Money is the lifeblood of your business, and arguably no member of your team does more to support you with the management of your cash flow than your bookkeeper. In fact, the very first team member you hire should be a bookkeeper—and that person should not be you.
If you’re serious about your business, you should not be doing your own bookkeeping. The job is simply too critical to your company’s success for you to try and fit it in with all of your other responsibilities. And the role really should be filled by a professional who keeps books for a living, not someone who took a few accounting classes in college.
Furthermore, keeping proper financial records is something that needs to be done properly from the very start of your business. So, even if your operation has yet to earn any revenue, consider paying for a bookkeeper out of your own pocket.
If you don’t have your finances set up correctly from the start, you’ll likely have a huge mess to clean up down the road. You also won’t have the resources you need to make insightful decisions to facilitate your business’ financial growth.
Seeing that bookkeeping is so critical to your operation’s success, we’re going to take a closer look at the what effective bookkeeping actually looks like. The first thing you need to get clear on is what you’re looking for in an effective bookkeeper. By clearly identifying your bookkeeping needs, you’ll be able to guide your working relationship with your current bookkeeper or hire someone new. Here are some key questions you should consider.
Are you looking for a bookkeeper, administrative support, or both?
In the past, companies often combined bookkeeper and administrative assistant into one position. To this end, make sure you’re clear on exactly what kind of services you need when hiring a bookkeeper. While the two roles have been blurred into one, bookkeeping and administrative support really are two distinct skill sets.
For this reason, you’ll be better off keeping the two jobs separate by hiring different individuals for each position. Keep in mind, a trained bookkeeper is not necessarily a trained administrative assistant and vice versa.
What services should your bookkeeper provide?
Bookkeeping is much more than just keeping track of your company’s credits and debits—it’s about financial management. Among other things, your bookkeeper’s role should include weekly (if not daily) cash flow management, monthly review of your financial reports, monthly categorization of expenses, as well as quarterly updates of your forecasts and projections.
And as we discussed a few weeks ago, your bookkeeper (in concert with your tax advisor) also plays a vital role in helping you develop and implement your company’s tax strategies. You bookkeeper won’t actually prepare or file your taxes—that’s your tax advisor’s job—but he or she is instrumental in building the financial foundation upon which your tax strategies are built.
It’s important to note that effective bookkeeping requires sound systems. If your company’s bookkeeping systems aren’t set up the right way from the start, your bookkeeper isn’t going to magically fix them.
As your Family Business Lawyer®, we specialize in helping entrepreneurs set up effective financial systems, including bookkeeping, for small businesses like yours. Contact us for help this process.
Does your bookkeeper truly understand your business?
To properly manage your company’s finances, your bookkeeper needs an in-depth understanding of how your business functions. Again, the job isn’t just about plugging in numbers—it’s about supporting you in developing your overall financial strategies.
To this end, your bookkeeper should thoroughly understand all of the ways your company brings in revenue, as well as the various expenses that go into delivering your product or service. From there, your bookkeeper will be able to create a meaningful chart of accounts and financial reports based on the specifics of your operation.
These resources allow you to clearly see all of your income sources and expenses broken out separately, which you can use to make strategic financial decisions based on hard data.
For instance, this data enables you to decide which products and services you should most focus on, which products and services you might want to eliminate, and find areas of your operation where you might be bleeding cash. Without these reports, you are basically in the dark about your company’s financial health.
Next week, we’ll continue with part two in this series and discuss some best practices you and your bookkeeper can implement to bolster your company’s financial foundation. Until then, contact a Family Business Lawyer® if you need support in setting up effective financial systems—bookkeeping or otherwise—for your company