Small Business Bookkeeping in 2022
Transactions are piling up, your calendar is as full as ever, and weeks have passed since you last spent a minute on business bookkeeping. We’ve all been there.
You started your business for a reason, and it certainly wasn’t to sort through and organize financials. Whether you’re already dealing with bookkeeping woes, or are early enough to actively avoid them, this article is dedicated to you. Over the next few minutes, we’re going to explore the ins-and-outs of small business bookkeeping, from deciding between internal and external management to best practices for succeeding on the road ahead.
Note that we’ve written this piece under the assumption that you’re already familiar with small business bookkeeping concepts. If that isn’t the case, check out this piece first.
To get the conversation started, let’s take a look at the differences between internal and external bookkeeping support – sometimes referred too as in-house and outsourced – and why one may be a much better fit for your growing business than the other.
The Bookkeeping Decision: What Support Does Your Small Business Need
Whether you generate $50,000 or $5,000,000 a year in revenue, your small business has cash and credit inflows and outflows that require organization and documentation. At a small enough size, it can be manageable for ownership to carry this burden. Unfortunately, scalability is completely out of the question, and it will become very clear, very quickly, that support – either internal or external – is needed.
The primary difference between internal and external bookkeeping for small business is exactly as it sounds. Internal refers to an employee hired for the purpose of managing the books (amongst other things). They’ll be paid a salary, offered benefits, and included in all other employee-related items. External refers to an outside firm or individual hired for the sole purpose of managing the books, contracted on a monthly or annual basis and responsible solely for ensuring successful business bookkeeping.
Although there are pros and cons to each (discussed in detail here), the rise of accessible, affordable cloud accounting software has made access to expert external bookkeeping support far more palatable for small and medium-sized businesses. At approximately 1/5th the cost of a traditional in-house bookkeeper, outsourced small business bookkeeping will allow you access to reliable financial management without breaking the bank. If both your operation and task-lists are large enough to keep an in-house bookkeeper busy with additional work, then it certainly shouldn’t be dismissed as an option.
Internal & External Bookkeeping: Best Practices
Regardless of whether you decide to move forward with internal or external small business bookkeeping support, there are a series of best practices that can be implemented to ensure success:
1. Bookkeeper Selection and Utilization
Although the selection criteria for internal and external bookkeeping support varies, the importance of finding someone capable is key.
When selecting an external bookkeeping service, you’ll want to focus on a few key items. Does the individual or team have experience in your industry? Have they worked with businesses of your size? Do they work with tools you already have implemented? What sort of insights and support do they offer you? These questions – plus any others you may think of – will allow you to select support that is fit for your specific business needs.
When selecting internal bookkeeping support, there are a separate set of questions you’ll want to keep in mind. Is the individual qualified for the role? Have they worked alongside a business of your size? Will they be able to support in ways beyond bookkeeping? Ensuring that this employee is capable of managing miscellaneous financial and operational tasks in addition to bookkeeping will be critical to utilization over time.
2. Bookkeeping Processes
It’s easy to assume that hiring a bookkeeper – whether internal or external – will mean you can forget about bookkeeping moving forward. In reality, you’ll be required to submit all receipts and invoices needing filing, and it’s important to set up a standard submission process – either weekly, bi-weekly or monthly – to ensure nothing slips through the cracks.
3. Dig Into the Data
Less time spent bookkeeping means more time spent managing. With the help of your bookkeeper, you should be able to access and analyze a wide range of data to help with decision making. Whether it be forecasting for the future, assessing current spend, or finding ways to optimize operations, extract every ounce of data you can from your bookkeeping support to drive the business forward.
Closing Thoughts
Without proper support, small business bookkeeping can become an anchor that prevents your company from moving forward.
If internal business bookkeeping seems like the right fit, we hope that the best practices discussion above makes your life easier moving forward.
If outsourced bookkeeping appears to be the best option, our team has spent several years helping businesses just like yours, with situations just like this. ParallelCFO offers comprehensive bookkeeping services so that you can get back to focusing on what matters most – business development – confident that professional accountants are handling the nitty gritty bookkeeping details.
To learn more about our team, process, or bookkeeping services, contact us today.
