Small business owners are predominantly known for "doing it all". In most small businesses, the owners are responsible for all aspects of the business, from customer relations to product delivery. Yet, one of the most important business management tasks, commonly known as "the books" is often overlooked or thrown together quickly. There are a variety of reasons for this lack of attention.
First, most small business owners do not have sophisticated financial knowledge, which makes "the books" cumbersome and intimidating. These are the clients that come to a CPA and hand over their books with the disclaimer "well, I'm not an accountant, so I apologize for the shape the books are in". Well of course you're not an accountant! If you were, you probably would have gotten a job in accounting, not have started your business.
Second, most small business owners run relatively simple, cash-basis operations that do not require accruals and adjustments on a monthly basis. These are the clients that determine the success of their business based on how much money is in their bank account.
Third, most small business owners simply do not have time to focus on the financial side of their business. By the time they are done dealing with customers and vendors, filling orders, managing employees and putting out other fires that come up during the day, the last thing most small business owners want to do is reconcile their bank statement.
All of these reasons, albeit legitimate, can wreak havoc in a small business if left unchecked for a long period of time. This is where small business owners can most benefit from outsourced bookkeeping and accounting services. By outsourcing, the business owner is getting another set of eyes on the books. This set of eyes can point out unusual charges, identify trends in the business finances, reconcile bank accounts and advise the business owner on their cash position.
Outsourcing is most effective when combined with tax planning and preparation. When the business owner's CPA can advise the client monthly or quarterly then the year-end planning and preparation are much less complicated and time consuming. Outsourcing typically has a lower cost impact than hiring a part- or full-time bookkeeper. Having the books analyzed by an accounting professional for a few hours each month, and then the tax return prepared by the same professional at the end of the year is more cost effective than only allowing the accountant to look at the books once a year. Furthermore, the accounting professional will most likely set the accounting records up in a formal accounting software such as Quickbooks or Peachtree, which will give the business owner historical data going forward.
If you are a small business owner and the burden of "the books" has become too much for you to handle, consider outsourcing your monthly accounting function. This will free up more time for you to focus or running your business, which is why you started it in the first place!