As a small business owner, it’s reasonable to look for opportunities to reduce costs wherever possible. Frequently, this means opting to manage the accounting responsibilities oneself instead of hiring a professional to do it.
But once the business starts to develop, small business bookkeeping becomes more challenging, and you may notice signs that you need better bookkeeping.
Juggling too much by yourself or among a handful of employees becomes unsustainable as the business grows, and it can lead to lower quality of work and cash flow issues.
With bookkeeping being such a crucial part of any business, you may need to bring someone in to handle it. So, here are some of the signs indicating that it is time to hire a bookkeeper.
6 Signs It’s Time To Hire A Bookkeeper
Your Books Are Always Outdated
When you have your own business and it starts to pick up, you may find yourself with an increased inflow of transactions and an outflow of expenses that you struggle to keep track of.
This quickly leads to outdated books, and you will not have a true sense of the financial status of your business. To tackle a backlog will be stressful and overwhelming – if you even have the time to work through it!
Having a bookkeeper to manage daily financial activity with regular book updates makes it much easier. This allows you to have a constant idea of the business’s financial health. As a result, it enables you to implement any necessary changes immediately.
You Only Update Your Books When It’s Time To Do Your Taxes
When tax season comes around, a sense of panic often creeps in with small business owners. You suddenly realize that you need to quickly get your books up to date and in order before sending them off to be filed.
The last-minute scramble often results in errors or incomplete information. This can lead to a back-and-forth between you and your tax accountant. Or it requires them to do more work to fix it. The extra effort by the accountant leads to a more significant fee that you have to pay.
Hiring a bookkeeper helps to avoid this. They will update your books regularly with quarterly financial statements, ensuring that everything is already in order come tax time and that you remain tax compliant.
You’re Missing Out On Tax Deductions
One of the upsides of tax time is being able to claim for tax-deductible expenses, which saves on the overall taxes you pay.
The catch is that you will need to keep on top of these deductible expenses with your quarterly estimated taxes to have the necessary bank statements during tax season. If you have yet to do this or have forgotten to record one or two of these expenses, you may be paying more tax than you should.
Bookkeepers record financial transactions so that you have all records ready for your tax reduction when the time comes.
Your Cash Flow Can Be Unpredictable
If there are specific periods in which you find yourself struggling to earn enough profit and pay off all expenses, you have an issue with your cash flow.
This can be a normal part of business, especially if you are a smaller and newer entity. However, it can be handled better if you thoroughly know the income versus expenses each month with cash flow statements.
For example, you may offer goods or services that are more in demand during the first half of the year. So, you may need to save to fill in the gaps during the second half of the year.
A bookkeeper will keep detailed records of all cash inflow and the necessary expenses. In doing so, not only will you avoid missing payments, but you can also prepare for the slower periods.
Your Sales Have Increased But Your Profits Haven’t
A spike in sales does not always mean that your profit is increasing. When this is the case, you need to have a deeper understanding of why your profit margin is low.
In most cases, this is because your expenses are increasing, so the increase in sales needs to make more of a difference. To solve this, you need to reduce costs and expenses in the business where possible.
With a qualified bookkeeper, you will have a detailed cash flow statement. You can see what costs impact your profit margin using your up-to-date books, allowing you to make an informed decision about where you can cut down on these costs.
It Takes Up Too Much Time
DIY bookkeeping is much easier when you embark on your business journey. But, once your business starts to scale, it becomes more challenging to find the time to keep the books updated as regularly. The result is outdated books, last-minute panic, and unexplained cash flow problems.
Bookkeeping is one of the most critical tasks in a business, so you should not compromise on getting it done. Hiring a bookkeeper allows you to designate this task to someone who can focus solely on managing the books so that you can dedicate your time to other parts of the business.
Conclusion
A bookkeeper is an incredibly valuable part of any business, as they handle one of the crucial areas that need constant attention.
To avoid outdated books, missing out on tax deductibles, unpredictable cash flows, narrow profit margins, and time-consuming work, outsource your bookkeeping. Doing so will help keep your business on the right track and enable you to maximize your success and profit.
Contact Pivot Advantage Accounting and Advisory Inc. today for high-quality bookkeeping services for your business.