the first person to notice when something terrible happens to your finances, it’s important that they feel they have the freedom to express themselves when they see that something isn’t right.

Best Practices for Small Business Bookkeeping: Simple Steps for Success

small business bookkeepingWith all this advanced and more complicated information out of the way, let’s finish up by labeling the basic steps involved in getting the best bookkeeping services for small business. Keeping the above factors and details in mind, here are all the basic steps to take for getting the absolute best bookkeeping services for small business.

1. Hire Your Employee

On this page, we have discussed many different aspects and character qualities that you will find in the right employee. As we mentioned, it is really important that they are trustworthy. Once you have gone through all the proper steps for interviewing and measuring the competence of your candidates, hire the best person for the job.

2. Determine the Platform and Methods

Once you have the right employee on your payroll, one of the most initial things that you need to know is how they will do their job. Perhaps they will log into your online banking account each day and then transfer all this information over to another document. Then, they might figure out how any physical cash was spent so that ATM withdrawals are completely accounted for. In any case, it’s important for you to know how the bookkeeper will meet the requirements of their job before you confidently work with them.

3. Develop a Routine Set of Deadlines & Requirements

No sort of employee will be able to get their job done effectively if they aren’t aware of the deadlines and requirements that they have to meet. As we discussed, there are four basic financial statements that you should expect from a professional bookkeeper. However, you will likely also decide to have a deadline for receiving them. As a reminder, here are the basic documents that you need to account for.

    • Income Statements
    • Balance Sheets
    • Cash Flow Statements
      • Statements of Changes in Equity
    • Other Desired Jobs

4. Establish Ground Rules and Clear Expectations

Just as important as establishing deadlines, there are certain rules and expectations that you will need to relay over to your new bookkeeper. Since many of the possible rules and expectations that you may have for your bookkeeper will probably depend on your individual circumstances, make sure to determine what these are and quickly discuss them with your new bookkeeper. Doing this right away (and in a powerful manner) will increase the odds that they will never do something wrong.

5. Incentivize Honesty, Hard Work, & Adherence

Since your new small business bookkeeping professional will be in charge of one of the most delicate manners of your business, your finances, it is important that you treat them well. Outside of paying them a reasonable salary, find ways to incentivize them to be honest, work hard, and to meet your expectations. If you have a system which positively reinforces good behavior, they are much more likely to continue with the same actions.

Small Business Bookkeeping: Major Points & Summary

As a whole, small business bookkeeping is a key component for ensuring that you handle all daily and monthly financial matters in an organized and responsible manner. Having professional bookkeeping services for small business at your disposal will also help you to monitor your growth and plan out your future investments and actions. In order to find the best bookkeeper for your small business, start by ensuring that this is something that you need. Then, find a trustworthy person with the proper background to handle basic financial matters for you.

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