10 questions to answer before hiring a bookkeeper

It’s a decision every small business owner will have to make eventually: Is it time to hire a bookkeeper to look after the accounts? Some entrepreneurs want an expert looking after their books from the outset; others do their own accounts and only employ a bookkeeper as they become more successful.

So, should you be hiring a bookkeeper? Here are 10 things to consider before taking the plunge:

1. What bookkeeping skills do I already have?

The first step is to have a close look at your skill set. Do you understand accounting, bookkeeping and financial reporting? Be honest with yourself here — maybe you understand accounting systems, maybe you don’t.

If you do understand accounting that doesn’t mean you should be doing your books yourself. Outsourcing to a bookkeeper allows you to focus your attention on business growth rather than spending your days (or evenings) completing the data entry that comes with bookkeeping. You can still oversee the accounts without doing the heavy lifting.

If you do not have any understanding of accounting and bookkeeping processes, then you are going to need a bookkeeper with a much higher level of competency. That’s because they’re not just doing the data entry part of the job, you’ll also be relying on them to interpret and make decisions around your finances.

2. Is it time to improve my financial literacy?

I strongly recommend you get at least a basic education in small business accounting because regardless of the type of bookkeeper you get you will need to understand the numbers you are looking at.

If you don’t understand your financial reports, you can get into trouble very quickly. You also leave yourself open to the potential for any fraudulent activity to go undetected.

3. How often do I want my books updated?

Having made the decision to hire a bookkeeper, you also need to consider how they will operate. How often do you want them to update your books? My recommendation is for weekly updates because it is vital to clearly understand your financial position at all times. The more regular the updates, the better.

Also consider whether you want your bookkeeper to produce reports for you each week or whether you have the time, skill, and inclination to access the accounting software and run the reports yourself.

If your bookkeeper is producing your reports for you, which reports do you want? Profit and loss statements? Balance sheets? Budgets? Cash flow forecasts? It’s best to be clear from the outset so you and your bookkeeper each know what is expected and so that they can give an accurate quote for their services before you engage them.

4. How (and how much) does the bookkeeper charge?

Hiring a bookkeeper is not just a cost to your business, it’s an investment in the future success of your enterprise. Although your natural inclination may be to keep costs down, cheaper is not necessarily better. You need the right person for the job.

However, you can still keep costs low by finding a bookkeeper who charges for their time in the way that best suits your needs. Find out how each candidate charges. Is it by the hour? Per line item? Per enterprise? Do they charge extra for reporting?

Seek out the combination of commitment and flexibility that works for you.

5. What bookkeeping software do we use?

Find out if the bookkeeper is competent in the accounting software you have chosen for your enterprise. You don’t want to pay for time wasted finding their way around a new system.

If you are asking the bookkeeper to recommend software, ask yourself whether it is the best software for your business needs or whether it is just the software the bookkeeper knows how to use.

When choosing software, check how much of the accounts payable and accounts receivable process it will allow you to automate. For example, most modern software will link directly to the bank and auto-import and reconcile accounts. This can greatly reduce the cost of your bookkeeping.

6. How good are they with cash flow?

Does your bookkeeper know how to build and update a cash flow budget? The weekly review of your budget to actuals will be one of the most important reports you will view. Make sure they are appropriately skilled for the tasks you need.

7. How much detail do I want on my accounts?

Have a think about what level of detail you would like on your accounts. The more detail you add to your accounts payable and receivable at the time you enter the original data, the more you will be able to analyse and measure about your business in the long run.

I would recommend at least:

  • Main account
  • Profit centre/category
  • Allocation/split
  • Description

These will be the backbone of your management reports.

8. How will my account information be shared?

Ask yourself how your bookkeeper will work with your accountant, financial advisor and banker. How will the books be shared? How will you ensure everyone is working off the same, up-to-date set? Who will be in primary control?

Do you want to use cloud accounting software or desktop software connected to the cloud for sharing and collaboration?

9. How will your accounts be coded?

You will need to set up a system for coding all of your accounts payable and receivable. Who will decide how they are coded? For example, do you write on all the invoices and payments to show where they should be coded? Or do you leave that up to your bookkeeper’s judgement?

10. Who has sign-off on the accounts?

I also recommend that you have dual sign-off on all payments, between you and your bookkeeper. This will have the advantage of you keeping a close eye on all money leaving the business and eliminating the risk of possible fraud.

Also consider who will sign off and submit your Business Activity Statement (BAS)?

If it is you, do you really understand what you are signing off? If it is your bookkeeper, are they a registered BAS agent? Or should it be your accountant?

If you’d like help with your finances and simplifying things for your financial professional, try out Reep. Reep uses real, constantly updated data to create forecasts and reports for your small business you can easily share with others.