Small Business Bookkeeping
By Amanda Patten, EA and Jason Watson, CPA
Updated Wednesday, March 24, 2021
“Do I really need someone to do my small business bookkeeping, or can I just do it myself? I mean seriously… my business is small.” – it’s a common question we hear from business owners every day. Like many small business owners, you may be wondering when it becomes time to pay someone to “do the books.” When you hire a bookkeeper, and what do they do? Are you getting a good value? These are good questions – we’ll explore these and more in this blog post since as Warren Buffet says, “price is what you pay. Value is what you receive.”
Bookkeeping is an important task to a business – small business bookkeeping provides business owners a general ledger, profit and loss statement and balance sheet which are combined to called financial statements. They are more than fancy graphs and charts showing cash in and out of your accounts – financial statements provide valuable information to business owners about where your money is going. Can you afford to purchase new equipment? Check the financial statements. Where are you spending the most money, and what expenses can you cut back on? Check the financial statements. Are you on budget for the month? Quarter? Year? (We know, we know…check the financial statements!) As we said, small business bookkeeping is definitely important to your success!
Sure, financial statements are often only used as a means to business tax return preparation. Most small business owners know exactly how much money they are making with or without financial statements. However, this does not discount the need for accurate financial statements. What a small business owner “feels” in terms of income cannot be converted into a tax return… especially an accurate one. At the end of day, we need compiled data in a format that can translate into business tax returns.
Bookkeepers Versus Accountants
Let’s look at the differences between bookkeepers and accountants. These terms are frequently used interchangeably and while they share some things in common, there are differences that might matter when a business owner is looking to hire someone to maintain their books and financial records.
Bookkeepers are tasked with keeping accurate financial records. Sounds simple, right? Not necessarily. A high attention to detail is needed to ensure numbers are entered correctly, and the coding is just as accurate. Bookkeeping at times is synonymous with bank reconciliation; not entirely true, but darn close.
How is accounting different?
Accounting is more specialized, and picks up where bookkeeping leaves off. Accountants interpret, classify, analyze and summarize the financial data. They typically have more advisory positions and offer advice to business owners. Can an accountant do bookkeeping? Absolutely – but they also can provide a higher level of guidance to business owners as well. Your friends at WCG are accountants; we are not only bookkeepers. While we can enter and code transactions, we provide the most value (think Warren Buffet) telling you what your financial statements mean rather than simply creating them.
So back to our original question – do you need a bookkeeper? The answer is… it depends! Great, you’re thinking. What does it depend on?
Here is a quickie checklist of questions you may want to ask yourself when trying to decide if you need (or maybe just want) a bookkeeper or an accountant, or if you should do it yourself:
Do you have the time to do it yourself?
Small business bookkeeping boils down to keeping accurate records. Records take time. Depending on the size of your business and the number of transactions, you might decide that it’s worth it to have someone else input the numbers so you can spend your time building your business by working with clients or products. Do you want to close a deal or provide a billable deliverable, or hear the beep of QuickBooks after each entry?
Is it a chore you want to take on?
As Jason often says, he can mow his own lawn and change his own oil, but he’d rather pay someone else to do it while he focuses on value-adding tasks. Bookkeeping is a chore to a business owner – some might actually enjoy it, but others might view it as something they’d rather hand off.
Do I know how to do it myself?
In the world of QuickBooks Online (QBO) and other products that make financial data entry much easier, this may not be a deciding factor for you. On the other hand, some business owners take comfort in knowing they have hired someone who does bookkeeping every day to handle their information. Accounting and bookkeeping is a profession, not a hobby. QuickBooks, Xero, Waveapps, etc. all make you feel like you are a bookkeeper and an accountant.
What is the value of doing it myself vs the value of having someone else do it?
When answering this question, you might look at more than just the financial cost. The amount you pay someone should factor into your decision, but you should also consider what your time is worth. How much time will you spend doing it, and is that time better spent growing your business? Let’s not forget the mental struggles too… the pain in the butt effect of having to stop what you enjoy (working, relaxing, recreating, sleeping) and do a chore (bookkeeping).
Are you afraid of not getting the most business tax deductions?
Often we obtain financial records and data from clients who are one hot mess. Great people, just lousy recordkeepers. And our first thought is… our primary concern is… is this business owner minimizing taxable income, or are his or her records such a mess that they are paying unnecessary income taxes? Not knowing is worse than knowing you paid too much in taxes (since that we can fix!).
So to revisit the question one more time – should you hire someone to keep your small business bookkeeping? You think for a moment, and say Yes. Now what?
Small Business Bookkeepers
Update! As of October 2020, WCG is now offering accounting services (bookkeeping + analysis). Bench is still a great referral for us when a client has few transactions and doesn’t need full-service accounting. You can kill a fly with a sledgehammer or a rolled up magazine… the fly is still, but was the hammer really necessary? But if you got a big rodent, then perhaps the hammer, right? If you have rodent size accounting needs (or larger), give us a call! WCG accounting services start at $400 per month with 250 transactions, and we also have great fees for bi-monthly accounting.
If you’ve answered all the above questions and determined that you need some outside help, we recommend Bench. They work with small business owners all over the United States and Canada, and have a virtual platform where you and your tax professional can view the financial statements – makes it easy at tax time!
Bench has a unique business model – their bookkeepers are fresh out of college and excited to work with your numbers (no, really!). Sure… these “kids” are fresh out of accounting school… but what is super interesting is that Bench does not necessarily consider them accountants; they consider them computer programmers or code writers. In other words, they create algorithms to efficiently and accurately import your banking data into financial statements.
Bench is located in Vancouver, and has an online platform that makes it easy to provide information to your dedicated team of small business bookkeepers, answer questions in their messaging center, see the status of your financial statements and what you’re missing, and give access to your accountant or CPA (not bad, eh?). We love it since we can see exactly which month is the most recent to be reconciled, and we can also see missing items or open points that we can review with you.
Need backwork done to get prior year tax returns filed? They’ve got a dedicated team for that. Need ongoing monthly bookkeeping? They’ve got a dedicated team for that. How do they get your info? Simple – you connect your online bank account or credit card right to Bench’s platform, and they download the transactions for you, code them and synthesize them into financial records! Pricing depends on your expenses per month. Makes sense – more expenses typically means more transactions, and more transactions means more bookkeeping needed. Bench is a great option for small business owners looking for bookkeeping assistance. And of course, WCG will be happy to be your accountant and business advisor, and help analyze and review those beautiful financial statements with you!
Amanda Patten, EA is a Director at WCG, Inc., a business consultation and tax preparation firm, and is part of the business development team.