I recently spoke with a startup that was doing really well. They had only been around for a few years and their revenues were in the tens of millions, their customer base had grown significantly and they were looking to expand their team and hire a Finance Director.
They wanted the Finance Director to manage the strategic direction of the company and the accounting function.
One of the areas in accounting that they wanted the person in this role to do was bookkeeping.
After hearing that I was curious to understand more about the company and asked: “What does the finance and accounting team currently look like?” to try to get some more color.
Their answer: “We have a Controller.”
You see, the Controller was doing the bookkeeping currently and he wanted to get that off of his plate. I get that. But what this startup didn’t really understand was the range of responsibility that goes with each of these titles.
Neither a Controller nor a Director of Finance should be doing bookkeeping for one simple reason: both of those positions are compensated at a higher rate than a bookkeeper. Check it out:
Why would you pay someone more than double to do the same job?
They said that they wanted the Finance Director to lead the strategic vision of the company. How can that person do that when they are spending half a day everyday in Quickbooks?
You should leverage the skills and experience that the Finance Director or Controller bring to the table. This not only benefits the company to get the most out of the employee, but also keeps them happy. Controllers and Finance Director’s do not want to spend a lot of time bookkeeping. They have already paid their dues and do not want to regress in their career.
But it is not the startup’s fault. How can someone who doesn’t know about finance and accounting know who does what?
You wouldn’t expect a finance person to know how code. Why would you expect a non-finance or accounting person to know which roles do what?
What Is A Bookkeeper Anyway?
- Is someone who manages the data entry of accounting transactions into your accounting system, like Quickbooks or Xero, for example.
- Reconciles bank and credit card accounts each month and at the end of year.
- Manages Accounts Payable and Accounts Receivable.
- Builds financial statements.
- Prepares 1099’s.
- May process payroll.
- Enables the accountant to spend less time when it comes to tax filing because they have recorded the books accurately.
- Works for small businesses.
- Is not an accountant or CPA.
- Does not interpret financial statements
- Does not give tax advice nor file taxes.
Yeah, But I already Have A Finance Director/Controller/X Title, Do I Have To Hire A Separate Bookkeeper?
Yes and no.
So, yes, even if you have a Finance Director or Controller you should hire a bookkeeper.
But no, that does not mean that you need to go out and hire a full time bookkeeper that comes into your office everyday. There are plenty of alternatives that you can find to get your bookkeeping done.
What are your options? Hire a bookkeeper, get a bookkeeping software plus service or do it yourself.
If you want to hire a bookkeeper, I would recommend you first go with a freelancer that works with many clients. How this works is you will give the freelance bookkeeper access to your accounting software, your receipts and bank statements and they will update your books. Ask for recommendations from friends or other people in your industry. Your accountants may even be able to recommend a bookkeeper.
When searching for a freelance bookkeeper you will want to make sure they understand the accounting for your industry and have experience with similar types of companies. For example, e-commerce or SaaS have very specific accounting rules that they will need to be familiar with. This will ensure that they know how to categorize revenues and expenses.
Alternatively, you can sign up for a modern hybrid of a bookkeeper plus software, for example Bench. These companies have a team of bookkeepers that work on your books each month and use their own proprietary software. With costs starting as cheap as $1,500 a year, you have no excuse to not have your books in order.
Doing it yourself means you purchase one of the available small business online accounting softwares available, like Quickbooks, Xero or Freshbooks. What is great about these tools is that the set up is very easy and you can get started today. Once you pay for a subscription you can connect your bank accounts to their system and it will pull in transactions. You categorize the transactions and voila!
See below side by side comparison of subscribing to Bench or Xero or hiring a full time bookkeeper.
It really depends on what you are looking for.
If you want something that is easy, plug and play and you need your books to be done right, a software plus service combination, like Bench, might be for you. The downside to Bench is that they use their own proprietary software and if your company outgrows them, you will need to migrate your accounting data. Not a big deal but still work.
If you want more of a do-it yourself kind of thing, a modern online accounting software for small to medium sized business, software like Xero would work for you. The drawback is if you do not know how to manage your books everything can become a mess easily.
If you are a small to medium sized business and do not plan on growing larger, a full-time in-house bookkeeper may be what you need. Of course you will need to buy software.
How Do You Know It’s Time To Hire A Bookkeeper?
If you answer no to to at least one of these, you should probably hire a bookkeeper or bookkeeping service.
___Do you have more than 50 transactions per month?
___Do you know how to close your books at the end of the month and end of the year?
___Do you know what accural means and how to apply it?
___Do you know how to accrue revenue and expenses in your accounting software?
___Do you know what GAAP is and how it applies to your books?
___Are you confident that you are not making mistakes with your books?
I don’t ask you these questions to make you feel bad but rather, to understand that even though bookkeeping is not complicated, you need to 1) know what you are doing in order to do it correctly AND 2) regularly spend the time to update your books.
Why It Is Worth It To Hire A Bookkeeper Or Bookkeeping Service Sooner Rather Than Later
If the person doing your bookkeeping does not know what they are doing you can run into serious financial problems that will negatively affect your business. For example:
- You could run out of money.
- Your revenue may be over/understated which causes you to spend too much or invest too little, pay too much or not enough taxes, etc.
- Your expenses may be over/understated which means you cannot plan for your business’ success.
In conclusion, if you are reading this, you should probably hire a bookkeeper or a service to do your books. It just makes financial sense to have your books in order.
For more insight or help managing startup’s finances contact me at me (at) katiebronnenkant.com.