What to Look for in Hiring a Bookkeeper
As your business grows, you will reach a point where you need to seriously consider hiring a bookkeeper. Unfortunately, bookkeeping is still a very un-regulated industry. Anyone can market his or herself as a bookkeeper, and it can be very difficult to sort the wheat from the chaff.
Obviously, your needs will be very specific to your company. However, there are a few basic things you can look out for to help you make the best decision in hiring a bookkeeper.
Look for certifications AND references.
Some people are very good at test-taking, and can certifications easily in an afternoon. (For instance, some lower-level QuickBooks certifications can be very easy to obtain with a minimal amount of studying.) But if they are difficult to work with, or don't do a great job of taking care of clients' books, they will likely not have many positive references available.
Some bookkeepers are very social and, at least on the surface, can impress clients. (Or, at the very least, they're good at getting friends and family to provide them with references.) However, if they do not have the accounting knowledge and technical skills necessary, they won't be good bookkeepers.
When seeking help, prioritize bookkeepers who have both certifications and a significant amount of references. Beyond client reviews, also look for reviews from partnering businesses, such as CPA firms. A good CPA appreciates working on financials that have been prepared by a good bookkeeper.
You can also ask your potential bookkeeper for references from current or prior clients in a business similar to yours.
Check their business registration.
Most legitimate bookkeeping firms will have officially registered their company. Depending on their state of registry, you can look up such information as how they are structured, how long they have been in business, their company officers, whether they have every faced dissolution, etc. (In North Carolina, where we're based, you can check the Secretary of State website for business registrations.)
There's nothing wrong with hiring a newer company, but you might want to consider a bookkeeping firm which has been in business for a few years, first. You can also look at things like whether they have a physical office space, or if the company ownership has changed hands multiple times. (And if they have been administratively dissolved in the past, consider it a major red flag.)
Heed the red flags.
There's a great quote from the show Bojack Horseman which goes, "When you look at someone through rose-colored glasses, all the red flags just look like flags."
Considering the high importance of your bookkeeping being done accurately, you do not want to ignore any red flags in your search for a bookkeeper. Being slow to respond, having little web presence, or being too eager to jump into working with you can all be red flags. If they are setting off your alarm bells during the initial search, consider how much worse things can become once you have hired them.
Ask about their experience with companies like yours, and with services you might need (such as their systems for managing payroll, sales tax, etc.). Ask about their policies on client communication, and how they prioritize time-sensitive tasks. Most importantly, particularly if they are a 1-person shop, ask about their plans for who can back them up on your account in the event of an emergency, where they might be unexpectedly unavailable.
Make sure THEY ask YOU good questions.
A few months ago, we met a prospective client for a free 1-hour consultation. She was upfront about the fact that she had scheduled interviews with other bookkeepers, and would be following up with us later. A few weeks later she let me know she would like to hire us. Her reason for choosing us, over other companies was, "You actually asked me questions and looked at my system. You were the only one who did that."
Be leery of a bookkeeper who swears they can handle your business financials without first establishing exactly what that entails. Not every client is a good fit for every bookkeeper (and vice versa). We maintain friendly relationships with our local competitors, so we have a good alternative to offer when we meet with a prospect and realize they would not be a good fit for us. Likewise, our competition sends us referrals, as well.
In your initial meeting with your potential bookkeeper, make sure they are trying to learn about your business, and not just sell you on theirs.
Find someone who understands accounting beyond record-keeping.
There is a misconception that a great bookkeeper is just someone with exceptional data entry and organizational skills. However, there is a lot that a real bookkeeper can do to help save money on taxes, identify areas of risk, or even improve profitability. Something as simple as how an owner's cash contribution to the company is recorded can have a massive effect on tax liability. A good bookkeeper can also locate missing accounts receivable, or locate credit balances with vendors. There's so much more to it than entering transactions from the bank feed.
Hiring a bookkeeper is one of the most important decisions you will make for your business. Be sure to take your time and be intentional in your search.
Staying (Financially) Fit Over the Holidays
With Halloween only 12 days away, we are officially in the holiday season. This is my favorite time of year, and I understand the temptation to let work slide as I give into the distraction of Thanksgiving, Christmas, and vacation.
But holiday season coincides with year-end and, for businesses, this needs to be a time of focus. Just as it's easy to undo months of dedicated diet and exercise with the wild abandon of the holidays, it's easy to let your business financials slip at the time when you really need them at their peak.
Here are a few common bookkeeping issues we see in Q4 year after year, and how to avoid them.
Missing Deductible Expenses
The holidays are a great time to let loose and be more sociable with co-workers, clients, and referral partners. But just as you lose count of how many calories you're taking in, you can lose track of the money you're spending. Not only can this result in overspending, of course, but you can also be missing out on deductible expenses that will save you money in just a few months at tax time.
Perhaps you're planning an office Christmas party for your staff. Not only would those expenses be deductible, even food purchased for a potluck, but any staff appreciation gifts you'd like to hand out, as well. The same goes for client or vendor appreciation gifts. (If you have someone external doing your books, be sure they're asking about purchases for things like massage gift cards and fruit baskets, and recording them as business expenses, not draw activity.)
Many networking groups hold a special holiday party. Not only would any food and drink you purchase for that be deductible, but also mileage to the event. If you're having trouble keeping up with your mileage, something as simple as a mileage log (free to download here) in your vehicle or as sophisticated as an app can do wonders to help you track that.
Whatever you do, be sure you're keeping proper record of your business expenses, even while you party it up.
Falling Behind on Bookkeeping
Between parties, travel, and employees being out sick from all the germs they picked up partying and travelling, it's easy for certain tasks to get a bit behind in the later part of the year. However, bookkeeping is not like cleaning the house; you can't just plan to catch it all up at once. If I don't clean my house for a month, it's not that much more difficult, proportionately, than if it's not cleaned for a week. Bookkeeping doesn't work that way. If your bookkeeping takes four hours a month and you fall three months' behind, you now have twelve hours worth of bookkeeping to do. (And finding twelve hours for a task you like is difficult enough; imagine trying to find half an entire day to dedicate to a task you dislike.)
Many business owners who find themselves in the position of staring down months of untouched financials make the decision to get some outside help, just to catch things up. The problem is that they're in good company. Beginning in November, professional bookkeepers get very busy with new clients who are hoping to get their books cleaned up for year-end. Not only is there an influx of new clients, but existing clients continue to need service, and we're busy getting all of their year-end documents ready as well. Many of my friends who work solo or operate smaller firms do not take on any new work during this time of the year.
If you aren't certain that you'll be able to keep up with your financials on your own during the holiday season, begin seeking assistance now, before you get too busy.
Not Preparing for Next Year
(NOTE: If you are one of those people who files an extension out of habit, this is for you.)
You may not realize it, but there is a lot you can be doing right now to get ready for next year's tax season.
Just like you don't have to wait to make a New Year's resolution to start getting fit, you don't have to wait for January 1st to start getting your books in shape for tax season. For starters, you can be preparing for the January payroll reporting rush. In the chaos of year-end, many business owners forget that 1099s and W-2s are due at the end of January, and not in April. To prepare, you can be sure that you have W-9s, W-4s, and any required state tax documents on hand now, instead of trying to get them from workers later. (This is especially true of 1099 contractors, as they may work for you for a much shorter season and can be harder to track down later.)
If you have been using an outsourced payroll system, be checking now to ensure that the payroll reports in your financials match those provided by the vendor. Sometimes errors do occur, and you will need to alert the payroll company right away if their totals are incorrect. (Like bookkeepers, they are getting very busy this time of year, too.)
You want to check to make sure that your sub-ledger totals, such as your Accounts Receivable and Accounts Payable, match your General Ledger balances. You also want to be sure that you are up-to-date on any reconciliations.
Finally, it's a good idea to take some additional tax-sheltering steps. For example, if you had a good year and are cash-basis, consider making a large business purchase in December instead of January, to reduce your taxable income. Or maybe you have not been paying enough into your withholdings or your quarterly estimated self-employment taxes, and need to increase those in December. There are many options available to you, but you need to act now.
Fortunately, you still have some time to make the most of your holiday season. Stay on top of your books as you go, and you will have a restful and relaxing January (at least compared to everyone who didn't put in the work during December). If you need help, we are always available.
Your Accountant's Weird Habits - Explained
If you have a pet in your family, maybe you've seen those articles purporting to explain why your dog spins in a circle before lying down, or why your cat would rather drink from the faucet than a water dish. To many people, there is a creature even more alien and perplexing than any animal: the finance professional.
Your bookkeeper or tax professional might say or do things that don't make a lot of sense to you. Some of their actions might seem flat-out contradictory. But, as with any exotic species, there is a reason behind all of it.
I want to break down a few of the most commonly complained-about behaviors, along with the explanations behind them (with the assistance of cat pictures).
First annoying habit: My accountant keeps nagging me to get organized.
Your bookkeeper wants you to have a system for tracking open customer balances, or wants you to keep all your expense reports in one place. It's frustrating, because the whole reason you're paying them is for them to "keep up with that stuff".
So why do they do it?
For starters, good bookkeeping relies on complete information. (A balance sheet showing $1M in the bank doesn't mean much if there's a $995K liability that got left off.) Unless you have an in-house accounting staff, your bookkeeper is relying on you to get that information to them. A good organizational system ensures that all of the information is getting to who needs it.
Furthermore, most accountants charge based on time expended, and though good accounting can be had at a good value, it's still not cheap. Paying your accounting service to dig through files and hunt down info is a waste of their time and your money.
Speaking of "time", my accountant freaks out if I don't get certain information to them right away. What's the rush?
Certain items, particularly related to tax filings, can incur massive penalties if late. Your accountant needs the information in advance of those deadlines, to record it and check for accuracy. (Inaccurate filings can also, of course, result in penalties.)
If your accountant is pestering you to get information to them quickly, it's because they are trying to keep you out of trouble and save you money.
Since we're already talking about taxes...Why does my accountant try to make me spend money I don't want to spend? For instance, why do I have to treat certain workers as W-2 employees, instead of paying them as contractors?
Because worker classification is a big deal. Not paying employees correctly can result in audits, fines, and even lawsuits. Your accountant is being a stickler about the rules because they don't want you to get sued.
Still talking taxes...Why does my accountant say I can't take this cool deduction I found? I saw online that I can expense my home office/car payment/pet kinkajou/etc.
Present blog excluded, internet advice is no substitute for real, professional guidance. Though you'll seeing many articles claiming that you can write off an entire car payment, or take a "home office" deduction, the actual guidelines surrounding those items have specific criteria which must be met. Unfortunately, small businesses, particularly those which are sole proprietorships, are frequent targets for audits. Taking excessive, unqualified deductions puts you at an even greater risk. If you trust your tax professional, trust that they will advise you of deductions for which you do qualify. (If you are not happy with your current tax professional, we can recommend some.)
So I have to spend extra on employees, but can't take any of the fun deductions. And now I'm being told that I need to watch my spending on meals, and look at ROI for things like advertising. Is my bookkeeper just a kill-joy?
No, they just don't want you to go broke. Going bankrupt isn't just bad for you; it also means you can't pay your vendors (like your bookkeeper). So they have a vested interest in keeping you solvent.
Because, no matter what your business, one thing we all have in common is that we like to get paid.
What does a bookkeeper do?
"So, what do you do?" It's one of the first questions we ask upon meeting someone. My usual answer is "bookkeeping and fractional CFO". The typical response to that is, "Okay...and what does that mean?"
Most people have a general understanding of bookkeeping is, but fractional CFO is a murkier concept. Essentially, we act as an "outsourced" CFO (Chief Financial Officer) for companies too small to have their own. Offering this service is one of the primary ways we distinguish ourselves from most bookkeepers.
However, there are several differences between what a standard bookkeeper does, and what we do.
A bookkeeper offers monthly reconciliations at an hourly rate. The process most bookkeepers use is to, at the end of the month, have their clients bring a stack of financial documents, such as bank statements, receipts, pay stubs, etc. The bookkeeper then uses that information to make entries and perform a reconciliation. This takes time, and their clients will usually receive that past month's financial statements about midway through the following month. Once the month's work is completed, the client receives an invoice for the hours worked. Depending on how busy that month was, this bill fluctuates.
The Bookkeeper offers bi-weekly reconciliations at a monthly rate. Instead of waiting until month-end, we enter information downloaded from the client's bank accounts every few days, so their financials stay more current. This prevents a long clean-up process at the end of the month, and allows us to complete the monthly financial statements more quickly. Furthermore, we offer our ongoing clients a monthly flat rate, so there are never any surprises on the bill (even when the month was a busy one).
A bookkeeper moves on and makes assumptions. Most bookkeepers focus on one specific aspect of their business, which is just getting transactions entered. If they have an expense and aren't sure what it's for, it gets stuck into "Uncategorized Expense" for the client to figure out later. If they're entering payroll and see that a contractor really should be paid as a W-2 employee, they're just going to make the entry as it's presented to them and move on. They might make a mention of it to the client when they see them again in a few weeks but, in most cases, likely not.
The Bookkeeper pauses and asks questions. Our clients hear from us frequently. If something looks "off", or if there are improvements to be made, we'll bring it to the client's attention immediately. In one account, we identified a case of credit card fraud before the bank and client did, and were able to alert them to it. We also warn clients about potential cash flow issues, or when certain bills are due, to help prevent overdraft fees and other penalties.
A bookkeeper does exactly what the client asks. That's not a bad thing, at all. But most bookkeepers do only what the client asks, and nothing else.
The Bookkeeper proactively seeks out ways to improve our clients' financials. On our own time (again, without charging the client a cent more), we've done things like developing a new pricing strategy to propose to a client having issues with their retailers. We've identified overdue Accounts Receivable to find clients money, and we've saved clients money by negotiating better vendor contracts. We've used our connections with merchant card processors to save clients thousands in credit card processing fees. And we have done all these things without the client ever asking us to.
Money, it is said, is a vehicle.
A bookkeeper is a mechanic. They do routine maintenance. If something breaks (and you notice it), you take it to them to get fixed. If something breaks and you don't notice it for a while, and the problems gets really big, when you take it to them to fix, you're going to end up with an expensive bill.
The Bookkeeper is a travel agent. We help you figure out where you want to go, and we get you there. Whether you drive, cruise, or fly, we are there for you at every step of the journey. And we work to help ensure that the trip is as enjoyable as the destination.
Of course, all of this is hard to sum up in a casual introduction. That is why we offer free 1-hour initial consultations, so we can get to know prospective clients and show them the differences we have to offer.
If you know someone whose business isn't going where they want it to go, before you send them to a bookkeeper, send them to The Bookkeeper.
Year in Review: Our clients' big wins in 2015
People tend to think of bookkeeping as a necessary evil. Your business has to have it, so just find someone who will do a decent job and whom you don't have to pay too much.
We beg to disagree.
We like to use our service to do more than just keep our clients' books clean. We like to go beyond balancing books to growing businesses. In that regard, 2015 was a very good year for us.
Today we want to showcase three clients who had big "wins" in the last 12 months.
C
lient #1: A Money-Saving Solution
One of our client's businesses was facing some difficulties staying profitable. Looking at the books, we found some areas where expenses were duplicated and some cases of fairly extreme overspending. We met with the owner and devised a plan to cut expenses. Once the plan went into effect, we were able to increase the bottom line by over $30,000 a month.
Of course...big deal, right? Everyone knows accountants are penny-pinching killjoys. Let's look at our second story, and see how we can help a client without forcing them to spend less.
Client #2: A Long-Denied Loan
A different client desperately desired a consolidation loan. He had gone to three different lenders, and been denied each time. He was getting nowhere in a hurry.
So, we took over.
First, we received authority to act on his behalf. Then we got to work, combing through his financials and organizing the data for presentation. Finally, we were able to present the information to the bank in the way we knew they wanted it. This time it was approved, and we were able to get our client a consolidation loan at one of the same institutions who had previously rejected him.
Thanks to those efforts, our client was able to consolidate his debt under one payment, and greatly improve his cash flow.
Still, that story isn't as great as...
Client #3: 
Money from Thin Air
Sometimes, something as simple as developing better procedures can make all the difference to a business. This was the case with a client who didn't have a good system in place for managing A/R.
Specifically, there was over $102,000 in receivables of which the owner was not even aware. (Some of the unpaid invoices were over two years old.)
When we discovered this large balance of aged receivables, we immediately began developing collections procedures, including a series of formalized letters to the debtors. Using the practices we put into place, over $30,000 has been collected within the last four months, with payments continuing to roll in.
To re-cap, that's money that the client did not even know existed.
These are just a few of our highlights from 2015. We can't wait to see what we do in 2016.