One of the more common experiences I hear from business owners who are at the point where they’re ready to start talking about hiring a bookkeeper is the embarrassment of how out of touch, disorganized, and behind they are when it comes to acting as the CFO or the controller of money in their organization. It sort of feels like you’re showing some stranger all the dirty laundry – it’s like a dirty little secret, that the business owner is not managing their books, and are falling behind. However, what you think is a secret isn’t a secret at all. You’re behind because you’re focusing on the thing you should be focusing on, which is building your business, and bookkeepers know that. We have a great sense for seeing the truth of the matter.
You need to be responsible to your company, staff, and clients, and that means bearing your soul, telling on yourself, and having it be obvious to at least one person how pitifully behind you are. Now we’ll
face three major components of an owner’s failure, and we’ll handle this obvious and easy-to-solve problem: 1. Fear of hiring someone who turns out to be a criminal and robs you blind, 2. Embarrassment that you are behind and don’t know how to hire the right person, and finally 3. lack of funds.
Is having strong financial reporting, measures, and statistics worth a little embarrassment? Do you love your business enough to take a little bit of personal criticism or to allow your ego to be hurt a little bit? As long as you can afford a bookkeeper, there shouldn’t be any questions as to whether you should have one. The answer is yes!
Unfortunately, it is the case that sometimes having to show somebody what your financial record-keeping really looks like is so mortifying to a business owner that they cannot face it, and will continue to try and manage the books themselves – utterly failing. Even though they are doing a terrible job as the CFO, sometimes business owners avoid hiring a bookkeeper simply to avoid looking bad. The thing is, it doesn’t even sound crazy to me. I get it. We don’t like to be embarrassed. What you need to know is that hiring a good bookkeeper means being embarrassed one time, and then forever going forward, your books are completely in order. You’ll also find it’s not nearly as embarrassing as you think it’s going to be. It lasts for about 5 minutes, and you’re set.
While we’re on the subject, hiring a trustworthy person is really not that hard if done correctly, but you still need to make sure your controls are in place. The reason the bookkeeper is such a fundamentally important position to hire correctly is that if they do their job correctly, they’re responsible for more than just entering transactions from your bank statement, and if they do their job incorrectly, you could be completely sunk. In a small business, the bookkeeper’s role is the VP of finance; the CFO if you will. I see business owners posting craigslist ads for bookkeeper positions starting at $20 or $25 an hour. To those people, the bookkeeper’s role and responsibility level is just slightly above that of a receptionist.
What you get when you pay a bookkeeper a low wage is what I call an administrative bookkeeper. An administrative bookkeeper should be capable of reconciling bank statements and entering transactions but they’ll do it with errors. They won’t be able to think like an owner. They won’t know how to create reports and displays that give you the answers you need. You’ll get someone who doesn’t have the experience to know what to look for.
An inexperienced bookkeeper won’t even consider looking at your return on investment,. They will have a profit loss statement that has one line for marketing and one line for gross income. They won’t take the time to drill down into those two and find out what piece of your marketing was working correctly. That’s just one example of the difference between an administrative bookkeeper and a professional bookkeeper.
I’m a business owner and a financial strategist. I’m a partner to my clients and acting as a fiduciary. If doing my job correctly produces money for them, everyone wins.
If your personal life is not balanced and organized there’s no way your business life is going to be balanced and organized. Because you have a responsibility to your business for it to grow, you have to make sure there’s enough money for income, investments, growth, and emergencies. A responsible business owner takes their cut last, and if there’s not enough left over for your cut, then immediate steps have to be taken to cure that. Otherwise, you’re covering your shortfall with the business’s foundation.
We talk about how the financial impact of the business affects the personal things, and I talk to your CPA to make certain the books are being done in a way that will allow for maximum deductions when it’s tax time, and to make sure I have a good feeling about their ability to get you the biggest tax breaks, and still keep you out of being audited. There are just as many unqualified, but licensed, CPAs out there as there are starving musicians.
A good bookkeeper can tell you where in the business you need to focus your attention to be able to generate the profit you require. Sure, more customers is a pretty good guess, but the real story is often more specific than that. There are two ways to earn more net profit, cut expenses or increase gross revenue. The question your bookkeeper should be able to answer is which expenses you should cut, or what needs to increase for more revenue to occur. Should it be the last direct mail campaign you did, or should you increase your prices by 5%? This is an example of what it looks like to be a bookkeeper with an owner’s mindset.