Things to think about and carefully consider before you decide on the person whom will hold your finances in their hands!
What is it worth to you? To be sure you make the right decision? It is amazing that some business owners spend more on their household utilities than they are willing to pay to keep their businesses in good financial order. Ask yourself what is it worth to you to succeed and not make the wrong choices for your business!
Ever wonder the difference between a Bookkeeper and an Accountant?
A Bookkeeper by definition keeps the books – Recording the Checks and deposits with limited understanding as to how the general ledger coding affects the Profit and Loss and Balance Sheets. Which all lenders require if the business or the owner(s) ever decides to apply for a loan?
An Accountant not only understands the bookkeeping side but also the general ledger. An Accountant has a complete understanding of the accounting process and reporting and can review for accuracy and make necessary corrections, which in turn saves you a lot of money with your CPA. However, limited by the fact that they cannot sign an audit they can still prepare and have everything in order and ready so your CPA does not charge his rate to do so. – An Accountant can help you determine a good budget to help you keep your cash flow and business on track by working as a good partner with the Owner(s).
Most Common Mistakes made by small businesses:
1 – Hire cheaply and their books become messed up by the time they realize their mistake. And it cost them even more money for the following two reasons.
a. Inexperience takes 2 – 3 times more hours to complete than an experienced accountant. Therefore, you may pay an inexperienced person $20-25 an Hour but takes them 6 hours @ $25 to complete which costs $150.00. Where an experienced accountant will take only 2 Hours @ $50 and cost only $100.00 and you know the work was done properly.
b. If you pay an Inexperienced person $25 Hour for $150.00 and they do not properly process the transaction to provide the P & L and Balance Sheet than you have to pay an accountant to fix It which will cost an additional $100 so overall cost would be $250.00 instead of the $100 it would cost to have it done properly the first time.
2 - Person willing to earn less than a standard wage, usually either
a. Does not have the experience or knowledge to perform the job
b. Steals from the company to make the difference of what they feel they are worth
3 – When a Business owner gets burned by hiring a cheap bookkeeper, they tend to over compensate and cost themselves even more money by requiring a CPA when A Accountant would work perfectly fine and only use the CPA for the signed Audits at the end of the Year.
4 – Most business owners are VERY good at what they know. But most hire a bookkeeper because they do not know the accounting process which leaves the door open for a dishonest bookkeeper to take advantage.
a. I encourage all owners to be part of the process and review all statements to be sure they authorized all transactions on the statements.
b. I encourage business owners to also limit the usage of Credit Cards unless properly reviewed by owner for unauthorized usage.
c. Always have a Month by Month P & L Analysis so that you can easily spot if something is out of sorts with the normal monthly expense which allows you to quickly identify an issue and ask questions while the memories are still fresh as to why there is a difference to prevent the expense of having to research why an expense is out of sorts and always notate the reason for later reviews and end of year audit again to prevent additional expenses of research to explain to the CPA and or auditors.
5 – New business owners tend to get licensed by the state and fail to be sure to get their city license in order or file their B & O returns properly. An accountant would be sure to verify you have not missed any steps and or critical returns that could cost you penalties in the end.