Small Business Information

Small Business Bookkeeper-Should You Hire One

Many small business owners, when they are starting out, think they can handle "doing the books" on their own and save a few bucks instead of hiring a part time or contract bookkeeper. Here are a few things to consider before you decide not to hire a small business bookkeeper.

Most of them come to realize very quickly that this can be a daunting task, not to mention, it can end up costing you far more than you would have spent by having a qualified person spend just a few hours a month making sure your books are in order.

Improperly kept books can really cost you in terms of stress and aggravation; lost time; lost business tax deductions; penalties for late filing or understated revenues on employment, business and federal taxes; and much more.

Considering that you can have a professional handling all this for you for anywhere from $15-25 per hour on a contract basis, just a few hours a month, there is really no excuse to hinder your business' growth by continuing to trudge through it all yourself.

What does a Bookkeeper do?

A bookkeeper is a person that handles Accounts Receivable, Accounts Payable, or Payroll. In smaller companies, the same person may perform all three tasks. In larger companies, each task is performed by a different person.

In very large companies, there are often multiple people performing each task. The bookkeeper's job is usually to "keep the books" on a daily basis, and then hand that information off to the accountant on a monthly or quarterly basis.

Smaller companies often hire a contract bookkeeper to come in for a few hours each week, or at the end of the month, to do what is called "writeup services" -- basically entering all that week's (or month's) transactions and reconciling the books in one fell swoop, rather than updating the books every single day.

What is Accounts Receivable?

Accounts Receivable (A/R) refers to customer accounts and the funds that are due to be paid to the company. The company provides products or services to its customers and the company receives payment in exchange.

A bookkeeper who does this task is often called an Accounts Receivable Clerk. The process usually consists of entering customer orders into the computer system, preparing invoices, sending them to customers, receiving payments, logging the payments into the computer system, and following up with customers who have overdue payments.

What is Accounts Payable?

Accounts Payable (A/P) refers to vendor accounts and the funds that are due to be paid by the company. The company orders goods or services from other businesses (vendors) and the company then pays for those goods or services.

A bookkeeper who does this task is often called an Accounts Payable Clerk. The process usually consists of entering purchase orders into the computer system, receiving bills and invoices and logging those into the system, paying those bills and logging the payment into the computer system, and following up with vendors regarding account adjustments, refunds, returns, etc.

What is Payroll?

Payroll refers to the company's employee salaries, wages, bonuses, net pay, and deductions; the maintenance of all records pertaining to payroll and payroll taxes (Federal income tax withholding, Social Security, Federal unemployment tax, State and Local taxes); and the issuance of the actual payroll checks or electronic payments to the employees.

A bookkeeper who does this task is often called a Payroll Clerk. The process usually consists of entering or verifying employee hours in the computer system, computing and recording the earnings owed to each employee, calculating payroll taxes and other deductions, generating the payroll checks or initiating the electronic payments, and keeping records of benefit deductions, sick leave and vacation pay, 401(k) and pension contributions, and other nontaxable wages.

As you can see, there is a lot to think about if you are going to continue doing the books on your own. Just keeping up with the taxation changes can be enough to make you tear your hair out, if it's not "what you do."

Your time should be spent where it has the most positive impact -- building your business and doing what you love. After all, you didn't start a "bookkeeping" business, right?

Labels: small business, small business bookkeeper, small business bookkeeping

posted by Jeff Schuman @ 7:18 AM