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Small businesses need to put together different pieces of the financial puzzle. Income and expenses need to be balanced with tax regulations and payroll and growth.

A bookkeeper can weave all of those financial needs and others together. This blog will walk you through why every small business needs one. You’ll learn how to find one, what they do, and everything else you need to know.

Why Every Small Business Should Hire a Bookkeeper

There are many good reasons to use a bookkeeper. According to the Small Business Administration (SBA), small businesses with accurate financial records are 50% more likely to stay solvent.

• Businesses need proper bookkeeping to manage their cash flows and avoid bankruptcy.
• Bad records can lead to tax penalties, legal issues, and audits.

The Federal Reserve Bank reports that businesses that have good financial records have a much greater chance of securing financing to expand.

The Role of a Bookkeeper in Streamlining Financial Transactions

Task	Responsibilities	Tools Often Used	Impact on Business
Transaction Recording	Accurately input all business transactions into accounting software	QuickBooks, Xero	Ensures accurate financial records, essential for tax and compliance purposes
Invoice Management	Generate, send, and track invoices	FreshBooks, Invoicely	Improves cash flow by ensuring timely payments
Expense Tracking	Monitor all business expenses and categorize them properly	Expensify, QuickBooks	Helps in budgeting and cost-cutting strategies
Bank Reconciliation	Match bank statements with recorded transactions to identify any discrepancies	Sage, Xero	Eliminates errors and prevents fraudulent activities
Payroll Processing	Manage payroll, ensuring all employees are paid accurately and on time	ADP, Paychex	Boosts employee morale and avoids legal issues
Financial Reporting	Create income statements, balance sheets, and cash flow statements	Microsoft Excel, Google Sheets	Provides an overview of financial health, useful for decision-making
Tax Preparation	Keep records organized and readily available for tax season	TurboTax Business, H&R Block	Makes tax filing easier and more accurate, reducing the risk of penalties
Cash Management	Monitor cash reserves and forecast cash needs for the business	Excel, QuickBooks	Prevents cash shortages and helps in planning for expansions or large expenditures
Accounts Payable and Receivable	Keep track of amounts owed to vendors and amounts owed by customers	FreshBooks, Zoho Books	Helps maintain good relationships with vendors and customers by ensuring timely payments
Compliance & Auditing	Ensure all financial transactions comply with legal requirements and prepare for internal or external audits	Audit software like AuditFile	Minimizes the risk of legal issues and prepares the business for potential future audits

Following are some of the responsibilities and tasks a bookkeeper takes on. Understanding the bookkeeper job description can help businesses ensure they are hiring the right candidate for the role.

Preparing Financial Reports

These experts collect data from different sources like bank statements, invoices, and receipts. They produce financial statements like balance sheets and income statements.

Manage Financial Transactions

Bookkeepers enter data into an accounting system and classify it. They make sure everything is compliant with accounting regulations and standards.

Monitor Accuracy and Compliance

These professionals stay updated on accounting regulations and standards. They track financial performances against budgets and make improvement recommendations. This is crucial when devising a training plan template to ensure compliance and accuracy.

Foster a Positive Cash Flow

Bookkeepers monitor issues within the cash flow. They take measures to increase this important metric.

How Professional Bookkeepers Can Enhance Business Finances

A professional bookkeeper is a strategic partner who can sharpen a small business’s financial processes. Here’s how:

• They ensure accuracy by reconciling the numbers that are on the books with bank accounts. They can also help reduce hiring bias by presenting unbiased financial reports.
• They look after compliance by staying on top of the latest federal, state, and local tax regulations.

They can also offer insights on things like cost control by doing a detailed financial analysis. A bookkeeper can identify overspending and other inefficiencies by sorting through accounts receivable.

Freelance Bookkeeper Vs. In House Bookkeeper or Firm

Hiring a bookkeeper comes down to three choices. There are advantages and disadvantages to freelancers, someone from a dedicated firm, and in-house candidates. It’s a question you might ponder: should I hire a family member for this role?

What to Expect from a Freelance Bookkeeper

Freelancers can be used during peak seasons. They are flexible when there’s a high volume of work. They offer personalized services that include unique financial knowledge. They are often found on various job platforms, which makes them relatively easy to hire.

There are none of the fixed expenditures associated with full-time employees. There are other potential cost savings when using a freelancer or hiring a part-time bookkeeper.

Using Established Bookkeeping Services

Here’s what you should expect when you hire an established firm.

They Can Handle Large Volumes of Data

The best companies have tools that can automate financial reporting, reconciliation, and even data entry. The software can reduce any errors associated with manual entry.

They Have a Team of Experts

Established companies have quality professionals. They will be able to help your small business with taxation, financing, and accounting needs.

They use Advanced Tools

Bookkeeping companies invest in industry-leading accounting tools and software.

The Advantages of an In-House Bookkeeper

An in-house bookkeeper has advantages like real-time financial insights since they access data on sight. They can also immerse themselves in your company culture so they can understand goals, challenges and specific needs. They may also be useful in devising unusual ways to promote a job opening within the finance department.

Key Steps to Hire a Bookkeeper

Following specific steps when you’re hiring one of these professionals helps to make sure you’re compliant and your numbers are accurate. These steps often start with sending out an interview rejection letter to unsuccessful candidates before moving on to finalizing your chosen hire.

Determine Your Business Needs

Small businesses can use a bookkeeper for payroll and invoicing. Medium to large enterprises need one for budgeting and forecasting. Industries like healthcare have certain regulations. Some businesses need experts with cash flow management skills.

Verify Bookkeeping Certifications

Certifications ensure bookkeepers are using reliable practices.

• Certified Public Bookkeepers (CPB): This certification covers ethical standards and accounting principles.
• Certified Bookkeeper (CB): A bookkeeper who has this certification has mastered essential accounting skills.
• Other Professional Certifications in Bookkeeping: There are other certifications that include Certified Management Accountant (CMA). That one focuses on management accounting. A QuickBooks Online Certification highlights proficiency in using that software.

Conduct Interviews and Check References

Video calls and face-to-face interviews will give you an idea of the candidate’s interpersonal skills. Checking their past work experiences will tell you how good they are at problem-solving. During this process, it is essential to understand how to onboard new employees effectively.

Add in the following.

Discuss Terms, Fees, and Expectations

Communication is important when you’re discussing these three terms. Be receptive to feedback and flexible to adjust the numbers.

Everything needs to be clearly laid out in a written contract so documenting the expectations, fees, and terms is important.

Finalize the Agreement

Make sure the agreement has:

1. A clearly defined scope of services.
2. Agreed upon payment terms and fee structures.
3. A detailed section on data security and confidentiality.

Bookkeeping Software vs. Human Expertise

There are some differences between using a virtual bookkeeper and a service. The same goes for bookkeeping versus accounting software.

• A professional bookkeeping service is the best for personalized attention and complicated financial needs.
• If you have a remote business, software or a virtual bookkeeper works well. The same goes for small businesses with a small budget.

You can use either the virtual option or a professional service to get timely insights and quick responses to urgent matters.

FAQs: How to Hire a Bookkeeper

Following are some common questions and answers. These are useful for making hiring decisions.

Is a freelance bookkeeper cheaper than bookkeeping services?

Generally, freelance bookkeepers are cheaper. A bigger bookkeeping firm has overhead costs. Both can provide accurate financial statements.

Does a small business need an accountant as well as a bookkeeper?

Both are beneficial for small businesses. Bookkeepers look after day-to-day transactions. Accountants look at the bigger picture and budgeting, forecasting, and tax filing.

How can a Bookkeeper Improve Cash Flow in a Small Business?

Bookkeeping professionals can do a regular expense review and follow up on overdue payments.

Image: Envato Elements

This article, “How to Hire a Bookkeeper” was first published on Small Business Trends