So you've taken the next big step. Congratulations! Starting a new business is no small feat. It must have taken months or years to get to where you are now, with loads of time to conceptualize and implement a business plan in between. However, before you truly hit the road, you must lay some solid groundwork first.
Running a company is a never-ending stream of rewarding successes accompanied by ever-expanding to-do lists. To consistently stay on top of your business, you'll have to keep track of the inevitable accounting duties. Bookkeeping that is accurate and up to date is the foundation of every profitable small business. Understanding bookkeeping best practices and when to hire business bookkeeping services is critical for keeping the company going smoothly now and in the future, regardless of the type of business you manage.
If learning the ins and outs of simple bookkeeping for small businesses sounds overwhelming, try to reel the information in slowly but surely. Learn about the various options open to you and why it is essential to maintain accurate financial records. But first of all, let's make sure we're on the same page.
Bookkeeping is the method of keeping records of any financial transaction made by a business from its inception to its closure. Each financial transaction is registered based on supporting documents, depending on the type of accounting method used for the company. That paperwork may be a receipt, an invoice, a sales order, or some form of the financial report demonstrating that the transaction occurred.
Bookkeeping transactions can be registered manually in a journal or inputted automatically using software such as QuickBooks bookkeeping services. Most companies now maintain accounts that display their financial expenses using advanced bookkeeping computer programs. To report financial transactions, bookkeepers may use either single-entry or double-entry bookkeeping. Bookkeepers must grasp the firm's accounting chart and how to manage the books using debits and credits.
Automation has been dominating in many industries, and for a good cause. After all, when an AI is taking care of most of the mundane tasks in your company, you gather yourself time and money to grow other aspects of your business. With that said, automation feels right at home with small business bookkeeping. The accounting process is filled with repetitive tasks that can pile on and add unnecessary workload to your employees. Modern accounting software is more than capable of automatically calculating important financial figures while simultaneously organizing your spreadsheets.
When shopping around for accounting software, it's a good idea to consider your company's storage, accessibility, and security needs. Don't go buying the first software that comes up on your google search. Instead, identify your needs first, so you can optimize your subscription costs and make the most out of the software.
Many situations will arise where you'll have to shoulder miscellaneous costs out of your pocket. While this might seem insignificant, it's good accounting practice to record those expenses in your company's records. Keep the business receipts and submit them to your accounting staff to reimburse you with a check. Reimbursing business-related costs should follow the same process as reimbursing your employees. This might include: Recording the details of your purchase on a spreadsheet (date, vendor, purpose, receipt), subsequently followed by an issuance of the reimbursement cheque. On that note, the cheque should be different from a salary cheque, so your bookkeeper can easily categorize the expense in your books.
Newsflash: It's a business. You're probably going to be getting an onslaught of paperwork. Accounting source papers are a recorded document of all your business' transactions. Source papers are essential in answering any queries or demonstrate proof for when the taxman comes knocking. Most tax authorities mandate companies to keep 5-7 years' worth of documents. This could include invoices, receipts, wage records, and other documents demonstrating a crumb trail of your business's financial transactions.
When your documents are in disarray, you'll be in a bind when you need a certain document. It'll be like finding a needle in a haystack. To avoid this issue, it's best to have an archiving system where you can organize files according to date, type of transaction, etc. Having an organized system also saves you money and time trying to procure documents that can no longer be found in any practicable time horizon.
It's easy to lose track of a business, especially with all the aspects that need attending to. This can lead to missing important tax filing deadlines. However, it's as easy as setting up a huge calendar or a google alert for important upcoming dates to ensure you never have to worry about missing it.
Harking back on number 3, when you have an organized archiving system, you can easily set up all the required documents so that you can be prepared ahead of time, which helps avoid all the fussing about during the busy tax season.
Late or unpaid invoices can leave plenty of frustratingly blank spaces in your spreadsheet. When running a business, it's your prime responsibility to develop a strategy for effectively following up and managing unfulfilled invoices. This could include writing down penalty clauses for late payments or having a contact team follow up consistently on the invoice.
As a rule of thumb, most firms assign a 30-day, 60-day, or 90-day category on late invoices, with a different strategy for each milestone. Of course, we'd all hate for it to reach the 90-day mark, but it doesn't hurt to be prepared. Late payments are incredibly impactful, especially for cash-intensive businesses.
The expense of hiring a bookkeeping service depends on a lot of variables. The rates can be influenced by the following:
If simple bookkeeping is what your business requires at this time, you'll need to consider whether to do it in-house or outsource it. If you wish to appoint and oversee a bookkeeper, you must also decide if the job is part-time or full-time. If you plan to outsource, you can choose between local bookkeeping agencies, local CPA firms that provide bookkeeping services, or specialized, global outsourced bookkeeping firms. Let's take a look at three different solutions that your organization could explore to meet this need.
Hiring a part-time bookkeeping service is more appropriate for small to medium-sized businesses. The costs of hiring such a service can vary greatly. Part-time bookkeepers are paid an average hourly rate of $20, which increases depending on the position or job description. Part-time bookkeepers are expected to perform basic bookkeeping tasks with your collaboration and consistent supervision.
A part-time bookkeeping service is an excellent choice if you're able to do a portion of your bookkeeping tasks and errands per month but need some assistance. You can expect your part-time bookkeeper to enter receipts and keep tabs on the employee timesheets, as well as organizing the accounts receivable and payable. When hiring a bookkeeper on a part-time basis, the management should check on the bookkeeper's job to ensure its speed and accuracy.
Some businesses take a shortcut by teaching a manager or an office employee the ropes on fulfilling part-time bookkeeping tasks. While this has a chance at success and is often the most budget-wise path for most businesses, the consequences of a steep learning curve and time spent can be detrimental to the business' productivity.
While the rates can vary depending on your location, the average rate of a full-time bookkeeper can be anywhere between $35,000 to $55,000 per year, on top of bonuses and overhead. As per GlassDoor's reports, a full-time bookkeeper working in high-cost cities like New York and Los Angeles could reach upwards to an amount of $70,000. Overheads can mean an additional 20% on top of the wage for office parking or lunch allowance.
A full-time bookkeeper is tasked with organizing the company's accounts daily. Having your accounts and documents organized and up to date is the core of a company's financial capabilities. Therefore, hiring a full-time bookkeeper for your growing company could spell out success for your long-term goals.
A full-time bookkeeper may be tasked with but not limited to activities such as fee payments, customer billings, timesheet organization and accounting, and laying down financial statements every end of the month. As the company owner, you would also need to double-check the final reports to ensure consistency.
To effectively outsource your bookkeeping responsibilities, you'll need to figure out what aspects of your financial management needs outsourcing. Outsourcing rates can vary depending on the volume of transactions and other factors you studied when hiring a part-time bookkeeper and defining their role. The estimated monthly cost of outsourcing a bookkeeping service can be anywhere between $500 to $2500. Outsourcing gives you the flexibility to customize what specific service your business needs.
You have the option of outsourcing more specialized accounting functions and controller roles in attaining a complete 'virtual accounting department", which would no doubt increase the pay scale but could be just what your business needs to accelerate its growth. Suppose the company is still in the developmental phase. In that case, you should consider making a move to full accrual accounting, with management and financial reporting that will make it easy to scale your business. This degree of complexity in financial management goes beyond your knowledge and will be instrumental for other business stakeholders such as investors, advisors, and banks.
If part-time or full-time bookkeeping seems to be limited to your business needs, choosing to go with a highly specialized bookkeeping firm may be the wisest choice.
There's plenty to learn, but the fact that you're reading this signifies that you have your business's best interest at heart. Acing your books right off the bat saves you headaches down the road. If you're unsure about organizing your finances, choosing any of the bookkeeping services above may be the right choice for you.
Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.