Many entrepreneurs toil over their books for hours on end—but you don't have to. Here's when it's time to hire a bookkeeping service for your business.
Many business owners need a hand with bookkeeping. Whether your DIY approach isn’t cutting it anymore or numbers have never been your thing, we get it – getting pumped about bookkeeping can be tough.
And as your business expands, so does the need to stay on top of your finances. That’s where a savvy bookkeeper or accountant can help. A go-to pro can handle the most complex number-crunching, so you can put your energy where it really counts – running your business.
But being completely hands-off with your financial operations isn’t the best way to grow a business, either. That’s where Collaborative Accounting™ comes in. It’s a new way for you to work with accounting professionals, so you are not on your own when it comes to managing your business finances. You only need to focus on the front-end business operations and leave the more complex financial tasks to a professional. That way, you’re paying them for advice and insights into financial data and not for things that need daily monitoring.
So, if you’re still wondering: Do I need bookkeeping? Keep reading for 7 signs that point to yes. It’s time to hire a bookkeeping service year-round.
Table of Contents
Doing It All Yourself Isn’t Ideal
But being completely hands-off isn’t, either. When you first get started, managing your books yourself might seem more enticing. But as your business grows, so will your financial needs, and you might find yourself wondering: Do I need bookkeeping?
Having a bookkeeper is an excellent resource as they can help handle some day-to-day finances for your business.
Typical tasks can include:
- Recording and organizing sales, invoices, purchases, bills, receipts, and other business transactions
- Producing accurate financial reports, such as financial statements and balance sheets
- Explaining your finances in a way that makes sense for you
- Designing, updating, and auditing your business processes
- Recommending accounting software programs and other solutions to help you run your business better
When your business is just starting out, you might be able to take care of these tasks without breaking a sweat. But eventually, the time comes when managing the books is the last thing you want to worry about.
By taking over your finances, an experienced bookkeeper allows you to focus on your area of expertise so you can achieve your business goals and grow your venture.
7 Signs Your Small Business Needs Bookkeeping
Now that we’ve covered all the essential information let’s dive into the key indicators you should keep an eye out for in your small business. Let’s get into the nitty-gritty details below.
1. You Have Unpredictable Cash Flow
Have you ever found yourself unable to cover your business expenses during certain months because you don’t have cash?
While many factors can cause this scenario—like insufficient client work, large unforeseen expenses, and late payments from clients—the bottom line is that your expenses have surpassed your income. You have a cash flow problem.
And not keeping tabs on your cash flow is a huge issue. Think of it as steering a ship with no map and no way to navigate. You become vulnerable to the smallest changes around you because you’re unable to catch them in time.
The numbers don’t lie either: According to CB Insights, 38% of startups fail because they run out of cash or fail to raise new capital.
A bookkeeper helps small businesses keep an eye on the map and their surroundings so they can navigate perilous financial situations with ease. They track your accounts payable and accounts receivable, following up on overdue invoices when needed, so you’re always on top of your cash flow.
2. Your Books Are Always Outdated
Keeping track of your monthly transactions is an important task—one you don’t want to neglect. Updated and accurate books can often mean the difference between:
- Knowing whether you can pay your employees and contractors for the month
- Getting approved or denied for a business loan or line of credit
- Bringing on investors or partners for your venture
- Knowing if you can sell your business when an opportunity arises
When your books are outdated, you never really have a firm handle on your finances. Tracking and managing your cash flow become difficult. It also becomes nearly impossible to confidently gauge the financial health of your venture or make important business decisions.
With outdated books, you’re also never truly prepared for tax season—which means you’ll always scramble to update your books at the end of the year and cause yourself even more stress.
A bookkeeper helps rectify this situation by recording your business’ daily transactions so you’re better able to understand your financial situation at any given moment. And when your books are up-to-date, you’ll be better prepared for any opportunity or issue that comes your way.
3. You’re Missing Out on Tax Deductions
Many business expenses are tax-deductible, including digital downloads, online subscriptions, and even the rent for your office space. You can use these deductions to offset your total business income and reduce the tax you owe—but only if you know about them and record them properly for the IRS.
But chances are you’ve likely missed a few deductions over the years because you never tracked them. It’s also easy to miss obvious tax write-offs when you’re scrambling to update your books at the last minute.
Thankfully, bookkeepers keep track of all your transactions and assign them to the right expense categories to reduce your total tax bill. They’ll also have a better understanding of which tax deductions your business qualifies for, and may identify business expenses you didn’t even know were tax-deductible.
4. You Don’t Have Enough Time to Handle Everything
A growing business means more clients, high billing volumes, and more back-office paperwork. And as your business grows, your to-do list does too. But there’s only so much work a person can do in a day—and as the person running the show, your time is extremely valuable.
When you’re responsible for your own bookkeeping, you may be removing yourself from more important tasks, such as marketing and client work, that will help grow your business and increase your revenue.
Think about it: Does it make sense to spend 5 hours on a bank reconciliation when a freelance bookkeeper could easily finish it in 30 minutes? Alternatively, would your time be better spent on finding tax deductions that net you $50 an hour or on sales calls that bring in $500 an hour?
If you can’t find time in the day to get everything done, focus on the most important areas of your business or on tasks that only you can do. You may discover that outsourcing tasks that others are more qualified to take care of (such as bookkeeping, data entry, or tax preparation) frees up enough time for you to finish all your work.
5. You’re Not Excited About Managing the Books
Do you regularly put off managing your books for as long as you can? Is the cumbersome task of maintaining your books draining your creative energy and affecting the quality of your work?
If you’re not passionate about business finance, we bet you’d much rather reach out to new clients than print out trial balances and income statements. But despite how crucial bookkeeping is to the success of your business, filling your days with tasks you hate is a surefire way to deplete your motivation.
If you don’t have the time, knowledge, or desire to manage your books yourself, there are thousands of professionals out there who’d love to help. Consider outsourcing your basic bookkeeping needs so you can free up your time and head space, rekindle your passion for your work, and reconnect with the reasons you started your business in the first place.
6. You’re Not Confident in Your Bookkeeping Skills
You may be an expert at what you do—whether that’s designing websites, writing copy, or taking beautiful photographs. But you can’t be an expert at everything.
And when it comes to your business financials, a certain level of expertise is required for the health and security of your organization. Without it, you won’t have an accurate picture of where your business is at. And in the worst-case scenarios, you can expect a letter from the IRS notifying you about the exorbitant late fees, interest, and penalties you now owe.
These situations happen more often than you’d expect. In a recent OnPay survey, 41% of small business owners reported that they handle the business’ finances themselves, while another 28% said they were audited by or received a notice from the IRS.
So if you have doubts about whether you’re managing your books properly—maybe you’re unsure about the integrity of your financial records—hire a bookkeeper for peace of mind.
7. You’re Paying Your Accountant to Do Your Bookkeeping
Bookkeepers versus accountants. What’s the difference? Well, it can get tricky, because both accounting professionals can record financial transactions (as discussed earlier) and interpret the financial data. Their strengths typically depend on the individual profession and the service they offer.
However, it’s important to note that CPA Accountants are known to charge more for the services. For example, Avalon Accounting found that bookkeepers typically charge between $30/hr and $110/hr, while the hourly rate for accounting work completed by a CPA ranges between $150/hr to $450/hr. A CPA tends to cost more because it’s a specialized designation that you will need in specific circumstances for your business needs.
So, if you’re not regularly updating your books (see point #2), you’ll have to ask your accountant to organize all your financial information ahead of tax season. They’ll need to make the necessary adjustments to your books and assign expense categories to your transactions — a task that could cost you in the long run, as you might end up paying more to have a tax pro do this for you at their busiest time of year. Instead, consider a bookkeeper that bundles their services so your books are in order year-round; that way, you know how much you’re paying them without any surprise costs or stressful end-of-year scrambles.
Get the Right Financial Help for Your Business
Rolling up your sleeves and taking a DIY approach may be what got your business off the ground and has carried it to where it is today. But as your business grows, so will your responsibilities, and if you resonate with the 7 signs mentioned earlier, then it’s time to call in an accounting professional.
So, where can you turn for bookkeeping help? One option is a bookkeeping service Bench (for U.S. businesses). However, when it comes down to it, we recommend hiring a bookkeeper or an accountant specializing in small businesses, as they’ll understand your growing pains. Or, you could hire a bookkeeper or an accountant who specializes in working with small businesses or even with businesses in your industry, who can act as a financial partner in your business.
If you use FreshBooks, consider a FreshBooks-certified accounting professional, who works collaboratively with you in your software of choice, which can remove so much of the friction and confusion from your bookkeeping process. It also ensures your bookkeeper or accountant is trained as a Collaborative Accountant™, and squarely focused on providing you with the support and financial insights you need. Talk about a win-win.
This post was updated in November 2023.