It’s a dilemma many business owners face: Do you take valuable time out of your day to handle things you could hire someone to do to save money, or do you invest in that help so you can be more productive? For growing businesses with an eye on the bottom line, it can be a toss-up—one that the flexibility of freelancers is helping to address. However, when it comes to more complex matters that require special expertise like accounting and bookkeeping, hiring outside help often won’t just save you time, it can save you money.
If you’re looking to scale your business, you’re often on the cusp of a few crucial decisions, one of which is likely whether or not to hire a professional to help you stay on top of your finances. For freelancers and other small businesses, and enterprise organizations alike, getting expert financial help and staying organized is crucial to success.
Figuring Out Your Accounting Needs
Every business has some financial needs in common, regardless of size: income, transactions, and overhead. These all explain how and why money comes into the business, and how and why it goes out of the business. Then, you look at your balance sheet, which explains your business’s assets, liabilities, and equity. From there, depending on the industry, size, liquidity, and number of employees, among other things, a business needs more in the way of financial services the more complex it gets.
Here are a few things to ask yourself:
- How much do you (or your team) know about accounting?
- How much time are you spending on financial administration currently? Do you only need help at tax time, or year-round?
- Would purchasing accounting software encourage better habits, make life easier, or be just one more thing to learn?
- What do you need help with most: Payroll and paying vendors, or more strategic things like business plans, market analysis, and risk management?
- Do you need accrual accounting or cash accounting? Cash accounting is sufficient for small businesses; however, if your sales exceed $5 million a year, gross receipts of inventory exceed $1 million a year, or your company is publicly held, you’ll need accrual accounting.
- Do you need single-entry or double-entry accounting? Beyond small, basic businesses, double-entry accounting because critical.
- How much are you planning to scale, and what new needs will you have for an accountant as you grow?
Think about your business today and also in the near future, then make a list of the things you need now or may need in the next few years.
Now, let’s look at what both do to help you see which best fits your needs.
A bookkeeper handles more clerical work than an accountant, although their roles do overlap. Bookkeepers will record and deliver the numbers—all of your day-to-day transactions and expenses. They generate the data that gets handed over to an accountant for more high-level analysis. They’ll also help you with:
- Organizing receipts
- Recording expenses
- Paying for everyday expenditures
- Recording forms of income
- Verifying deposits and other transactions
- Balancing bank accounts
- Billing clients directly
- Managing past-due accounts
- Preparing monthly financial statements
- Handling payroll and withholding taxes
Rates: On Upwork, bookkeepers charge anywhere from $8 – $15 an hour, and up to $50 depending on how much additional accounting expertise you need.
Should you try to do it yourself?
Bookkeeping is more likely to be something you can attempt on your own, though it may be a better use of your time to enlist an expert. Figure out which responsibilities are worth your accountant’s time vs. your own time, then you’ll be able to delegate, save time, and also save a little money. Take on some bookkeeping-related items then hand them off to an accountant so they can spend their time on the more complex things. For help keeping your books organized, look into some accounting software to help you out—some are basic and affordable without a steep learning curve and the automation can save you lots of time.
That bookkeeping data gets turned into valuable guidance for your business in the hands of an accountant. Generally, an accountant can do everything a bookkeeper can and more, but their true value lies in their ability to analyze and interpret numbers and turn them into forecasts, actionable insights, and tools to make decisions as you scale. A great accountant is also going to be an expert in business and how finance relates to your everyday operations. Auditors are independent accountants that are a separate subset of certified public accountants (CPAs).
- Bookkeeping items listed above
- Generating business reports, forecasting, evaluating past and future decisions, and optimizing processes
- Finding appropriate deductions
- Preparing and filing taxes on time
- Analyzing financial records to check for inconsistencies and errors
- Providing a complete audit of your business to make sure your records are accurate and up to date
- Generating profit and loss statements, business reports, and monthly financial statements
- Financial and market analysis
- Handling payroll (with proper privacy and security measures) and withholding taxes
- Business valuation
- Risk management
- Strategic planning
- Writing a business plan
Note: If a bank has required an independent opinion regarding the accuracy and compliance of your statements—usually in the case of acquiring a bank loan or signing a certain type of contract—you’ll likely want a third-party independent auditor, which is a specific kind of CPA.
Rates: Depending on the complexity of your filing or reporting needs, certified accountants can charge as much as $800 an hour. With higher rates, you’re paying for expertise and education—some of these professionals will have 4-year accounting degrees as opposed to bookkeepers, who learn from more on-the-job experience. On Upwork, accountants charge around $25-35/hour, while senior business consultants and analysts can charge as much as $180/hour.
Should you try to do it yourself?
If you’re not a CPA, chances are more complicated accounting is better left in the hands of a professional. But don’t throw it entirely over the fence—be sure you know some basics and enough about deductions to make sure you’re getting what you need.
Key Differences Between Bookkeepers and Accountants
The difference between the two really boils down to expertise, experience, and education. Bookkeepers have more on-the-job experience. Accountants will have 4-year degrees, while CPAs and licensed accountants will have that in addition to passing a national or state exam. Auditors, accountants, and bookkeepers can all obtain licenses and accreditations from various organizations by state, which is useful in understanding their particular expertise when you’re reviewing candidates.
The next important differentiation is experience with a particular software package. Many bookkeepers and accountants are exposed to payroll services, enterprise accounting software, etc. For example, larger companies using systems like Intuit or SAP will be hiring an individual who knows their way around that particular platform.
There’s definitely some overlap between the two—bookkeeping is essentially documenting financial records, and accounting includes bookkeeping in addition to taxes and analyzing those financial records to make decisions, assess the health of the operation, determine how effective effectiveness certain decisions were, and make plans to optimize processes.
Handling Finances Yourself
If it sounds like you haven’t quite scaled up to justify hiring an independent professional to handle your finances, it might be worth looking into accounting software. Check out this article for some pointers on the things to consider before you go the DIY software route.
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Author: Carey Wodehouse