Many business owners start out doing their own books because it seems like a cost-effective way to get started. But the reality is it may be costing them more than they realize.
The best way to calculate the cost of a bookkeeper is to give them an initial consultation and look at their records. This allows you to provide them with a fair quote based on their unique needs.
1. Time
Every business earns money and spends it, so it’s essential that accurate financial records are kept at all times, says one expert at The Bottom Line Bookkeeping. These records are used by key stakeholders to make informed decisions about the company’s future direction.
Bookkeepers work to keep these records up-to-date and accurate. This requires a good deal of math skills, as well as the ability to understand the financial implications of any transactions. The job also requires the use of technology like accounting software and spreadsheets, and it often involves travelling from client to client.
It’s not uncommon for small businesses to hire a part-time or freelance bookkeeper to help with their accounts. However, many of these professionals are underpaid and undervalued for their work. This can lead to low morale and a lack of motivation, which can impact productivity. It’s important for employers to recognise the value of their bookkeepers and pay them accordingly.
As a result, it’s not unusual for Bookkeepers to experience a lack of work-life balance. The need to meet deadlines and the frequent interruptions from clients can create stress and tension in their personal lives. In addition, the seasonal nature of the job can mean extra demands at certain times of year – particularly during tax season.
Fortunately, there are ways for Bookkeepers to improve their efficiency and reduce the time they spend on their books. For example, keeping up with the latest trends in accounting software can help them become more efficient at completing tasks. By reducing the amount of manual data entry, automated processes can speed up the process significantly.
Another way to save time is to plan ahead and avoid leaving any work until the last minute. This will reduce the risk of mistakes and ensure that all work is completed before deadlines. It’s also helpful to make sure that all necessary information is easily accessible, rather than wasting time searching through old bank statements for the right invoices or receipts.
Finally, using a modern Bookkeeping app can also make the entire process quicker and easier for even the most inexperienced bookkeepers. Fyle, for example, is a user-friendly app that makes it easy to reconcile transactions and receipts in seconds and eliminates the need to wait for broken bank feeds or delayed statements.
2. Mistakes
No matter how good an accountant is, mistakes are inevitable. These can be the result of human error, or simply because it’s hard to keep up with a lot of data on a daily basis. Regardless, they will cost your business money because they skew your numbers and make it impossible to accurately assess your financial situation.
It’s important to clearly define each type of transaction and how it should be recorded in your accounting system. For example, a transfer between accounts is not income but a disbursement, which means it must be categorized as an expense and tracked in the general ledger. Otherwise, you’ll see inaccurate profit and loss figures and may overspend on certain expenses.
In addition, a mistake in recording a payment to an employee or vendor can lead to the wrong amount being paid and could potentially result in legal issues. Not properly categorizing these transactions will also affect the budgeting, forecasting, and reporting functions of your company. And although a few hundred dollars incorrectly recorded doesn’t seem like a big deal, it can add up quickly and prevent you from making the right decisions for your business.
Many small businesses aren’t in the position to hire an accountant, so they attempt to save costs by doing their own bookkeeping. However, they often overlook the importance of separating their personal and business expenses, which can create major discrepancies in their books. For example, if you have one credit card for all your business and personal purchases, you’ll need to carefully review your bank statements to be sure you are only recording the expenses that are valid for your business.
Another common error is failing to back up your accounting records, which can be catastrophic if you suffer from a technical glitch that erases all of your data. Fortunately, there are many ways to catch these errors before they cause real damage to your business. One way is to review your trial balance on a regular basis, which will help identify the kinds of mistakes that need correcting. Also, a professional accounting and bookkeeping firm can use their experience to spot errors that you might not notice on your own.
3. Taxes
The work that bookkeepers do is not only necessary to fulfill government reporting requirements, but also to help businesses make better decisions. Financial statements provide accurate indicators that can be used to set goals and identify problems within an organization. Up to date, reliable financial records also help business owners avoid stress and anxiety during tax season by catching any discrepancies between financial statements and what has actually been recorded.
The more money that passes through a company, the more important and challenging it is for a bookkeeper to keep up. Larger companies typically have more complex and infrequent transactions that must be accounted for, and they may have multiple accounting software programs or platforms to manage.
In addition, the volume of a company’s payments can be erratic at certain times of year, leading to a backlog of receivables that must be cleared in order to ensure accurate records are up to date at all times. This is a common challenge faced by small business bookkeepers, which makes it all the more crucial to have reliable software that offers real-time bank feeds.
Reconciling your bank account is a key part of the bookkeeping process, and it’s often the last step before you can feel confident that everything is on track and in line with what has actually been spent. If you don’t take the time to reconcile your accounts, you could miss out on valuable deductions, or even put yourself at risk of an IRS audit.
Every business, from handmade cloth makers to gaming developers to restaurant chains, earns and spends money, and it’s up to the bookkeepers to keep track of it all. This is a complex and challenging job that requires attention to detail, precision and consistency. The best way to minimize the time and cost of your bookkeeping is to work with an expert who can handle your accounting needs for a fair price. The peace of mind and confidence that comes from a quality bookkeeper is worth the investment.
4. Payroll
Payroll isn’t just about handing your team a check. It requires meticulous records and attention to detail, and any mistakes can mean costly payroll tax penalties. From calculating gross pay to withholding allowances and deductions, there’s a lot that goes into paying your employees. Then there’s maintaining the required records, preparing year-end reports and filing with government agencies.
Keeping up with all of this takes time. Even if you set and stick to a regular work schedule, there are still only so many hours in the day for an entrepreneur. That’s why many businesses turn to bookkeeping software, which reduces errors and frees up time for more revenue-generating activities.
However, choosing the right software is a challenge. With so many options on the market, it can be difficult to decide which is best for your needs. Some applications have features that you might never use and others are more comprehensive than your business needs. The goal is to find a solution that’s “just right,” and that can grow with your business as it evolves.
As you begin to scale your bookkeeping practice, it might become more efficient to hire a bookkeeper to help with the workload. This can be a cost-effective way to ensure you meet your client’s expectations and stay on top of deadlines.
When you hire a bookkeeper, it’s important to agree on an hourly rate that reflects the level of expertise needed and how much time the tasks will take. The bookkeeper should also outline what additional services they offer to ensure the client’s needs are met.
Then there’s the question of how to calculate the total cost of outsourcing your bookkeeping. If you’re paying an hourly rate for your services, you’ll need to multiply that by the number of clients you serve each week. This will give you a rough idea of how much it will cost to outsource your bookkeeping. However, this is just one of many factors that will influence the cost of your outsourcing plan. To determine the exact cost of outsourcing your bookkeeping, consult with a trusted accounting firm.