If you’re a small business owner, professional bookkeeping services may seem like an indulgence, a perk that can be added once cash is flowing or the business has reached a certain size.
In fact, a bookkeeper is the first pro your business should partner with. Why did you start your creative business? Not to keep your books. It takes a specialist to do the job well, and that’s why you should hire a bookkeeper. Spend your time doing what you love to do, not trying to make sense of the numbers with a free accounting software.
A Bookkeeper will maintain your business’s financial records and document its transactions, keeping a record of what your business spends and what it takes in. He or she looks at not only what’s happening now, but at what has happened up until now and then prevent any red flags or audits.
Quality bookkeepers pay attention to detail, are willing to track down every tiny detail and never forget a task. One of their main tasks is to maintain a general ledger by recording the amounts from sale and expense receipts. They are comfortable dealing with late payments and customer pushback on invoices. They reconcile the payment accounts on a monthly basis, at minimum. They organize, collect and disseminate the financials of a business. They understand accounting principles, accounting software, Canadian Revenue Agency rules and regulations, as well as the Income Tax Act. There is so much to know, it’s said that 35% of a Bookkeeper’s time is spent keeping up to date with current trends, policy changes, and learning updated software.
On a broader scale, a bookkeeper manages the financial and accounting data of a business, which is really the backbone of your business —invoicing, payments, cash flow, customers, suppliers—and affects every part of the business. It has to be right or it will all fall down.
A great bookkeeper will make sure the business owner provides all the information they need to do their job and keep a list of what’s outstanding. They are mathematically inclined and detail oriented and will always follow the money. Their job is to build a map of your financial trails. They will have the psychological understanding to know your creative mind and figure out what you’ve done. They have a thirst for knowledge, especially keeping up on the latest technology.
What’s the Difference between a Bookkeeper and an Accountant?
Accountants go beyond record keeping, as they provide analysis on the financials. They see the Bookkeeper’s work from an oversight point of view and give it a second set of eyes. Their job is more subjective. By looking forward, they figure out where the business is going and give projections and insights. Quality accountants can build budgets, cash flow models and business plans. They do strategic tax planning, file tax returns, and then turn that information into a financial model.
Analogy Example: Accounting is the game they’re all playing. Accountants are the offence and bookkeepers play defense. They’re all on the same team and working together, just not doing the same thing.
Hiring a Bookkeeper
Now that you know you need to hire a Bookkeeper, how do you go about hiring a good one?
Ask your own clients for referrals; find out who they’ve worked with, then ask them these questions:
- How much time do you have in your schedule?
- How many years of experience do you have?
- Are you familiar with my accounting
- e.g. QuickBooks Online
In addition to these questions, it’s important to ask yourself if you are comfortable with him/her/them. Do you have a good rapport? Do they answer your questions in a straightforward manner?
It’s important to note, if a self-employed bookkeeper is charging the same amount as an employee’s salary would be ($20-$30 per hour), than they do not have enough experience. Find a bookkeeper who charges $65-$75 per hour, as that shows experience.
What About Hiring In-House?
Many people forget about the extra costs of having a bookkeeper as an employee. Some of the added costs on top of their salary include: Employment Insurance, Canada Pension Plan, Workplace Safety and Insurance Board coverage, training, computer, laptop, programs, and a QuickBooks online subscription.
As a business owner, you’re paying for an outcome, not a drain on resources.
What are the Benefits of Hiring an Outside Bookkeeping Firm?
It makes much more sense to hire a freelancer or an outside bookkeeping firm who have the resources to ‘keep up’ on their own.
Most quality bookkeeping and accounting firms now use a fixed price value billing model. They set a flat monthly rate which is easier to budget and on cash flow. An hourly rate is no longer a preferred billing method. Bookkeeping firms introduce the latest technology and integrate them together to help build the most efficient way to do the job, a much more secure way with minimized risk. An outside firm will also have their own liability insurance just in case something goes wrong.
As well, if you then hire a external professional accounting firm to do your tax preparations, they will appreciate and often offer to charge you less for your a year end and tax return because they’re dealing with financials that have been put together professionally in a correct way. They won’t have to spend time adjusting and fixing because the information provided is clean, balanced and workable.
Do I Need to Hire a Bookkeeper if I Have QuickBooks Online?
You may have an accounting system and it can automate your books for you, but that doesn’t make the rules correct. You need a professional to initially set it up and have the financial transactions entered properly. Once you’ve had your books set up correctly, including your accounts and tax information, then you can begin to learn the tools and features in QuickBooks to help you enter in and speed up some of the more fixed transactions that are always the same every month. Anytime there’s a judgment call to be made that’s when you need a professional’s help. If you’re still wondering which cloud accounting software to purchase, read our article Comparing Xero vs QuickBooks in 2019.
What Experience Should a Skilled Bookkeeper Have?
A skilled bookkeeper should have experience serving multiple businesses at once. This way, they will not have only one set way of doing things. They will have learned multiple systems and be much more flexible.
As far as education goes, there are many colleges in Canada that have bookkeeping programs that cover academic courses including accounting basics, computer applications (Sage, QuickBooks, Excel), taxation and payroll administration.
Make sure that your potential bookkeeper is also a member of the Institute of Professional Bookkeepers of Canada (IPBC), the country’s largest non-profit bookkeeping association. Their Certified Professional Bookkeeper accreditation reflects the level of knowledge, education, and skills necessary to carry out all key functions necessary for responsible bookkeepers.
Two Main Principles of Bookkeeping
- Operating in an ethical and honest manner. Some bookkeepers
may try to stray outside of rules, but a good bookkeeper needs to know their
line and align with your values and ethics. He/she/they will emphasize the
importance of ethical behaviour and compliance with generally accepted
standards of practice of the profession.
- Being accountable for reviews of financials. Small businesses are better served when the owner and their bookkeeper hold regular seasonal reviews to look at and consider the financial health of the company. Produce a profit and loss statement and look at it. Produce a balance sheet and look at it. Although many creative business owners do not understand all of the details of a financial statement, they should take care to understand the highlights and what they represent.
Bookkeepers Pay for Themselves
Do you have the backup data and proper documents to prove the transactions and the numbers? If not, you may have to pay thousands or even tens of thousands if an audit comes your way. It’s not worth it the risk. Whatever you pay a bookkeeper you’ll save in tax, potential audit time, potential penalties, reassessments and general ‘hassle factor’. For all of these reasons, it makes sense for creative businesses owners to embrace all of the advantages that outsourcing bookkeeping operations have to offer. If you don’t know what to ask a potential bookkeeper, read Top 7 Bookkeeper Interview Questions. When you hire a bookkeeper, they will cover those pesky back end business needs, enabling your business to run smoother and turn more profit.