It takes a certain set of skills to be a successful business owner. But unfortunately, financial management skills is not one of them. In fact, very few entrepreneurs have ever received any sort of formal financial management education.
This is evidenced by the fact that 42 percent of small business owners never receive a post-secondary degree. While some high schools do teach students some personal finance lessons, it is nowhere near the level of expertise that someone would need in order to properly handle the bookkeeping for their entire business. That is why so many SMEs outsource their bookkeeping to professionals.
What is Bookkeeping?
A lot of people make the mistake of thinking that bookkeeping and accounting are interchangeable terms. But they are actually two distinct roles that are similar but involve slightly different services.
Bookkeeping is the act of diligently recording daily business transactions. This could be broken down into posting debits and credits, producing invoices, updating and balancing ledgers or historical accounts, and completing the payroll process. These processes are all vital to the success of any business and can become increasingly complex as the business continues to grow.
On the other hand, accounting services tend to involve more subjective tasks such as preparing company financial statements, analyzing the cost of operations, educating business owners about the impacts of pending financial decisions, and filling out income tax returns. The majority of these processes are things that depend on the information provided by day-to-day bookkeeping. That is why it is quite common for accountants to also offer general bookkeeping services.
But why is it a good idea to get these services outsourced? There are several main reasons, which can be found below.
Able to Dedicate More Time to Clients
Even when you work a 60-hour week, it still feels like there is never quite enough time to do everything that you wanted to for your clients. Rather than trying to struggle to work even more hours every week, it is much easier to simply offload some of your other tasks. And what better task to offload than one that you are not overly familiar or confident with? For the majority of business owners, this area is their bookkeeping.
What takes the average financial professional an hour to do can easily take a less financially-savvy entrepreneur two or even three hours to do. Therefore, by outsourcing the bookkeeping tasks, you will likely save about five percent of your weekly man-hours.
To put this into perspective, that previously mentioned 60-hour week would instantly become three hours less just by outsourcing a single area of your business operations. And any experienced manager will know just how much work they can get done in three hours. This could be the difference between closing an additional deal or exploring several more potential client leads. Or if you’re feeling overworked, then this could mean three more hours spent at home with the family every week.
Improves Financial Accuracy and Risk Management
While no one is perfect and mistakes are bound to be made in any area of life, making financial mistakes is one of the most devastating types of slip-up a person can have. This is especially true when it comes to bookkeeping for an entire company rather than just a single household. This is because you are suddenly dealing with the livelihood of dozens or even hundreds of people rather than just one or two people.
So while ambition is important, you want to make sure that you never take-on something that is beyond your skill level. This is the point when mistakes become much more likely to occur and the risk level associated with your business begins to skyrocket. But you know who rarely makes mistakes and has the closest to a perfect track record that you will ever see in the world of finance? Accountants!
That is why it is always a good idea to rely on these professionals to handle the bookkeeping process for your business. Not only will this improve your financial management and subsequently keep your company out of hot water with the IRS, but it will also improve your risk management, which is something that can have many positive effects on the rest of your business operations.
Avoid Purchasing The Latest Bookkeeping Systems
There are a lot of various software programs and services that are required when trying to do bookkeeping for an entire business. So when you attempt to handle all of this on your own, this means that you will have to spend the money to purchase these products and then make sure that you are also upgrading them whenever a new version gets released.
But as soon as you make the decision to outsource your bookkeeping department, this financial and productivity drain suddenly disappears. This is because bookkeeping professionals will already have access to all of the best systems. And since they use these programs to handle the bookkeeping for several other companies, they are not forcing their clients to handle the financial burden of purchasing these financial programs.
So all of the money that would otherwise need to be spent on getting bookkeeping software, which can often be upwards of $200 per year, is instead being directed towards paying financial professionals to do the bookkeeping using these systems. This is the epitome of making your money work for you.
Bookkeeping Process is Not Tied Into Your Schedule
In almost every industry, there is bound to be a certain time of year where business becomes particularly hectic. When this happens, you might struggle to find time to do certain tasks, which means that things like bookkeeping can often land on the back burner. And any financial professional can tell you that trying to retroactively do bookkeeping is definitely harder than trying to do it on an as-needed basis.
So if you outsource your bookkeeping, you don’t have to worry about this happening since the schedule of your remote professionals is not linked to your hectic work schedule. Therefore, your bookkeeping will always be completed on time.
These are just a few of the main reasons why outsourcing your bookkeeping is such a good idea. If you’re ever looking for more reasons why outsourcing this or other back office tasks is the right thing to do, then make sure to check out our blog or contact us at AdminAssist today.