8 Signs Your Business May Need a Bookkeeper

When you first start a business, doing your own bookkeeping may make perfect sense.

There may not be many transactions. You know what every purchase was for. You can send a few invoices, keep an eye on the bank account, and enter transactions into QuickBooks when you have time.

Then the business grows. There are more customers, more bills, more bank transactions, maybe a credit card or two, employees, loans, equipment purchases, payroll, sales tax, or jobs that need to be tracked.

Before long, bookkeeping becomes something you plan to do “when you get a chance.” And somehow, you never quite get the chance.

How do you know when it is time to stop doing the bookkeeping yourself and bring in professional help? Here are eight signs.

1. Your Bookkeeping Is Always Behind

This is probably the most obvious sign.

Ask yourself: If I opened QuickBooks today, how current would it be? If the answer is several weeks or months behind, something needs to change.

Falling behind occasionally does not necessarily mean you need a bookkeeper. Business owners get busy.  But if catching up has become a repeating cycle, bookkeeping may no longer be a good use of your time.

You may find yourself thinking, “I’ll catch it up this weekend,” or “I’ll work on it after this project is finished,” or “I’ll get everything entered before the end of the quarter,” or my favorite… “I just need one quiet afternoon.”

Then another month passes.

Eventually, being behind can create bigger problems. Bank accounts are not reconciled. Customer balances may be wrong. Bills may be missed. Loan balances may not be accurate. Financial statements become less useful. And tax deadlines become much more stressful.

If bookkeeping is permanently on your catch-up list, it may be time to outsource it.

2. You Are Making Business Decisions Based on Your Bank Balance

Your bank balance is important. But it does not tell you whether your business is profitable.

You might have $100,000 in the bank and still owe $60,000 to vendors, $20,000 in payroll and payroll taxes, $15,000 on credit cards, $10,000 in sales tax, and a large loan payment next week.

On the other hand, your bank balance may look lower than you would like while your business has substantial Accounts Receivable that will be collected soon.

Your checking account answers one question: How much money is in this account right now?

Your accounting records should help answer much bigger questions like:
Are we profitable?
Who owes us money?
What do we owe?
Where is our money going?
Are expenses increasing?
Is our financial position getting better or worse?

If you are running your business primarily by watching the bank balance, you probably need better bookkeeping.

3. You Don’t Trust Your Financial Statements

QuickBooks can produce a Profit and Loss Statement and Balance Sheet almost instantly. That does not mean those reports are correct.

Maybe you run a Profit and Loss Statement and think, “There is no way we made that much money.” Or you think, “I know we had a better month than this.“

Maybe your Balance Sheet contains accounts you don’t understand.

Maybe Accounts Receivable says customers owe you money when you know they have already paid.

Does your Accounts Payable contains bills from two years ago?

Does your Undeposited Funds have a large balance?

Maybe a loan or credit card has a negative balance that does not make sense.

If you can’t trust the information coming out of QuickBooks, you can’t confidently use it to make business decisions.

A professional bookkeeper should do more than enter transactions. They should reconcile accounts, review balances, investigate unusual activity, and help make sure your financial statements reasonably reflect what is really happening in your business.

4. Tax Time Is Always a Crisis

Does tax season begin with a frantic attempt to get your bookkeeping finished?

Are you searching for receipts, reconciling an entire year of bank statements, trying to remember what transactions from nine months ago were for, or making major corrections right before your tax return is due?

Does your tax preparer send you a long list of questions because the accounting records are incomplete or do not make sense?  Has your tax preparer ever told you that you need someone else to look over your books?  Or do they have to charge you and arm and a leg to clean it up before they can even begin your tax return?

That is a sign your bookkeeping process may need attention. Good bookkeeping happens throughout the year, not just before the tax return is prepared. Your books should ideally be maintained so that when tax time arrives, your tax professional receives organized, reconciled, tax-ready financial information.

There may still be questions and year-end adjustments for things like depreciation expense, but preparing a tax return should not require reconstructing an entire year of business activity first.

5. You Spend Too Much Time Doing Bookkeeping

There is a cost to doing your own bookkeeping that does not appear on your Profit and Loss Statement: your time.

Suppose you spend five hours every month working on QuickBooks, and I believe that is an extremely low number!  That may not sound like much.  But that is 60 hours a year.  Now let’s say you are spending five hours a week working on QuickBooks, which is much more likely, that is 260 hours a year.

Now ask yourself: what could I do with those 260 hours if I weren’t doing bookkeeping?

Could you:

• Meet with customers?
• Prepare estimates?
• Complete more jobs?
• Follow up on Accounts Receivable?
• Train employees?
• Develop a new service?
• Work on marketing?
• Spend time planning the future of the business?
• Go home a little earlier?

Business owners often continue doing tasks because they can do them. But the better question is whether they should be doing them. Your time has value.

As your business grows, there comes a point when spending hours doing bookkeeping may cost you more than hiring someone else to do it.

6. Your Business Has Become More Complicated

Sometimes the need for a bookkeeper has nothing to do with falling behind. Your business may simply have outgrown basic bookkeeping.

Maybe you now have employees, multiple bank accounts, several credit cards, accounts receivable issues, accounts payable issues, inventory, equipment and fixed assets to keep track of, loans or lines of credit that don’t agree with your loan statement balances, sales tax, multiple locations or departments, or a higher volume of transactions than it used to have.

Certain industries add another layer of complexity. A construction company, for example, may need to track job costs, retainage, work in progress, overbillings and underbillings, labor and material costs and profitability by job.

Your business’s tax entity type also matters.

An LLC may be taxed as a sole proprietorship, partnership, S corporation, or C corporation, and that classification can affect how owner compensation, distributions, contributions, benefits, loans, and other transactions should be recorded.

As your business becomes more complicated, knowing how to enter transactions into QuickBooks may no longer be enough.

You may need someone who understands the accounting behind those transactions.

7. You Keep Saying, “I Think That’s Right”

There is a difference between knowing your books are correct and hoping they are correct.

Maybe you find yourself saying:
“I think that’s where this goes.”
“QuickBooks suggested that category.”
“That’s how I’ve always done it.”
“The bank balance matches pretty closely.”
“I’m not sure what that account is for.”
“I don’t know why that balance is negative.”
“I think my tax preparer fixes that at the end of the year.”

Those are signs that it may be time for some help. You don’t need an accounting degree to own a business.  But someone involved with your business should understand what is happening in the accounting records.

A good bookkeeper asks questions when something does not make sense.  They don’t simply accept every transaction suggested by the software. They reconcile.  They investigate.  They correct mistakes.

And when something requires the expertise of your CPA or tax professional, they should recognize that and know when to ask for guidance.

8. One Person Has Control Over Everything Financial

Even if your bookkeeping is completely up to date, there is another reason your business may benefit from professional bookkeeping support: separation of duties.

Separation of duties is an important internal control that can help reduce the risk of errors and fraud.

Ideally, the same person should not have complete control over receiving money, paying bills, recording transactions, reconciling the bank accounts, and reviewing the financial statements.

Why?  Because when one person controls an entire financial process, mistakes, or intentional activity, can be much more difficult to detect.

For example, if the same employee can create a new vendor, enter a bill, approve the bill, make the payment, record the transaction in QuickBooks, and reconcile the bank account there may be very little independent oversight of that transaction. Separating some of those responsibilities creates checks and balances.

I know what you’re thinking… “but I’m a Small Business. I Don’t Have Enough Employees to Separate Everything.”

That is very common. A small business may not have an accounting department with enough people to separate every financial responsibility. That does not mean you should ignore internal controls. Instead, look for practical ways to divide responsibilities.

For example one person may enter bills while the owner approves payments. An employee may prepare customer invoices while the owner reviews Accounts Receivable. An employee may handle day-to-day transactions while an outside bookkeeper reconciles the bank and credit card accounts. A bookkeeper may prepare financial statements while the owner reviews them each month. Bank statements and credit card statements may be reconciled by the outside bookkeeper and then reviewed by the owner. Changes to vendors or payment information may require additional verification.

Even a small amount of independent review can make a difference.

Don’t Let Convenience Eliminate Oversight

Business owners are busy.  It can be tempting to give one trusted employee responsibility for everything financial simply because it is convenient. Trust is important. Internal controls are not about accusing someone of being dishonest. They are about creating business processes that protect the company, its owner, and its employees.

Good internal controls can help identify innocent mistakes sooner, discourage inappropriate activity, and make unusual transactions easier to spot.

An outside bookkeeper can sometimes provide another layer of oversight, particularly when that person is independently reconciling accounts and reviewing the Balance Sheet and other financial reports.

You should still remain involved.  Review your financial statements. Look at your bank activity. Ask questions about transactions you do not recognize. Pay attention when something does not make sense.

Trust the people who work with you, but build financial processes that don’t depend on trust alone.

What If I Only Have One or Two of These Signs?

Needing a bookkeeper is not an all-or-nothing decision. You may not need someone to handle every accounting function in your business.

Maybe you are perfectly comfortable creating invoices and paying your own bills but want someone else to reconcile the accounts and review the books each month.

Maybe you have an employee handling day-to-day bookkeeping but need an experienced accounting professional to reconcile accounts and review the work. 

Maybe your books are generally in good shape, but you need help with monthly financial reporting.

Or perhaps you simply need your QuickBooks file cleaned up and properly organized so you can take it from there.

The right level of bookkeeping support depends on your business, your accounting knowledge, your available time, and the complexity of your financial activity.

“But I Can’t Afford a Bookkeeper.”

That is a legitimate concern, especially for a small business. Professional bookkeeping is an expense.  But before deciding you can’t afford it, consider what your current bookkeeping process may already be costing you.

What does it cost if:
You spend evenings and weekends catching up your books?
A customer payment is overlooked?
You pay a bill twice?
An invoice never gets sent?
You do not follow up on past-due Accounts Receivable?
Income is recorded twice?
An expense is missed?
Your tax preparer has to spend additional time cleaning up the books?
You make a business decision based on inaccurate financial information?

The answer is not that every business needs full-service monthly bookkeeping.

But as the business grows, it is worth comparing the cost of professional help with the cost, in money and time, of continuing to do everything yourself.

What If My Books Are Already a Mess?

This is where many business owners hesitate.  They know they need help.  They also know they are behind.  And the longer they wait, the more embarrassed they become about calling someone.

If that describes you, please don’t let embarrassment keep you from asking for help.  Professional bookkeepers see messy books.  We see accounts that have not been reconciled.  We see transactions that were entered incorrectly.  We see old Accounts Receivable and Accounts Payable.  We see Undeposited Funds problems.  We see duplicate transactions.  We see bookkeeping that has not been touched in months, sometimes years.

You do not need to clean up your books before you call a bookkeeper.

That may be exactly why you need one. Start with what you have. A professional can help determine what is wrong, what information is missing, what needs to be corrected, and how to move forward.

There is no prize for waiting another six months because you are embarrassed. There is, however, a lot of relief in finally knowing that someone is helping you get it straightened out.

So, Is It Time to Hire a Bookkeeper?

If you recognized your business several times while reading this guide, it may be worth having a conversation.

Hiring a bookkeeper is not an admission that you cannot handle your business. Quite often, it means the opposite.

Your business has reached the point where your time is better spent running it than trying to do every job yourself.

At Melton Bookkeeping & Accounting Services, I work with established small businesses that want accurate, organized, tax-ready books and financial information they can rely on.

Whether your books are in good shape and you are ready to hand off the monthly bookkeeping, or they are considerably behind and you don’t know where to begin, we can start by figuring out where things stand today.

If you are looking for professional bookkeeping and accounting services, call Melton Bookkeeping & Accounting Services at 417-630-0057.