Today, more and more entrepreneurs seek to increase their chances for success by carefully scrutinizing each function they choose to handle in-house. As a result, many are discovering that the best approach to financial record keeping may be to let someone else deal with it.
Think about it. What merits the attention of you and your staff? Developing an internal expertise in bookkeeping? This is not quite as strategically important as increasing revenue or improving customer service. Time and money spent on bookkeeping will be, at best, invisible or, at worst, a drain on precious resources.
Based on what Ive encountered working with hundreds of small businesses and nonprofit organizations, here are five tips to effectively utilize professional financial services and keep your company focused on growth.
1. Honestly evaluate your accounting and computer skills.
Most entrepreneurs hope that user friendly accounting software will make up for their inexperience. Dont believe the hype. Learning and operating these systems often requires a significant investment of time. If the result is that you wind up with an electronic shoebox, not only are you not properly utilizing the technology, you may be creating unnecessary work for your accountant. You might find that the fastest, easiest and most foolproof method for basic accounting is a low-tech peg board system.
2. Keep it simple.
If you decide to implement an accounting software package, start by mastering the basics. Identify specific goals before you move onto the softwares more complex capabilities. A job-costing system wont provide you with any valuable information if you cant balance your checkbook. As you implement more features, make sure the value of the information gained justifies the time invested to get it.
3. Contract with a payroll service and use all the bells and whistles.
If you cant see using a payroll service to merely cut a few paychecks, look more closely at the value proposition. Primarily, a payroll service is an insurance program in which the service assumes responsibility for the collection and payment of payroll taxes. If anything goes wrong, its S.E.P. (somebody elses problem).
Payroll services handle direct deposit, 401(k) and other benefits functions that employees expect from employers. Viewed this way, cutting paychecks is only a small part of what a payroll service can do for you.
4. Make good use of your CPA firm.
If your business is not transaction intensive, it may make sense to have an accounting firm do your bookkeeping on a monthly, quarterly or yearly basis. As your company grows more complex, you will need to involve your CPA firm in the evolution of the accounting function.
Companies today often engage CPAs to act as their chief financial officers in lieu of hiring controllers or other high level executives. This practice is becoming more prevalent, leaving companies that outsource with fewer accounting personnel to manage.
5. Consider a modular approach to outsourcing.
As your requirements grow, keep in mind that accounting systems dont have to be all or nothing. You may find that its just not possible to outsource a particular component of your accounting.
But that doesnt mean you cant use services to pay your bills, do routine accounting, perform collections or automate your billing. Minimize what you have to do internally. By minimizing or eliminating staff, you not only save on salaries, but also on time spent recruiting, training and supervising.
The key to bookkeeping is to find the system or combination of systems that works for your business. Avoid the temptation to copy what someone else is doing. Look at your own business and carefully and honestly evaluate your needs.
Thats the first step to implementing a bookkeeping system that gives you the information and freedom you need to focus on growing you business.
Thomas S. Joseph is president of Bookminders Inc., a North Side-based provider of automated bookkeeping solutions for companies. He will speak about bookkeeping at the Entrepreneurs Growth Conference June 3 at Duquesne University. Reach him at (412) 323-2665.