How Should You Hire a Bookkeeper for Your Small Business?

Bookkeeping started way back in 6000 BC, according to historical artifacts. Keeping track of financial records began long ago during the Babylonian period (Southern Mesopotamia), and even the kingdoms of Greece and the Roman Empire have also kept records of their day-to-day financial transactions. 

And so, clearly, bookkeeping is not a recent development but an ancient necessity. As soon as agriculture began, the idea of bookkeeping came into existence.

Bookkeeping is the systematic process of organizing and recording your company’s financial transactions daily. It encompasses various techniques for recording these transactions and is an essential component of your accounting procedures for several reasons. Keeping accurate and up-to-date transaction records allows for generating precise financial reports, which are invaluable for measuring business performance.

But why is bookkeeping essential, and is it inevitable for small businesses?

Making sound judgments when one has complete data, facts, and knowledge is not leadership - it's bookkeeping.

- Dee Hock, founder and former CEO of Visa

Why is Bookkeeping Important?

Clear Tax states, “Bookkeeping helps identify and summarize transactions chronologically and systematically.” 

Sounds complex, right? 

Here is a more straightforward explanation. Bookkeeping is a record of financial transactions that will help an individual or a business to keep track of their performance. 

Based on the data recorded in bookkeeping, businesses can make strategic decisions and set a benchmark for their financial milestones. These five questions might constantly pop into your mind if you're a small business owner.

1. Is my business profitable?

2. Where is my cash going every month?

3. Who do I owe money to?

4. Who owes me money?

5. Do I have enough money to operate my business next month?

To answer these five questions, you’ve got two options:

1. You must do the bookkeeping yourself, or

2. You can hire an experienced bookkeeper. 

Choosing the latter will be the best thing you can do as a small business owner so that you don't need to burn the midnight oil to keep track of your business transactions. 

Focus on your business while your bookkeeper manages numbers.

Who is a Bookkeeper?

"A bookkeeper is a professional in the accounting field who is tasked with meticulously documenting sales, purchases, and other financial transactions."

Hiring a bookkeeper is inevitable if you want best to manage your company’s financial statements and records.

But is it not an accountant's job? It is not! 

There is a definite difference between a bookkeeper and an accountant. Experienced bookkeepers will record all your financial transactions, whereas an accountant will help you with your financial transaction reports, like income statements, and make accurate conclusions about your business performance. 

Some job responsibilities of a bookkeeper include employee payroll, bill payment, reconciliation, and sending invoice follow-ups.

Important: Bookkeeping will help you with a micro view of your financials, while accounting provides a macro view.

10 Tips for Hiring the Best Bookkeeper for Small Business

You need to have a collaborative hiring process.

 - Steve Jobs, former CEO of Apple

#1 Understand Bookkeeping

Before hiring a bookkeeper for your small business, you must try to understand bookkeeping basics. Know about a bookkeeper's responsibilities to outline how they'd be helpful for your business. The primary job of a bookkeeper is to reconcile your bank statements every month and categorize your expenses and revenue. 

Additionally, your bookkeeper might follow up with your customers for payments through invoices, pay off credit cards, transfer cash between bank accounts, record bills, and make payments on your behalf.

#2 Hire a Freelance Bookkeeper

You must know these statistics if you're a US small business owner reading this piece. The average income of a small business owner in the US is $63,560 per year (as of August 2022), while bookkeeper charges in the US vary between $500 and $2500. You can opt for a freelance bookkeeper if you're not a small business owner making over $150,000. 

According to Milestone, based on the complexity of your business transactions, you'll need 5-15 hours of bookkeeping per month. You’ll have to pay a freelance bookkeeper around $26.30 to $42.52 per hour.

#3 Experience with Bookkeeping Software

A bookkeeper with QuickBooks or Xero experience can complete your job in less time than a traditional bookkeeper. A bookkeeper's experience with accounting software can benefit businesses if they like to get quick insights, detailed reports, and better financial decisions. And, with an automation tool like Saasant Transactions, a bookkeeper will find it easier to import a bulk volume of transaction data to QuickBooks Online. 

A tech-savvy bookkeeper will be able to manage your books efficiently. Being bookkeepers, they should also be able to gather online payments from various e-commerce platforms and payment gateways like Shopify and Stripe. Hire them if they can sync all your online payments to QuickBooks or Xero. They might already know about popular QuickBooks add-ons like PayTraQer to make the sync seamless.

#4 Hire a Bookkeeper who Understands Your Business

A good bookkeeper understands your business and can customize operations according to your business’s financial needs. Try finding a bookkeeper (see after point #10) who understands your industry and has experience bookkeeping for a similar small business. 

If not, your bookkeeper might make huge mistakes since they're not on the same page as yours. For example, if you want a bookkeeper for your cookie-selling business, find someone with experience in a similar company. If your bookkeeper's previous financial expertise aligns with your business, your bookkeeper is a keeper!

#5 Find a Certified Bookkeeper or Certified Public Bookkeeper

Although it is not required for a bookkeeper to have a stamp of approval from the American Institute of Professional Bookkeepers (AIPB), if you can find a certified bookkeeper, your business will thank you for it. They would have signed the AIPB's code of conflict and completed the examination. Additionally, a certified bookkeeper should have spent at least two years doing bookkeeping.

A Certified Public Bookkeeper charges less than a Certified Bookkeeper (CB), and they would have spent at least 2000 hours or a year doing bookkeeping. They are certified by the National Association of Certified Public Bookkeepers (NACPB). But Bookkeeping certifications are optional and are not the same as accounting, where a Certified Public Accountant (CPA) designation is required. 

#6 Experience with Managing Taxes

Taxes can take a toll on your income, so hiring a bookkeeper with experience managing taxes is essential. If you want to stay on track with your financial goals, find a bookkeeper who lessens your tax burden. 

Bookkeepers should be aware of all the tax law changes, creating a tax-efficient structure for your small business. A stat says Hiring A Bookkeeper Can Increase Your Profits By 16% and only proves a bookkeeper's importance.

#7 Refer for Reputation

When you understand the type of bookkeeping you need, seek referrals and start searching for trustworthy individuals. Governing associations such as AIPB, NBA, and NACPB might have job board listings and a list of certified bookkeepers available for hire.

Many local bookkeeping firms can provide references, helping you to hire the best bookkeeper in your locality. When it comes to referrals, ask for testimonials from past/current clients to know about the reputation of the bookkeeper you're about to hire.

#8 Schedule Interviews

It is essential to schedule an interview with your bookkeeper to understand their experience, expertise, computer skills, future aspirations, and fee for customized services.

Consider fixing a payout day or paying them on a weekly or contract basis. Be specific about the hours you'd require the service of a freelance bookkeeper to cut off additional expenditure. You'll need to ask questions related to day-to-day account management, maintenance of records, tax laws, managing account payables & receivables, sending invoices, payroll processing, and cash flow.

#9 Bookkeeper with Good Communication Skills

Collaborate with a bookkeeper who is good with numbers and can communicate intricate details. A bookkeeper with good communication skills can provide valuable insights into various financial aspects of your business in simple language. 

Think of your bookkeeper as an extension of your business. Does your prospective bookkeeper hold onto similar values? Are they capable enough to explain a complex concept in simple terms? After an interview with a bookkeeper, ask yourself these questions, and choose someone you can trust. 

#10 Transparency in Bookkeeping

You should find a trustworthy bookkeeper free to discuss their past accolades and accept some blockades in their bookkeeping journey. Transparency is vital in bookkeeping as most bookkeeping services have hidden charges. 

Get an upfront quote from your bookkeeper and only hire one if you're confident enough to share your sensitive financial information. To avoid accounting fraud and enjoy peace of mind, recruit a trustworthy individual. 

Hiring the Right Bookkeeper for Your Small Business

Hiring a freelance bookkeeper will help you save money, but what if they're unavailable on days when you need them the most? That's why discussing your business activities and financial plans with your bookkeeper in advance is essential. A freelance bookkeeper will charge you based on transactions carried out in a month and the complexity of transactions. You can find freelance bookkeepers with good reviews on websites like PeoplePerHour, Upwork, and Bark if you need to hire a bookkeeper immediately.

Hiring a bookkeeper is important, even if they only come in once a week for a few hours.

- Marley Majcher, Author, But Are You Making Any Money?

Consider working with a firm if your business starts growing and you're making over $100,000. You'll have a pool of bookkeepers you can rely on daily, but you must allocate a monthly budget for working with them. Paperless bookkeeping is gaining popularity, so working with a cloud-based bookkeeping firm would be ideal.

Using bookkeeping software like QuickBooks Online makes bookkeeping effortless. A virtual bookkeeping service could be your affordable bookkeeping buddy if your finances are simple. You'll always have a pack of Quickbooks authorized bookkeepers to take care of your books virtually. 

Bookkeeper versus CPA

Small business owners should know the difference between a CPA and a bookkeeper. A CPA will give you financial advice to improve your business finance performance, while a bookkeeper will maintain an organized record of all your transactions. A CPA's part mostly comes after completing bookkeeping to analyze and give valuable insights about your business performance.

"There are a total of 664,532 CPA licenses in the US."

Take an example of a travel company called "Wander & Wonder." The company hires Benjamin as a CPA and Emma as a bookkeeper. Emma's work will involve a spreadsheet that records purchases, sales, payments, receipts, and expenses while assisting in account receivables (AR) and account payables (AP). Based on these recordings, Benjamin will assess the balance sheet and every transaction detail of "Wander & Wonder" to prepare financial reports. Benjamin would find areas of improvement and notify the firm officials of the same. Based on his inputs, "Wander & Wonder" will make profitable business decisions. 

What if You don't Hire a Bookkeeper?

Should I hire a bookkeeper? You might need one if you ask this question more often as a small business owner. According to Investopedia, the number one reason a small business faces failure is the need for more capital to carry out operations. And, even if there is enough capital, managing the capital would be of significant priority. More than 33% of small businesses fail within the 1st two years. 

It is not that a bookkeeper is a magician with a wand who'd magically make your business profitable with their ‘Abracadabra’ trick. Suppose you have the right strategy for your business, a trustworthy team, and reasonable movement of products, but you feel your financials need to be fixed! In that case, you need a bookkeeper to manage your routine transactions. 

5 Reasons to Hire a Bookkeeper

According to Starling Bank, an average micro-business (one to five employees) spends about 15 hours per week, or 19% of its time completing financial administration work.

1. Save Time: Hiring a bookkeeper is the best choice for small businesses focusing on their core business needs. Concentrate on your business strategy, marketing milestones, team building, logistics, and funding while your bookkeeper keeps track of your finances.

2. Track Your Money: Know where your money is spent most and least. Take data-driven decisions to rethink your budget allocation and stop splurging on miscellaneous things. Hiring a bookkeeper guarantees you don't miss any payments or pay penalties for late payments.

3. Tax Compliance: With a bookkeeper, you will remember your quarterly or annual tax filings. Different businesses have different tax requirements, and based on the company you have built, your bookkeeper will make estimated tax payments, 1099 for contractors, and corporate tax payments. 

4. Cash Flow Management: Manage your outstanding client payments and late payments with the help of a bookkeeper because they will send reminders to the concerned client and keep your cash flow in check. Small businesses waiting for venture capital to fund their company would have to showcase a positive cash flow. A bookkeeper comes in handy in such crucial times.

5. Business Decisions: If you have multiple business partners, a bookkeeper will act as a gatekeeper who avoids conflicts and manages the approval process. Your bookkeeper will set up a system for all the founding partners while granting access to money. 

Commonly Asked Questions about Hiring a Bookkeeper

1. What's the difference between bookkeeping and accounting?

Accounting comprises interpreting, classifying, analyzing, summarizing, and reporting a business's financial data. Bookkeeping is simply a record of financial transactions. 

     2. Should you hire a bookkeeper?

If you want to focus on your business strategies and improve your profits, hire a bookkeeper. They will manage your financial records, leaving room for you to work on the core business area.

      3. What is the best bookkeeping software?

The "best" bookkeeping software varies based on business needs, budget, and expertise. QuickBooks Online by Intuit offers comprehensive features, a user-friendly interface, and extensive integrations. Xero, another top choice, emphasizes collaboration, simplicity, and intuitive design, making it popular among small businesses and startups. Both platforms provide invoicing, expense tracking, bank reconciliation, and reporting functionalities, catering to businesses of all sizes. Ultimately, the choice between QuickBooks Online and Xero depends on specific requirements and preferences.

      4. How can a bookkeeper help my business?

A bookkeeper helps businesses maintain accurate financial records, generate timely reports, and ensure tax compliance. They manage invoicing, expenses, and accounts receivable, optimizing cash flow and minimizing bad debt. Additionally, bookkeepers reconcile bank statements, assist in budgeting and forecasting, and provide valuable insights for informed decision-making. By overseeing financial tasks, bookkeepers enable businesses to focus on growth and stability with confidence.

       5. What problems do bookkeepers solve?

A good bookkeeper will solve your cash flow, delayed payables, delayed receivables, payroll management, expense tracking, tax preparation, and reconciliation problems.

       6. Do small businesses need bookkeeping?

Yes! Small business owners should have a fair idea of the amount going out and coming into your business. The data recorded in bookkeeping will help with your tax filing.

If you’re looking for an easier way to record thousands of rows of transactions on QuickBooks Online, gear up with Saasant Transactions to automate your bulk import of data.

      7. What are accounts receivable in the financial report?

Accounts receivable (AR) represent short-term assets on the balance sheet, signifying funds owed to a company. They arise when a company extends credit to buyers for purchasing goods or services.

     8. What does a Small Business Bookkeeper do?

 Their responsibilities include curating and auditing the company's financial statements. It entails recording various transactions such as expenses, invoices, payments, tax payments, wages, and sales revenue. Bookkeepers typically utilize general ledgers to compile the balance sheet and statement of revenue.

     9. Should I do monthly bank reconciliations?

Monthly bank reconciliations are essential for ensuring accuracy, detecting fraud, providing financial oversight, supporting budgeting and planning, and maintaining compliance with accounting standards and regulations.

    10. What is the difference between in-house and remote bookkeepers?

In-house bookkeepers are physically present at the company's office, facilitating immediate communication and collaboration with other team members. Due to their proximity, they may have a deeper understanding of the company's culture and operations. On the other hand, remote bookkeepers offer flexible working hours and can often provide cost-effective services. They rely on digital communication channels and software to access financial data and complete tasks efficiently from a remote location.

    11. What questions should I ask my bookkeeper during tax time?

Here are six critical questions you should ask your bookkeeper during tax time.

• Are all financial records up-to-date and accurately documented for tax purposes?

• Are there any changes to tax laws or regulations that could impact our tax return this year?

• Have all potential deductions and credits been considered and maximized?

• Are there any outstanding tax liabilities or issues that need immediate attention?

• Can you guide tax planning strategies to minimize our tax liability for the current year?

• Have all sales transactions been tracked and recorded to ensure accurate reporting for sales tax returns?