Guest Blogger: Diana Stehling
Are you one of those small to medium sized businesses grinding away to create a company that’s built to last?
You may be fighting internally to release the financials out of your “control” so that you can do the very thing you were created for – your unique craft.
You announce to yourself with resolution, “It’s time for an accounting solution!”
Great, now what does that mean?
Are you going to hire an internal accounting person to record transactions?
Do you have an accounting software?
Will they do the taxes also?
So many questions to consider and at the same time, how much will all this cost and can I afford it? “Well, I need an accountant to answer that question!”
This problem presents itself too many organizations throughout their lifecycle. Some owner/operators find that had they engaged in accounting services long before they did, the company would have been much easier to sell or hand down to the key stakeholders or family members in waiting.
The fact is, accounting is a critical element to operating a business.
With that being said, “What accounting services do you need?”
We have found that there is a gross misunderstanding of the term accountant and what this mythical bean-counter actually does. So let’s address that first.
An accountant is essentially a professional that performs accounting functions. Although they aren’t always, many times this term is assumed that the individual is certified in some way, be it a state, federal or other governing body that certifies them. The most common types of certified accountants are Certified Public Accountants, CPA and Enrolled Agents, EA.
A CPA is certified through the state in which they took the certification exam. Although many states have a mobility clause that allows them to move and practice their craft without additional certifications unlike attorneys. The main role of a CPA is either to audit financials, prepare taxes, or provide consulting services to businesses.
An EA on the other hand is an individual who has studied accounting and has passed an exam developed by the Internal Revenue Service (IRS) or is a former IRS employee. The main role of an EA is similar to that of a CPA, however is generally focused on tax preparation, but is usually equipped to handle many accounting functions.
Both of these professionals usually work for a firm or private practice. Their certifications and demand allow them to charge substantial hourly rates to their clients. Although they may enjoy auditing financials or finding tax savings for your organizations, we have found that they don’t necessarily enjoy the transaction based, methodical and mundane duty of bookkeeping.
So what is a bookkeeper and is this what you are actually looking for?
Well, simply put – a lot! Here is just a general list of what a bookkeeper may do within or for an organization:
- Pay client’s bills weekly
- Reconcile bank statements
- Journal and data entry (coding)
- Provide clients with weekly & monthly reports
- Accounts receivable aging
- Accounts payable aging
- Monthly aging
- Balance sheet
- Profit & Loss preparation (P&L)
- Budget to actual review
- Statement of cash flow
- Other custom reports
- Managing cash flow
- Assist with Budgeting and forecasting
- Maintain and manage the chart of accounts
- Debit/credit card reconciliation
- 1099 preparation
- Process payroll by working with a verified vendor to set up the payroll account, and then they schedule and process payroll.
These are just some of the tasks that are performed by bookkeepers. Their qualifications range anywhere from administrative experience and on-the-job training, to MBA’s in Accounting or certifications of some level.
The cost of a bookkeeper depending on their experience can vary, but a solid one will cost you $50-$60/hr in central Texas. Now, you can find them for as low as $35 but the experience is either low or it’s a brand new firm trying to gain clients and traction. If this new firm is worth their salt, expect your rate to go up significantly after the initial agreement. CPA firms also provide bookkeeping services, but those can go as high as $150/hr. The work is time consuming and they would rather provide more costly services with greater margins.
Well, why don’t I just hire one, you ask? Great question. You can!
Hire a bookkeeper and pay them $35,000 per year. First, pay the cost of recruiting, and time interviewing, onboarding and hoping they are the right culture fit for your organization. Also, pay employer taxes and any benefits that come along with it. Then take on the risk of hiring the wrong one and having to go through the separation process and finding a new one. If you don’t choose the right bookkeeper, your CPA or EA will spend significantly more time on your tax preparation correcting all of the mistakes that were made causing additional expense and headaches at the CPA/EA rate which is usually double that of a bookkeeper.
Overwhelmed and stressed yet?
Let us put your mind at ease. Get a bookkeeping service.
We recommend that you determine how many hours it takes you to fulfill the financial obligations and source an accounting services professional to do what you do in a fraction of the time and do it the right way!
If you find the right professional service, they should be able to negotiate a monthly fee, so you can budget accordingly and not have to worry about the honesty of recording hours worked or absurdly high contract labor costs. Frankly, it’s a burden for the bookkeeping service also. A good service is banking on your growth and wants to prove their worth by saving you time and hopefully money.
Also, most bookkeeping services can refer an excellent professional to prepare your taxes and provide consulting services – they should have a list of a few for you to choose from. These two professions working closely to ensure accurate financial reporting.
Just start at ACTSAccounting.com for your complimentary consultation.