I guess it’s time for another blog post and this month I want to discuss whether or not small business owners require a bookkeeper. When small business owners launch their business often they want to save money by doing their own books. This is a mistake! Contrary to popular belief a business owner needs a bookkeeper upon launch. Allow me to explain. Let’s assume a small mechanic’s shop is opening and the owner would like to keep his/her own books. This person is likely a well trained and experienced mechanic and does amazing work on client’s cars. But what does he/she know about accounting? Probably very little if any at all! Said mechanic starts preparing invoices, paying bills etc in an accounting software that was recommended by a friend (that is a whole different blog!). Time passes and he/she figures everything is going smoothly.  Chances are they couldn’t be more wrong! Business grows and finally the owner decides a bookkeeper is needed. A good bookkeeper comes in to take over the books and notices that the books are a mess and not at all representative of the company’s financial standings. What comes next is many hours (and therefore more money) of correcting the books to properly reflect the income statement and balance sheet, among other reports. So what did the owner save by doing the books him/herself? Probably nothing. Hours of time spent doing the bookkeeping incorrectly doesn’t sound like a very good business practice to me.

Further, why would the business owner want to do their own books? We all know that as business owners we should be outsourcing our ‘non-revenue generating’ activities. This includes bookkeeping.  Using the example above of the mechanic, let’s assume he/she is spending 10 hours per month on the bookkeeping (likely incorrectly). An experienced bookkeeper will be able to do the same work in a fraction of the time and do it correctly. So, if the mechanic charges $100/hr in labour, that is $1000 of potential revenue left on the table. Yes, the bookkeeper will cost money. But if the bookkeeper only spends 4 hours doing the books at a rate of $45/hr, the bookkeeper’s bill for the month is $180.00. The business owner is still potentially ahead by $820. This is a very simple example but you get the picture.

The bottom line is this: a good, qualified bookkeeper is an essential part of the business right from the beginning.  Don’t wait. The sooner you hire a bookkeeper the sooner you will start saving money. Stay tuned next month when I will discuss what to look for in a good bookkeeper.