Why Does Your Business Need a Dedicated Bookkeeper?

Jo Landers

Many small businesses don't have a dedicated bookkeeper on staff.There are several reasons for this.

They don't need a full-time (or even half-time) person:

Most businesses only need 5-10 hours a week of dedicated bookkeeping. It's difficult to hire someone long term for so few hours. Instead, many small businesses combine bookkeeping with other work to create a half or full-time position, or the owner handles the bookkeeping themselves, in addition to their other responsibilities. This can be a mistake.

  • If bookkeeping is only one of several duties, it may go to the bottom of a to-do list. Bills are more likely to be paid late, customers who owe money won't be contacted, and the overall fiscal health of the business will suffer. If it continues for too long, the bookkeeping stops being a tool for managing cash flow and long-range planning.
  • A receptionist, general manager or even the owner may not have a fiscal background. They are more likely to make errors which won't be apparent until tax time and less likely to have the skills and experience to analyze the information a good bookkeeping system can provide.
  • The owner and someone on staff with part-time bookkeeping responsibilities are less likely to have a dedicated, regular time each week or month to review fiscal information. If they see each other every day and have other duties, information may be communicated in bits and pieces; the owner never sees the whole picture but may feel like they do, resulting in poor planning.

They think they can't afford a bookkeeper:

Even if a business is paying avoidable fees for bounced checks, late payments, etc. they may think it is less expensive than having a dedicated, knowledgable person handling their finances. But bank fees are the least of the problem.

  • NSF check fees add up quickly, while late credit card payments trigger default interest rates, adding to the cost for years down the road.
  • The ability to obtain future credit may be compromised, making it difficult to obtain financing for new equipment or expansion.
  • Even a single bounced check to a vendor may result in a terms account (for example, a net 30 account) being closed, creating tighter cash flow. At a minimum, it creates trust issues, making it more difficult to get credit line increases when needed.
  • Sales tax, payroll withholdings, or other 'pass-through' collections may be used to provide short-term cash. This is a mistake that can cost hundreds or thousands of dollars in penalties when the state or IRS catches on, but it is a strong temptation when cash is tight, especially if the person doing it isn't fully aware of the consequences.
  • Cash flow may be tight when it doesn't need to be. There are often ways to improve cash flow, but they require someone focusing on the books.
  • The business may be missing opportunities to reduce costs because they aren't analyzing their overhead for possible savings or aren't following simple procedures to reduce insurance and other expenses.
  • The business may be paying more in taxes than they need to because they miss deductible expenses, time expenses poorly, or don't ask their accountant the right questions or provide the right information.
  • The business may lose track of what aspects are the most profitable and make poor planning decisions as a result.

They are concerned about possible theft:

Most businesses need to give their bookkeepers personal information and access to bank and credit card information. Hiring a short-term or very part-time person who has access to that level of confidential information is a risk. This is especially true if your bookkeeper signs checks AND reconciles bank and credit card statements, since no one else may know where payments are going.

Often an owner deals with the books for just this reason, but the risks can be minimized.

  • Even businesses with a very small staff can have one person responsible for taking customer payments, and another for reconciling daily cashouts against receivables and bank statements, making sure all sales were actually deposited.
  • The same 2-person system can be applied to payments. Although one person may be responsible for entering vendor invoices and writing checks, another should sign the checks and review what's being paid.
  • Risks with online accounts can be minimized by simply changing account passwords when someone leaves. You should also notify the bank and remove the person from the list of authorized signers if they were able to sign checks, and let your payroll service know they should no longer have access to payroll information.

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