In a survey of over 300 small business owners from Clutch, a leading BRB research, ratings and reviews company, nearly 95% of owners said they were confident in the accuracy of their financial records. While a business owner may think their records are fine, they usually are not aware of a problem until their accountant questions their records at tax time.
When most small businesses start out, the business owner shoulders the responsibility of managing the company’s finances. But as a company grows, when should you consider getting outside help? Here are four signs to look for:
1. Your books are behind
It has been said that “Life can only be understood backwards; but it must be lived forwards”. This phrase has application to the way you are handling your company finances. If you are stuck cleaning up activity that has already happened, it prevents you from identifying issues that could be fixed in the future. It will hinder the ability of your business to grow and thrive.
The most immediate benefit of hiring a bookkeeper is catching up historical data. A good bookkeeper will leverage technology to organize months, and sometimes years of data. They will also suggest and implement workflows to keep the books up to date going forward.
2. You do not know much money you are making or spending
I watch a lot of Shark Tank. On that show, every contestant is asked one simple question: What are your sales? Most contestants come prepared, but for the few that can’t supply sales numbers – I can’t help but cringe. If you are choosing to go on national television to seek an investment in your business, you need to Know. Your. Numbers.
Most small business owners will never go on Shark Tank, but the principle still applies. If you don’t know your revenue, you cannot plan to increase it. If you do not track expenses, you cannot cut costs. And if you lack understanding of the total money coming in and out of your business, you open yourself to fraud. A bookkeeper can generate clear basic reports that show sales and expenses. In addition, they can provide a wealth of knowledge on how to grow revenue and reduce your costs, since they are familiar with the day to day operations.
3. Your collection process is a nightmare
Business owners frequently focus on cash flow. Regular customer payments are key to good cash flow. If a large percentage of your invoices are unpaid for three months or more, that is a red flag. Usually, this indicates that you need to establish a collection process or improve upon it.
Invoices are typically created by you or someone on your team. However, a proactive bookkeeper will monitor your aged receivables regularly. They will inform you of any lingering unpaid invoices that require follow up with customers. Bookkeepers can suggest ways to automate your invoicing for recurring customers, set up invoice reminders, and even connect online payment services so you can be paid faster. No more waiting for checks in the mail!
4. The time you are spending on the books takes you away from working on your business
“But wait…isn’t accounting part of working on my business?” That is true, but let’s be honest: You did not start your business so you could do paperwork. As a business owner, you need blocks of time to sell, create and grow aspects of your business. This is true regardless of industry, including ours! Cindy, our founder, regularly blocks out time in her schedule to work on our firm’s growth.
We all know the expression: “Time is money”. Time is your most valuable asset, and if you are spending the majority of it on your books, then little time is left to focus on business growth. By outsourcing your accounting to a bookkeeper, you can focus on activities that will generate revenue.
If you are experiencing one or more of the above situations in your business, we encourage you to explore a financial partnership with a modern bookkeeping firm. Interested in how to get started? Contact us to schedule a conversation on how Team BBB can help you!