1. you are involved in the bookkeeping
As a business owner, your instinct is to save money wherever you can. However, you need to weigh whether spending a lot of time with bookkeeper on bookkeeping and accounting, even if you’re just helping out, is really a financially responsible use of your time.
How is it holding you back?
If you are currently spending too much time on these tasks, it is very likely that you are not doing what you do best.
You’re wasting time that could be invested in more valuable areas of your business: Making leadership decisions, motivating your employees, and focusing on improving your company’s core value proposition. Imagine how successful your business could be if you spent your time only on tasks that increased revenue.
If you’re doing more than signing checks, it’s time to re-evaluate your back office.
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2. Your back office lacks checks and balances.
If your accounting department consists of just you and a bookkeeper, there are no proper internal checks and balances and no proper segregation of duties.
If you don’t have a second person overseeing your company’s accounting and bookkeeping, you risk errors, inefficiencies, or worse, internal fraud. Unfortunately, small businesses are disproportionately affected by internal fraud, with companies with fewer than 100 employees suffering nearly twice as many fraud-related losses as companies with more than 100 employees.
How does this handicap you?
Regardless of how trustworthy you think your back-office employees are, a company must have controls in place to protect your employees and your bottom line from preventable losses due to costly errors or internal fraud.
The fundamental way to reduce fraud in your small business is to establish internal controls. Additional sets of eyes looking for anomalies provide an extra layer of protection – not only to prevent fraudulent activity but also to increase the overall financial accuracy of your business.
3. report problems
Many small business owners focus only on the financial reports they understand. As a result, they often only see a balance sheet or income statement once a year at tax time. If you get more frequent reports, you’re already a step ahead, but you still need to have complete confidence in the numbers you’re getting if they’re going to be of any use to you.
An inefficient accounting system with data that doesn’t appear to be accurate and doesn’t provide actionable reports to help you make decisions is useless. If you find that you can’t rely on or get timely and consistent processes, numbers, and financial reports, then you have a major problem with your existing accounting system.
Without the ability to get accurate numbers when you need them, you simply can’t make good decisions for your business. You don’t have a clear picture of cash flow or costs. With a reliable reporting system, you’ll always have a clear view of the state of your company’s finances. You’ll be able to plan for the future, avoid pitfalls, improve cash flow, and make data-driven decisions based on accurate, up-to-date information.
If you don’t get management reporting every month, you could be missing out on information that will help your business grow or keep you from implementing costly programs that don’t deliver ROI.
4. You are using an accounting system that is not optimized.
Are you still relying on paper and manual data entry for expense reporting and tracking? Are you paying invoices with paper checks? Are you still sending out paper invoices? Do you have automations to assign and track everything that goes in and out of your accounting system?
How are you being slowed down?
An outdated accounting and billing system puts your business at risk of dealing with losses and inaccuracies due to human error. You’re also likely incurring higher costs than necessary due to missed discounts and cash flow issues while waiting for slow receipt of invoice payments.
With a fully optimized accounting system, you save time and employee costs associated with data entry and cost recording. You also benefit from greatly improved accounts payable and accounts receivable processes.
If your bookkeeper does not have the most up-to-date information on the latest technology designed for accounting, then you will inevitably lose money working with an inefficient system.
5. Tax season is a nightmare.
Okay, no one likes paying taxes.
But a disorganized back office and accounting system can turn tax season from an inconvenience into a veritable annual nightmare. If you’re all too familiar with the headaches that come with squaring receipts and categorizing expenses at the last minute, you’ve probably outgrown your bookkeeper.
How does he hold you back?
Aside from the annual stress of getting everything ready by the tax deadline (or audit). Letting your accounting (expense tracking and categorization) fall behind during the year means your company’s financial picture is out of date, too. The really scary part of not knowing your company’s current numbers is that you are forced to use last year’s numbers. To make important decisions for today’s challenges.
6. you don’t want to lose your bookkeeper
For many business owners, one of the main obstacles to finding a better back office solution is that. They don’t want to part with their bookkeeper. This person has likely been with your company for a long time, and you’ve built a relationship with him. He also undoubtedly has invaluable knowledge about the inner workings of your business.
How does it hold you back?
By keeping your bookkeeper in a bookkeeping position, you could be missing out on revenue and growth opportunities. Have you ever thought about what kind of revenue their knowledge could generate in another, more senior position?
Instead of completely replacing your bookkeeper, consider moving them into a different position by giving them new responsibilities, the opportunity to learn new skills, and opportunities for professional development. You empower your employee and may even surprise them with what they can do by promoting a bookkeeper into a role that generates income.
7. You’re not making data-driven business decisions.
If you’re running your business based mostly on instincts, outdated information, and reactions. To unforeseen events, you’re lucky to still be in business. A weak accounting system can do very little for your business. Up-to-date financial data, reported regularly, is essential for management accounting and making data-driven decisions for business success.
If you lack timely, accurate, or reliable numbers. Then you simply won’t be able to make the right decisions for your business.
How is it holding you back?
A better back office could not only produce financial reports required for compliance but also generate timely, accurate management accounting reports with key performance indicators that help you take control of your business drivers. As a result, you can make data-driven decisions to steer your business in the right direction. Strengthen your profit margins and increase your bottom line.
Should you hire an in-house accountant?
Hiring an in-house accountant (or paying extra for more of your CPA’s services) seems to be the only option for the problems associated with growing out a bookkeeper. However, the actual costs and limited benefits of doing so versus considering outsourcing options may surprise you.
The costs
First, there are the obvious costs associated with hiring an employee with an advanced accounting degree. A high salary, benefits, overhead. You also need to consider the cost of the actual hiring process. And the time you spend on training your new employee.
You also run the risk of incurring high turnover costs for the position. Since you probably won’t be able to offer your CPA many opportunities for career growth.
According to the U.S. Small Business Administration, the cost of replacing an employee increases with their rank in the company. For example, replacing an entry-level, unskilled employee can cost up to 50% of the employee’s annual salary. While turnover costs for a supervisor position can rise to as much as 150% of the annual salary.
As a result, you may find that your new accountant leaves earlier than expected for a better position elsewhere. Thus, the cost of hiring for a vacant accounting position becomes a recurring expense. The result is that you have to spend more resources. And more of your own valuable time on the interviewing and hiring process.
Limitations
Hiring just one internal employee inevitably leads to inconsistencies as employees need time off. If your CPA gets sick or goes on vacation, your accounting department’s operations will inevitably grind to a halt until he returns.
With only one accountant, or possibly one bookkeeper and an accountant staffing your back office. You still have pretty limited potential when it comes to fraud protection. While you may have at least two employees who can segregate some of their duties. You still won’t benefit from the complete controls that an entire outsourced accounting team can provide.
Consistency and security are both important concerns. But the biggest opportunity you’ll miss is the benefit of an outside perspective from a team of industry experts. A team of outsourced accounting, bookkeeping, and managerial accounting professionals can provide you with an objective perspective and insight into your company’s strengths and weaknesses that you simply can’t see.
