When is the right time to hire an accountant or bookkeeper?
The short answer: Before you think you need one. Why do I say that? Because by the time you realize you need one, things are probably already spiraling out of control, and there could be permanent damage done to your business.
One reason to get someone ASAP may be that your business is growing faster than you thought it would. You keep putting off some of the things you don't really want to do, or just plain don't have enough time to do - like bookkeeping. You're working late at night and on the weekends, spending more and more time away from your family and friends. When was the last time you balanced your checkbook? Are you tracking your income and expenses properly? Are your books a mess when tax time comes? It's important to realize early on when this is happening. Yes, it's going to cost money to hire a bookkeeper sooner rather than later. But you're not going to save money by waiting. Why not? Because if your books are already a mess when you contact a bookkeeper, they are going to have to spend time cleaning up what's been done in the past - and you are going to pay for it. Probably MORE than if you had called them before things got messy. If you have slacked off on keeping your documentation, a harsh reality may be that your books may never be accurate. Bookkeepers are pretty awesome with numbers, but we're not miracle workers. We can't magically create what isn't there and we can't read your mind.
Another reason things may be spiraling out of control is if you don't really have a handle on the concept of bookkeeping, but you've been trying to do it yourself to save money. However, you may end up in the same scenario as above - the longer you wait to hire a bookkeeper, the more it is likely to cost you to clean things up. Having QuickBooks software does not make someone a bookkeeper. It actually gives a false confidence that everything is fine. And not to sound like a broken record, but your books may never be accurate due your accounting system not properly set up in the first place. Bookkeeping is so much more than just writing your income and expenses in your checkbook register (or in QuickBooks). If you have an employee (even if it's just yourself), deal with sales tax, have any assets (vehicles, equipment, etc), or if you have put equity (funds from you personally) into your business, all of these things require special bookkeeping entries BESIDES what is in your checkbook. If not entered properly, you could pay more in taxes than you need to. Many times, tax preparers are NOT bookkeepers, and they are going to take whatever numbers you provide them with to file your taxes, without asking questions. They are not in your books throughout the year to see if something does not look right. The burden is on you if the information you gave them is wrong. This is one of the reasons it is important to have a bookkeeper separate from your tax preparer.
I can't say it enough, no matter what you do, keep your business and personal funds separate. You are only inviting trouble from the IRS. If you end up getting audited and your funds are intermingled, they are more likely to dig deeper trying to catch you doing something wrong. If you need money out of your business to pay personal expenses, then you take a draw out of your business and put that money in your personal account to pay from there. Very simple, and will save you a lot of headaches later on. Just remember, you still have to pay taxes on the money you pull out of your business!
Do yourself a favor and invest in your business by hiring a bookkeeper as soon as you start making money. It is a cost of doing business and is an important one that often gets overlooked. We have different packages to work with even the smallest businesses and can scale up from there as you grow. According to the Bureau of Labor Statistics, 20% of new small businesses fail within the first year, and 50% by their fifth year. Don't let poor bookkeeping practices be the reason your business becomes a statistic.
