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.
Perhaps unsurprisingly, many small business owners have a hard time getting excited about bookkeeping. And despite the pride we may feel about our DIY accounting systems, most of us would rather do anything else than manage our business finances.
The good news? As your business grows, experts recommend outsourcing tasks you’re not excited about or lack experience in so you can focus on the ones that require your expertise.
So if you’re ready to hand off your bookkeeping but still have some uncertainties about doing so, keep reading for 7 signs your business is ready to hire a bookkeeping service.
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Why DIY Bookkeeping Isn’t Ideal for a Growing Business
Managing your books yourself may be easy at first. But as businesses grow, their financial needs do too. This is where hiring a bookkeeping service or in-house bookkeeper can help.
A bookkeeper handles the day-to-day finances of your business. Typical tasks 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 Services
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
Bookkeeping and accounting are not the same. Bookkeepers record financial transactions (as we discussed earlier), while accountants analyze and interpret this financial data. Accountants plan. They forecast. They offer financial and tax advice.
Because accountants have greater financial expertise than bookkeepers do, they charge more for their accounting services too. Xendoo found that bookkeepers tend to charge between $30 to $90 an hour, while the hourly rate for certified public accountants can range between $150 to $450.
The problem is, 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—all tasks your bookkeeper could’ve done for much less.
If this situation sounds all too familiar, consider hiring a bookkeeper well ahead of tax season for some catch-up bookkeeping (where they get your books up-to-date and organize your past paperwork) and properly maintaining detailed books for your business moving forward.
Get the Financial Help Your Business Needs with Bench Bookkeeping Services
As small business owners, we tend to pride ourselves on our DIY approach. And why wouldn’t we? It served us so well when we first started out.
But taking a DIY approach to bookkeeping becomes counterproductive as our business grows. With growth comes new responsibilities and an ever-growing list of to-dos. At some point, something has to give, and you’ll need to hire a bookkeeper.
Not every small business owner will choose this route. After all, mastering your financials can be a rewarding and empowering experience. But if number crunching feels like the last thing you should be spending time on, it’s worth exploring a solution that frees you up to do what you really love.
To help you get back to the work you’re meant to do, FreshBooks offers bookkeeping services for our U.S. customers through our partner Bench. By combining smart software with an affordable virtual bookkeeping professional, Bench ensures your books are up-to-date monthly and ready come tax time.
This post was updated in December 2022.