Many small business owners think they can manage everything without any support or advice. This do-it-yourself attitude extends into keeping their company’s financial records.
Regardless of the size of your business, it is critical to ensure the financial accuracy of daily transactions and use that data to make decisions for the future. As your business grows, employing the services of a bookkeeper and/or an accountant may be essential to your success.
How do you know which one will best fit your needs? One basic distinction is that bookkeepers record day-to-day transactions, while accountants verify and analyze that information. The following specifics regarding each of these roles will help you determine which skills will provide the greatest benefit for your business.
Bookkeepers Handle Financial Transactions
Bookkeepers are responsible for maintaining accurate records of daily financial transactions. The scope of this job can vary depending on the size and type of business, but it generally includes recording sales transactions and purchases, processing payments, completing the payroll, handling petty cash, and balancing the books at the end of the month.
Some small businesses record these items using a general ledger or journal, but many owners have switched to software such as QuickBooks, Xero, or Freshbooks. These programs are designed to minimize the amount of time spent on accounting functions as well as to help ensure that your company’s financials are accurate and reliable.
Bookkeepers may also manage accounts payable and accounts receivable. This can involve handling vendor bills and invoice payments as well as customer invoicing and follow up and recording payments.
Accountants Focus on the Big Picture
Bookkeeping is designed to generate data about the activities of an organization. Accounting turns that data into information.
The role of an accountant may include reviewing your books to look for discrepancies, analyzing sales trends, completing end-of-year financial statements, and filing taxes. An accountant’s analysis of your financial data can provide information for forecasts, business trends, managing cash flow, and identifying opportunities for potential growth. They can be an invaluable resource when you need to make financial decisions that impact your short and long-term business goals.
In fact, many small business owners consider their accountants as outsourced chief financial officers. They can advise you on financial strategies such as whether or not to secure working capital financing to cover cash flow gaps or purchasing a new product line. If you apply for a business loan, they can help pull together the necessary paperwork.
When it comes to tax preparation, your accountant will make sure your business is in compliance with tax laws and your return is accurate. They will determine the credits and deductions for which you qualify and make sure you have the records to support each claim. In the event that the IRS audits your business, your accountant can guide you through the process.
Evaluate Which Services You Need
Deciding whether to hire a bookkeeper or an accountant depends on your business needs. For example, if you’re a startup company, you may need an accountant to help you choose a business structure and establish a record-keeping system. If your business has outgrown your personal efforts to manage daily transactions, it may be time to delegate this responsibility to a bookkeeper.
Many small businesses choose to contract with independent consultants for their accounting or bookkeeping services. According to Entreprenuer, the typical service business can often outsource its CFO and bookkeeping tasks until it has about 30 employees or its revenues rise above $1 million. Until then, there may not be enough work to warrant hiring a full-time employee.
Growing businesses typically continue to work with an accountant outside the company, but you may reach the point where you need to employ a bookkeeper or have a small accounting department with data-entry staff. If your financial transactions become more complex, it may be necessary to bring in an accountant on a part-time basis to provide additional oversight.
Tracking and analyzing financial transactions gives small business owners a solid foundation on which to make day-to-day decisions and plan for growth. Enlisting the help of skilled professionals is a wise investment in your company’s future.
Working Capital Financing is a few clicks away.
Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.