Hiring The Wrong Type of Bookkeeper Can Be Costly to You Part 1

I hope you’re in the business that you are in because you like doing the work. If you’re a painter, carpenter, programmer, or baker, I believe you do it because it’s something you like and you are able to pursue it as your career, so that you also get paid for it and can make a living. More than likely you didn’t get into the business you’re in because you like doing administrative paperwork and accounting. In the beginning, you have to do it all whether you like it or not, right?

Typically, when you’re first starting out, you have to try to do as much as you can yourself before you hire somebody to do it. For a business that’s just getting off the ground, this method of handling responsibilities in the business works just fine, but when a business does start working correctly (or if you happen to have adequate startup capital), that’s when it’s time to hire some help. Though this might not come to mind, there is rarely a more important position to fill correctly than that of the bookkeeper. They can help you ensure your profits will be there.  I helped my wife figure out how much she needed to charge for her preschool so that she could afford to pay all her taxes and earn enough to feel like it was worth the effort.  She was still able to be lower than her competitors, but without this calculation, she certainly would have been earning much less.

You might think that doing your own books is not rocket science and that it’s completely common and ordinary. You are right, and at the same time, it’s also usually the case that the books are not current and up-to-date and there are almost no metrics available. Generally, do-it-yourselfers don’t know exactly what it costs for them to live each month, and they don’t know exactly what the return on investment is on their marketing, their bank statements are not reconciled, and they can’t tell you their current net worth.  This isn’t actually an obvious problem in small businesses, because nobody’s asking you for the answers to these questions. You’re at a place in the development of your business where you take as much as you possibly can from the business because that’s what you need to live. It doesn’t really matter what your bank statement says, or does it? 

At some point after the business is making enough money and before it’s making so much money that hiring somebody is obvious, you reach this point where you continue trying to do it yourself, and it starts to look exactly as I described – everything is behind.

You start thinking you need to get a bookkeeper, and of course, the next thought is regarding how disorganized your books are. So you think “I’ll get everything organized and then I’ll hire a bookkeeper”. I’ve seen dozens of times, if not hundreds of times, where this is the case, but it’s a fallacy to believe you’re going to get caught up. If your business is growing, you’re busy growing with it, and if it’s sinking, you don’t need to do the books, because you already know how bad things are. During times like these what happens in almost every case is that the owner shifts their attention away from the mundane tasks of record-keeping, including bookkeeping, and either shifts that responsibility onto an administrative bookkeeper, someone who may not even be trained to do the job, or they stop altogether hoping that one day soon they’ll be able to pay somebody to get them caught up.  But the City, State, and Federal taxes continue to become due, and that causes severe stress.

You see the inherent problem here right? If you don’t do the books on time and properly, you get into tax trouble or you overspend on things, such as payroll or inventory. Late fees start to eat up your profits, and needing to rush things is costing you as well. You aren’t watching the money. All of these are contributing factors to the ultimate collapse and failure of thousands of businesses every year.