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That could be the case for a variety of reasons. You may be very disciplined and good at setting aside time each day to log your financial transactions and reconcile your accounts. Maybe you don’t need expert guidance to gain a clear picture of your business’s financial health. If this sounds like you, kudos — you are on top of it and ahead of the pack. If that doesn’t sound like you, it might be time to bring in some extra help. Here’s how to go about making the decision, along with a few guidelines for hiring the right person or company.
If your small business is just getting off the ground, or you’re new to freelancing or view it as a side hustle, then hiring a bookkeeper right now is probably premature and not the best use of your valuable income. This might apply to you if:
• You’re in the first year of your freelance career
• You haven’t yet incorporated your business
• You don’t have any sales. Perhaps you’re still developing your business offerings, or your service requires a lengthy sales cycle.
• You have a low volume of financial activity. You only have a handful of transactions each month, including revenue and expenses like subscriptions, office supplies, laptop payment, etc.
• Because of the low volume of transactions, you are operating your finances from your personal bank account.
If you answered “yes” to any of the above, then you’re just fine handling your own bookkeeping for now. Hiring a bookkeeper in the future might be the epitome of #goals because it means that your business has taken off — but you’re not there just yet.
If, however, you’re finding that what were once mundane but still manageable financial administrative tasks have snowballed into overwhelming amounts of record keeping, tracking and paperwork, it might be time to ask for help. Here are some telltale signs that it’s time to hire a bookkeeper.
1. You’re Scrambling At Tax Time
Are you pulling together your tax paperwork at the last minute? If so, you’re not alone. According to the entrepreneur mentorship organization SCORE, 40% of small businesses say that accounting and bookkeeping are the things they dread most about running their business. The average person puts about 13 hours towards their taxes each year. For business filers (including freelancers), that number almost doubles to about 24 hours. If you’re spending significantly more time than the average person, it might be time to bring in help. That’s a lot of time and attention diverted from your core business and things that can move it forward, like prospecting and sales development.
2. You’re Running Your Financials Out Of A Shoebox
Depending on the nature of your business, you may need to record your financial activity on a monthly, weekly or even daily basis. But in my experience, many freelancers take the unwise and risky approach of letting their receipts, statements, invoices and bills pile up without ever really recording them. This method is a recipe for disaster as you can easily lose track of key transactions and find yourself scrambling to recreate them after the fact. A bookkeeper can pick up these tasks so that you can tie each transaction back to a particular client, spot cash flow issues before they worsen and ensure you’re not missing important payments.
3. You’re Paying An Accountant To Do Bookwork
There’s a common misconception that if you have an accountant, you don’t need a bookkeeper. But the truth is you likely need both. There are differences between the two, including a huge variation in cost. Yet, in their scramble to get ready for tax time, many freelancers have their accountants do things that are really a bookkeeper’s responsibility. If you show up at your accountant’s office with a box full of receipts and a pile of statements, you’ll pay for them to spend numerous hours reconciling your books before they even get to filing your taxes. A bookkeeper can make sure your books are locked and loaded for the handoff to your accountant — and they’ll typically do it at a much lower hourly rate.
4. You’re Not Really Sure How Your Business Is Doing
Off the top of your head, do you know what your revenue was last month or what your operating costs were? Do you know your bottom line? A bookkeeper can provide accurate and up-to-date books and help you see trends that may point to changes you need to make or places where you need to tighten your belt. You’ll be able to see which clients are your biggest money makers and which you may want to cut loose.
5. You Just Paid A Ton In Taxes
Many freelancers who pay their estimated taxes on a quarterly basis are surprised to find they still owe more at year’s end. You can prevent this by meeting with your account quarterly, armed with up-to-date books. Together, you can discern ways to mitigate your tax liability. Orderly books can help your accountant identify opportunities for tax breaks and write-offs.
Today there are many options that make it easy and affordable to outsource your bookkeeping — when the time is right for your business. Whether you hire a local expert or subscribe to a done-for-you digital service, releasing the responsibility of financial tracking to focus on the core of your business can help propel your business to the next level.
April 8, 2019 at 07:59AM
Forbes – Entrepreneurs