If you’re like most people, you don’t know what to do with all the money that’s coming into and going out of your business. You probably spend a lot of time staring at Quickbooks or whatever other bookkeeping software you use. You probably have a spreadsheet or a set of files you use for tracking your income and expenses. But you still feel kind of lost. This is a problem.
But you can solve it by hiring a bookkeeper to do your books for you. What does this mean? It means that once every couple of weeks someone else will come in and take care of all that stuff that’s been stressing you out so much. They’ll put all the transactions from your bank account into Quickbooks, reconcile your credit card accounts, check that your income and expenses are correctly categorized, make sure everything is properly entered.
If you don’t know how to set up bookkeeping files or use accounting software, this will sound expensive to you. But it actually isn’t very much work for a professional bookkeeper to do all those things I just listed—you may be spending more time on them than they would cost if you paid someone else to do it.
Most of us do not enjoy doing bookkeeping. If we did, we would probably be accountants or bookkeepers. We know our limitations and we know that we will make mistakes if we try to do it on our own. Our time is limited and there are other things we’d rather be doing. But the one thing we hate most is the accounting itself.
So what can you do? You can either do it yourself or you can hire a professional to do it for you. And the more money you make, the bigger difference there is between paying someone else to do it and doing it yourself.
The more money you make, the bigger difference there is between paying someone else to do it and doing it yourself:
Whether it’s the books of a small business or the finances of your household, you should hire an accountant to do your bookkeeping.
A lot of people think they’re saving time and money by doing their own books. They’re wrong.
It is true that hiring an accountant will cost you money. The reason you should do it anyway is that the accountant will save you money. The accountant will find mistakes that you aren’t smart enough to figure out on your own, and suggest other ways to make more money.
Accountants also know things about the tax system that are complicated but important; for example, if you are self-employed, there are certain rules about deducting expenses that no one tells you about but accountants know. If you don’t hire an accountant, you might find yourself in trouble with the IRS for not deducting these expenses, even though no one told you about them because they think it’s obvious.
Getting rid of the stress is another good reason to hire an accountant. Keeping track of your money takes time and effort, and if it’s not done right can be psychologically stressful. It’s okay to hire someone else to do this work for you so you can feel free to spend your time on things that are more fun than book
Do-it-yourself accounting is a pain, but there are other, even better reasons to hire an accountant. Books are important. You have to keep them. You have to know how to read them. If you don’t understand what your business is doing, you can’t run it well.
As a rule, people with little business experience underestimate how much time they waste on accounting. And most of them also underestimate how much money they lose by doing their bookkeeping in an amateurish way.
If you are in business, or plan to be, you need to keep track of income and expenses. And unless your business is very small, you will probably need someone to help you.
I’m a big fan of having a bookkeeper. All the start-ups I advise have one. Even if you’re going to do your own bookkeeping, I urge you to use a bookkeeper in the early months.
It’s not that I don’t think you can handle the job. It’s just that accounting is really not that hard; it doesn’t take any special talent to do it, and most people who say they hate numbers are wrong. You might be one of them; but even if you are, accounting will be easier for you than for most people because of the kind of business you’re in.
Some people can’t do their own books either because they don’t like numbers or because they don’t have the time (or energy) to do them properly. They know there are errors in their books; they know they probably pay more taxes than they should; and they know that sooner or later an auditor is going to decide they actually owe money. They just want someone else to deal with it. And who can blame them?
Do you know how to do accounting? No? That’s OK. Very few people do.
The first step is to understand that it doesn’t matter. Accounting is a tool for keeping track of money, and if you don’t actually have any money there’s no point in keeping track of it. You can keep track of imaginary money if you like, but only as a hobby: the whole point of an accounting system is that the numbers don’t mean anything unless you check them against reality from time to time.
If you’re doing business with actual customers and vendors, then of course you need some kind of bookkeeping system. If you’re not, then all you need is something that helps you remember how much imaginary money your imaginary business has made over the last month.
If it’s a small amount, no problem; just write down what comes to mind and forget about it. But if you’ve got millions of dollars changing hands every day, you probably want something more organized than an ad-hoc spreadsheet or a notebook with a locked cover. You probably want a real bookkeeper, or at least someone who knows how to use Excel macros.