If you own a small business, you might be used to doing many tasks on your own. For example, you may be responsible for contacting your suppliers, marketing your products, monitoring sales, and responding to customer inquiries and complaints. You might even do bookkeeping on your own. Although you might think you're saving money by managing your cash flow yourself, you can actually do more harm than good to your money management.
An accountant or a bookkeeper can help you manage your day-to-day finances. These experts monitor cash flow from different accounts, bills and invoices, and they can organize your books to improve your business's money management. However, before you hire a bookkeeper or an accountant, it's important to understand the differences between the two, the pros and cons of hiring one, and what to look for in a bookkeeper.
What is a bookkeeper?
A bookkeeper handles financial administrative tasks related to preparing your accounts and keeping a record of your daily financial transactions. Bookkeepers do not analyze these numbers or offer financial advice.
What do bookkeepers do?
Bookkeepers handle financial administrative tasks. They are the ones responsible for consolidating books of accounts, following up on past-due payments and billing reminders, processing payments for suppliers and even processing payroll. For basic financial tasks, it's usually a better idea to use a bookkeeper than an accountant, since the former charges a cheaper hourly rate.
What's the difference between an accountant and a bookkeeper?
Whereas a bookkeeper manages basic financial tasks, an accountant is more suitable for a higher level of financial analysis, such as financial forecasts, auditing and tax preparation. Accountants are more likely to give business owners financial advice and insights. [Here is more on the differences between bookkeepers and accountants.]
What are the pros and cons of hiring a bookkeeper?
A bookkeeper handles your finances more professionally than you, but having someone else manage your finances can pose risks for your business. Here are the advantages and disadvantages of hiring a bookkeeper for your business:
Pros of hiring a bookkeeper
- Bookkeepers are more experienced in handling records.Though bookkeeping can be done by nonprofessionals and even the inexperienced, this duty is best handled by a trained individual. This also prevents more errors that can result in penalties on filing documents in the future.
- A new bookkeeper can offer a fresh perspective on your business.A bookkeeper can give you an outside perspective on how you can manage your budget and run your business more efficiently. They can teach you ways to cut costs, provide insight into your spending and more.
- Ultimately, hiring a bookkeeper will help you save money.Hiring a bookkeeper, especially one who can work off-site, helps you avoid financial penalties.
- Hiring a bookkeeper gives you more time to focus on your business.When you don't have to worry about organizing your own books, you can spend more time and effort on the core activities of your business.
Cons of hiring a bookkeeper
- Hiring an outside bookkeeper means a higher risk of exposing your data.Your bookkeeper has access to sensitive bank data, such as account numbers and online banking passwords.
- The bookkeeper's mistakes become your company's mistakes.Your business is accountable for any errors, missed payments and noncompliance by your bookkeeper.
- There might be hidden costs. Your bookkeeper might charge fees in addition to their hourly rate.
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What are some types of bookkeepers?
Before you hire a bookkeeper, you need to know which type is right for your business. Consider the following options:
In-house staff bookkeeper
Hiring an in-house bookkeeper is ideal if you have a medium-size business and want to keep track of the bookkeeper's day-to-day duties. However, you need to cover all of the resources they need, including salaries and benefits. [Are you interested in accounting software? Check out our reviews and best picks.]
Freelance bookkeeper
If you need a bookkeeper only for consolidating your accounts once a year, consider using a freelancer. These independent bookkeepers usually charge an hourly rate that depends on their expertise.
Agency bookkeeper
Large enterprises often use agencies to handle their finances, but small and midsize businesses sometimes take this route as well. The cost of using these agencies depends on the type of service you need.
Outsourced bookkeeper
You can outsource your bookkeeping duties to a company that will set up and train a dedicated team for you and cover all of the expenses needed for their work. These resources include computers with accounting software, VoIPs for billing reminders and the office space where they will work.
What should a business owner look for when hiring a bookkeeper?
Here are some factors to consider when choosing a bookkeeper:
- Your bookkeeper should be able to show a track record of success, especially among clients in your industry.
- A trustworthy bookkeeper should have some sort of certification, though legal requirements for bookkeepers aren't as strict as they are for accountants. Bookkeepers association memberships are common as well.
- Although much modern bookkeeping is done online and thus facilitates remote work, it can be smart to have occasional in-person meetings with your bookkeeper. As such, you may want to limit your search to bookkeepers in your area.
- Make sure your bookkeeper is open to accountability measures, such as regular bookkeeping reviews, the use of project management software and prior authorization for certain bookkeeping tasks. These controls help to ensure that your books accurately reflect your finances and thus don't lead to trouble at tax time.
- Ask your bookkeeper candidates for references who can testify to the quality of their services. Feel free to reach out to these references with a list of questions.
How much do bookkeepers charge?
To hire a bookkeeper, you may need to pay as little as $10 per hour for basic data entry or as much as $75 for a senior bookkeeper with a bit of accounting expertise. If a bookkeeper is an accountant, they may charge $150 per hour or more.
Online bookkeeping software
When you hire a bookkeeper, you might ask if they prefer a particular bookkeeping tool or accounting software. Here are some popular bookkeeping software programs:
QuickBooks Live Bookkeeping
QuickBooks Live Bookkeeping offers basic bookkeeping services for small businesses. The service will assign you a team of virtual bookkeepers who will consolidate all of your accounts and expenses in real time. You can chat with them, have a video call or share screens. You can also track their progress through the platform's Live Bookkeeping Hub. QuickBooks Live can also arrange your books in preparation for your tax filing. However, it can't file your tax documents. [Read our full review of QuickBooks.]
FreshBooks
As one of the most popular bookkeeping tools for small businesses, FreshBooks offers a full range of services, including invoicing, billing reminders and financial reports. The software has an easy-to-use interface, and it integrates with platforms such as PayPal, Google Workspace and Stripe. It also has a mobile app that lets you update and track your books on the go. [Read our full review of FreshBooks.]
Zoho Books
With Zoho Books, you can organize your books and collaborations on one platform. The software allows you to add your bookkeepers and accountant and monitor them through the platform. In addition to invoicing and billing reminders, Zoho Books can handle your bank accounts and payments to organize your expenses. It also allows you to keep an inventory of your office supplies or product stock so you'll know when and how to replenish them easily. You can also request reports, such as profit-and-loss statements and tax summaries. [Read our full review of Zoho Books.]
Xero
Xero is cloud accounting software that lets you handle all accounting and bookkeeping tasks on one platform. It allows you to check your product inventory, save contacts and evaluate business performance through generated reports. It also has a sales tax feature that lets you file your taxes and prepare sales tax returns with automatic calculations. [Read our full review of Xero.]
Kashoo
Kashoo has basic accounting and bookkeeping services suitable for very small businesses. It helps you keep track of your expenses and bills, create invoices and generate basic reports, such as income statements and balance sheets. The platform is simple and easy to use, but it doesn't offer full bookkeeping features, such as product inventory and pre-invoice documents. You can access your account through a mobile app for on-the-go tracking. [Read our full review of Kashoo.]
Additional reporting by Max Freedman.