Dealing with your business finances can be overwhelming. If you want to take your company to the next level, you are going to need to have some major clarity around your business finances. You need to lift up the hood of your business money and see what is going on in there. That way, you can make better financial decisions, have more control over your business, and focus on your life without being worried about your company finances. How cool would it be if your stress level went down?!
Here’s the key – you don’t have to be a numbers person to do this. You just need a system for dealing with your business finances. The first place to start is to hire a bookkeeper. Your bookkeeper will enter financial data into software, create financial reports for you, and help you manage your cash flow. Your bookkeeper will explain your numbers to you in a way that you can understand them and you’ll feel really empowered to take control of the money for your business.
Here are my 9 to dos that you should consider when working with a bookkeeper.
1. You need your bookkeeper to communicate with you. For the first few months, it’s best to meet face to face. Afterward, tell them that you would like a call or an email from once every two weeks. One of the calls can be a check-in to see if you need anything. The other call needs to be a review of two reports: a profit/loss statement and a balance sheet. Your bookkeeper must teach you how to read these two reports. Once you understand how to read a basic profit/loss and balance sheet statement, ask your bookkeeper to teach you how to read a statement of cash flows so you understand how to work with key lines in each report.
2. Get references from your peers before hiring a bookkeeper, and call the references. Ask if the bookkeeper pays attention to detail, follows through, and is easy to work with.
3. Hire a firm to do a background check on your bookkeeper before you hire them. Your bookkeeper will have access to most of your financial information, and you need to be able to trust the fact that you don’t want your bookkeeper to run off with your money.
4. Agree on an hourly rate that you will pay your bookkeeper. Typically, hourly rates for bookkeepers range from $40-$150 an hour. Most bookkeepers also have additional employees that work under them so see if you want to initially start off with the senior bookkeeper and gradually move to one of their employees.
5. Make it clear early on what your budget is for monthly bookkeeping. The last thing you want is a surprise as to how much you owe your bookkeeper. Have your bookkeeper contact you ask for permission first if they need more time than your budget can allow. Remember, part of the reason why you are hiring a bookkeeper is to become more clear and aware of your financial situation. You can always increase or decrease your monthly budget once you have a better understanding of your cash flow. Keep in mind that for the first few months, your bookkeeping fees will most likely be higher because there is a lot of historical data that your bookkeeper will have to enter to get you caught up for the year (or more years should you choose to go back in time).
6. You need a system for how your bookkeeper will access your financial information. The easiest thing to do is to give your bookkeeper your online user ID and password for your credit cards and bank accounts. Be sure to review your statements monthly to be sure that all money is accounted for.
7. Track food and entertainment receipts. Label all of your physical receipts with either the client/prospect name, or the reason for the business expense. Decide how you will get your receipts to your bookkeeper – FedEx is usually an easy option to pick.
8. Decide where your financial data is going to be stored. You’ll need to be able to access and get reports quickly. It may be best to store the data at your office, and have your bookkeeper log in through a remote connection to a computer at your office.
9. At the start, it’s best if you don’t give authority to your bookkeeper to pay your bills or to sign checks. I’ve been with my bookkeeper for four years and I still pay my own bills and sign my checks. I like the idea of being involved with my finances. It’s an internal control I have set up to make sure that my finances are under control.
Having a solid bookkeeper to help you with your business finances not only makes you feel great about running your own company but also gives you more clarity and empowerment to make the right decisions for your business. How cool is that!
Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter@justinkrane.
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It is good to know that you need to communicate well with the bookkeeper you hire. That is good to know if you are a business owner or need someone to help you with your finances. Also, it might be smart to get someone who also does regular updates as well.
I was sitting in my home office yesterday trying to make a business phone call, and I realized that the office is super cluttered with financial reports and receipts. I am thinking about hiring a bookkeeper to handle my finances, and I didn't realize there are so many things to think about! Thank you for explaining that I need to trust the bookkeeper I choose, so I will make sure to do a background check before hiring them.
I liked that you pointed out that it would be smart to get an account that can help you manage your monthly budget. that is great for me to know my sister wants to open a bakery this August. So, she will probably need to change her business budget every other month depending on how things are going.
I agree with you that every bussinesses must invest in a bookkeeper because this type of professional will help them understand the basics of balance sheets statements and cash flow. Anyways, you're also right about the importance of running a background check on the prospective service because they'll have your financial information, and this could be dangerous. Well, if ever I'll run my own company someday, I'll see to it that a bookkeeper will be hired, so I'll have more time to focus on the other aspect of my business.
I like that you recommend making it clear with he bookkeeper you find what is your monthly budget for bookkeeping services. My brother and I are thinking about starting a business, and we know we'll need an accountant. I will ask the proper question and make sure we work with the best accountant.
Thanks for reminding me to get reference checks before hiring a bookkeeper to make sure that they are trustworthy. It was also helpful when you said that background checks will also be helpful when hiring a bookkeeper. If I am to have a business in the future, I think these tips would be really helpful for me when I hire a bookkeeper. Thanks!
It really helped when you talked about double-checking a bookkeeper's past references before working with one! Recently, my wife and I decided we'd like to start a business together. We want to open a coffee shop, and we would like to work with an expert to handle our accounting, so we'll definitely follow your hiring tips! Thanks for the advice on how to verify if your bookkeeper is trustworthy!