Here's 10 reasons why you ought to:
1. Cost saving
Expect to see a small cost saving outsourcing, but don?t make this the primary goal. The saving is likely to be 10% to 20% of the base wage of an in-house bookkeeper. Your primary motivation for outsourcing should be getting better financial reporting and advice. One piece of advice now could save you tens of thousands of dollars later.
2. Manage less
Most business owners can only effectively manage a handful of staff. Hire the most number of people you can manage to carry out revenue-making tasks, and outsource every other function including bookkeeping. The entire cycle for one person in one year can be up to 100 hours of a manager?s time in training, directing, salary negotiations, firing and hiring. Outsource and the 100 hours can be reinvested elsewhere. A professional bookkeeping company will shoulder the responsibility of replacing bookkeepers who leave, and conduct necessary training.
3. Own less
The things you own, own you. Every additional computer or software license you own is one more you need to track and manage and pay for! Apart from the upfront cost of purchase, troubleshooting these systems will add expense and require the business to learn new non-essential competencies. Outsource bookkeeping and you outsource ownership.
No PAYG taxes, government contributions or other benefits . You save more than salary by outsourcing - factor in super contributions, worker’s compensation, holiday pay and long service leave benefits.
4. Increase effectiveness
Counting money won’t make more money. If you have spare time to build in-house accounting teams, inject it into the areas of the business which make money like your sales team. Outsourcing is not a perfect system, but compared to the alternatives its far more effective.
5. Do what you love
Not enough emphasis can be placed on this. No client I’ve ever spoken to went into business for the love of administration (other than myself!) There’s nothing worse than an unmotivated leader to bring down the morale of the whole crew.
If you are still doing the books each month, stop today. Maintain your passion and do what you love most. You will excel at what you love most and are more likely to remain motivated.
6. Value creation
By engaging an outsource bookkeeper, you physically restrict the number of hours you are exposed to bookkeeping per month. For most service businesses, one or two days per month is adequate. Tasks take as long as the time allotted to them. A full-time bookkeeper will occupy part of your day, every day. Outsource and instead focus adding value to your client?s business.
Rent constitutes one of the largest fixed costs for businesses. You want to maximise every dollar of this expense item and ensure this space is occupied by sales teams or producers, who directly contribute to the revenue. If you pay $20 per sq metre, how much do you make per sq metre?
You may want to keep the books confidential. One of the most outsourced financial functions is payroll. This is because payroll is complicated and many firms do not want to share salary details with internal stakeholders. By outsourcing bookkeeping, the accounts are one step removed from your staff.
9. Unbias advice
In times of financial crisis, tough decisions need to be made. An outsourced bookkeeper will be more impartial than an in-house person, and will probably give you unbias advice.
10. Improved control
Despite how it may appear, an outsourced bookkeeping company should provide you more control. Choose the software you want to use, the date each month the service is performed, the location and how reports are accessed.
When choosing a bookkeeping company, look for value in their advice and practices. Hiring one of the big accounting firms to do your monthly books is an over-kill. However, I still recommend hiring a big firm to perform an audit and certify your financial statements once a year.
If you are considering outsourcing your bookkeeping needs to a professional, it is important to have a firm understanding of what you should look for before making a hire. There are key skill sets, and characteristics that every bookkeeper should possess.
First, the bookkeeper should have at least basic knowledge of your industry. If your company falls within a specialised industry, such as franchises, restaurants, medicine, sports, etc., there are bookkeeping firms that work with just those industries. If your company is not as specific, any type of professional bookkeeper should suffice, but should have a basic understanding of what you do.
Next, you should verify that the bookkeeper or bookkeeping services firm you will be using is utilizing the latest technology. All bookkeeping tasks today should be done through using software such as Xero or MYOB or other similar systems. The company or professional should be highly skilled at using these applications.
Then, you should verify that the professional has a firm understanding of the requirements you are seeking for your business. A good bookkeeper will become a partner of sorts, that will help the business, and provide detailed financial information to assist with the decision making process. Your books should always be maintained the right way, the first time.
Finally, the bookkeeper you hire should have a great deal of experience working with small businesses. Errors made on the books of small businesses can be extremely costly, and can even cause a business to fail. You need to ensure the professional you choose can provide you with evidence that he or she has a successful track record with small businesses, and that references are provided.
When you take the time to locate a firm or independent bookkeeper that meets all of the criteria mentioned above, you will gain great peace of mind. This person will be there for you with every financial need you may have, and will become a valuable asset to your company.
When running any type of business it is important to understand basic accounting methods as well as the associated accounting statements. Perhaps one of the most important statements is profit and loss. Without a firm understanding of this document, you will not be able to completely track the progress of your company.
The technical definition of a profit and loss statement is as follows: a document that is created by a company that illustrates all income, expenses, and net profit. This statement is then used to calculate net income by subtracting the total expenses from the total income. A profit and loss statement depicts all transactions that take place over a particular period of time, such as a quarter or a year.
In order to get the most out of a profit and lost statement it is always a good idea to compare your current data to data that was collected for previous years. This helps to give you an idea as to how your decisions are affecting the business as a whole. You will be able to quickly see if you are making less money or more money, and if further changes need to be made.
A profit and loss statement can also be handy to present to other people who may have an interest in your business. For example, you may need to present certain reports, such as this, to the bank in an effort to obtain funding. The bank can then quickly look to see how well the business is doing, and make an assessment as to if the investment would be wise. This document essentially informs the bank as to whether or not the business is profitable, as well as if the business has potential.
An ideal profit and loss statement should show a consistent amount of growth and a steady stream of income. If the statement does not show this, or if the numbers do not appear to be headed in the right direction, a business owner many be faced with difficult choices. The owner may decide to put off a planned expansion for the time being in order to better increase the bottom line. The business owner may also look for areas to increase profits, such as reducing a product line that is not selling well, or cutting back on positions that may be costing too much to fund.
The profit and loss statement is an essential tool that can be used in a wide variety of ways. From keeping tabs on the overall monetary health of a company, and predicting growth potential, to finding areas to cut overspending and reduce costs, this statement should be considered a lifeline for any type of business.
There are several common bookkeeping mistakes that business owners make. These mistakes can not only cost you money, they can cost you a great deal of time as well. In order to help you avoid these mistakes, let’s take a look at what they are, and how they affect a business.
Mistake #1: Trying to keep the books yourself.
This is an especially big problem for small business owners. It is not uncommon to try to manage every aspect of a business by oneself. Many times people do this in an effort to save money; however in the long run it can lead to errors in the accounting, and a good bit of time being wasted that could otherwise be spent on the products or services being offered. If you’re not an experienced bookkeeper than hire a bookkeeping service.
Mistake #2: Not reconciling your business bank accounts with your books.
It is essential that the books always match the bank statements. When all the numbers are properly tallied, you can clearly track where money goes, what money is owed, and what bills are outstanding. This keeps monetary errors from being overlooked.
Mistake #3: Not updating the books regularly.
It is very common to simply forget to update the books. Anytime you make a purchase for any type of business expense, and every time there is any type income or outgo of cash, you need to document it in entry form.
Mistake #4: Not using, or not using the right type of, bookkeeping software.
Bookkeeping software can be extremely beneficial to accurate record keeping. Try to find a program that will work well for your type of business, and train anyone who completes transactions for your business to use it properly.
Mistake #5: Not backing up data.
You should always keep a backup log of all of the data that is entered into any type of bookkeeping program. This takes no time at all, but will mean a world of difference should your computer crash.
Mistake #6: Not categorizing entries.
Make sure you design your books to have plenty of categories in order to properly explain all entries. This will ensure your records are easy to follow, clear, and consistent.
Mistake #7: Not establishing a separate business bank account.
Even if you run a sole proprietorship, you should always have a separate bank account to track all of the transactions that have to do with the business. Doing this will make the process of keeping books much simpler, and will provide easy to track documentation of all income and expenses.
If you are serious about having a successful business do not fall into the trap of trying to be an expert at everything. Do what you do well and outsource what you do not do well.
An experienced bookkeeper who is up to date with government regulations is an asset to your business because they will keep your business government compliant.
The tax office does not accept ignorance as a reason for not complying.
Bookkeeping Mistakes Made by Small Businesses:
1. Not having an audit trail.
While receipts may not be required by the tax office, they provide backup documentation for the many deductions you claim. It is very simple to have a folder for such receipts, which can prove valuable at tax time, or if audited.
2. Doing it yourself.
No matter how much they hate it or how little they know about what is claimable and what is not claimable, many small business owners insist upon spending hours on the books themselves. Having a competent bookkeeper handling the finance side of the business is extremely beneficial in that they have the skills to do the job quickly and efficiently and will provide a second pair of eyes to find errors and make suggestions.
3. Forgetting to track reimbursable expenses.
Small business owners often pay for expenses out of pocket or with their own personal credit card then make the mistakes of failing to track these expenses. They then fail to submit the expenses to the company for reimbursement.
4. Not properly classifying employees.
The proliferation of independent contractors, consultants, and casual employees has made it difficult to determine who is on staff and who is not, and the government has guidelines which need to be understood by businesses.There are different rules and regulations for employees and non-employees.
5. Lack of communication.
Having open communication with your bookkeeper is very effective in maximizing the benefits for the business.
6. Not reconciling bank statements, credit cards and petty cash each month.
One of the fundamental aspects of bookkeeping is reconciling bank statements and credit cards every month. This is extremely important to ascertain the profitability of the business.Small businesses should be a miniature of larger businesses, and a larger business would never operate without understanding it profitability each month. A good reason for hiring an experienced bookkeeper.
7. A good bookkeeper will code transactions correctly.
There are fairly standard categories for expenses. Often expenses are entered into the wrong categories or too many categories are created. A good bookkeeper will use general bookkeeping guidelines for standard categorization and create as few new categories as possible. A good bookkeeper will use accepted accounting guidelines.
Angelique offers professional service with peace of mind. As a qualified and registered BAS agent, Angelique provides quality services combined with honesty and integrity, confidence, competence and lawful independence.