As a small business grows, financial management becomes a more delicate task and as such requires professionalism and financial intelligence.
As a business owner, it is important to focus on growing your company, gathering new market, gaining a reputation. This requires a large amount of your time and such activities as keeping financial records become time-consuming.
To focus on more critical duties, it is worth considering outsourcing financial management.
Here, we will explore Bookkeeping Services and the Chief Financial Officer (CFO). Both make a big impact on the success of your business but which one do you need?
A bookkeeper, in simple terms, is employed by a small to medium-sized company to record and track its financial transactions such as the payroll, invoices, and income/expenditure.
A bookkeeper’s role is not limited to keying in data. They are also skilled in using accounting software and are thus able to:
- Offer advice and train staff on using accounting software.
- Clean up mistakes done by unqualified staff.
- Streamline work to ensure smooth flow, for example, using POS systems.
Today, many business owners choose to outsource these duties to firms offering bookkeeping services.
Such firms offer the services of an on-site bookkeeper who will be available on call, on agreed days and terms, and online bookkeeping in which a certified online bookkeeper is assigned to a business owner and all accounting work is sent to them via an online platform to which the business owner has access.
Both on-site and online bookkeeping come with varying methods and have their own advantages. While on-site bookkeeping relies on ledgers and paperwork, online bookkeeping uses modern software such as Xero and QuickBooks to record and process data.
An on-site bookkeeper works at the business premises and is in direct contact with the business owner at all times.
Online bookkeepers work at a corporate organization and are assigned to the business by the firm for which they work. They communicate with the business owner via mail or telephone.
Advantages of Virtual Bookkeeping Services
Online bookkeeping services allow for the provision of specialized skills in bookkeeping.
More often than not, online bookkeepers are experts in their fields and so are able to avoid mistakes that could prove fatal to the company.
They ensure proper computation and recording of data using computer software and keep up to date records of this data on secure databases that are accessible all times.
Business owners also reduce overhead costs with online bookkeeping services.
These costs include maintenance cost for on-site bookkeepers which can instead be added to profit-gaining investments. Other expenses such as utility bills, office space, and office supplies are also reduced.
Online bookkeeping also offers packages that a business owner can choose from, thus allowing for a larger workload to be completed at a time than with an on-site bookkeeper.
It also allows for better financial planning depending on how much money one is willing to pay at a time for a specific amount of work to be done.
Online bookkeeping also reduces the clutter of paperwork and makes it easier to access financial transactions from a well-organized database. It is also fast and easy to send invoices, allowing for quicker cash flow in a business enterprise.
In short, online bookkeeping is efficient.
Advantages of On-site Bookkeeping Services
On-site bookkeeping allows for in-depth discussion of the business’s accounts.
Face to face communication is essential in making sure that data has been recorded. It also allows for immediate sharing of new information and challenges between the bookkeeper and the business owner.
On-site bookkeeping also ensures that the bookkeeper is paid only for the days on which their services have been required. Thus more of the business ‘s money can be channeled to other areas of the business unlike in some online bookkeeping services in which fixed monthly charges may include non-working days.
Some firms offer both online and on-site services interchangeably to suit a business owner’s needs.
What are the Signs You Need Bookkeeping Services?
Your Business Is Expanding
This comes with added roles and increased pressure.
To ensure that your business remains stable, it is critical that you delegate duties and distribute work. If as the owner you continue to keep the books as well as take on new tasks, you are more likely than not to make errors that may end up affecting your business.
Outsourcing bookkeeping would be a viable option at this point.
Increasing Cash Flow
As your business grows, you are likely to experience an increase in revenue and expenditure and so, more information to record.
More invoices and payrolls will need to be prepared and more balancing required. Taking on these duties on your own or with a small staff unqualified in bookkeeping may prove detrimental.
It would, thus, be wise to invest in professional bookkeeping services.
Your Books Are Never Up-to-date
You may find that you are unable to track cash flow at the end of the month and that you are months behind on records.
You may also be unable to calculate how much profit you are making since you have no record of how much money you actually spent compared how much you raked in (Cost of Goods Sold vs. Net Sales.) Filling your tax returns also becomes a problem.
A professional service will save you a lot of trouble and a lot of money.
Your Customer Payments Are Never On Time
Running a growing business alone means you may hardly have enough time to collect on debts.
You may find yourself giving customers too much leeway allowing them to take advantage. A bookkeeper ensures that customers pay on time and that the system is well organized and debts are identifiable and addressable.
This ensures proper cash flow and quicker returns on investment.
Your Cash-Flow Is Unpredictable
You are unable to estimate the amount of money you expect for given months in the year since you have not tracked your money.
This makes it very difficult to plan ahead given that business can be very risky without well-calculated moves.
Having a professional bookkeeping service do the work for you lets you see the financial graph and visualize the market situation as well as capitalize on new market strategies.
You Are Uncertain On How To Pay Your Employees
Paying employees on time and can be very stressful.
It may prove difficult to keep up-to-date with the law on matters of tax and deductions on employees. It may also be difficult to track allowances and stipends.
A professional service will easily take the burden off your shoulders by keeping a record and giving you updates on changes to these rules and monies.
Your Bills Get Paid Late
If your accounts are not up-to-date it is easy to miss deadlines on bills and payments.
This leads to poor credit which is not good news for a business which needs to spend money. Bills can also gain high interests and the money to pay them may not be available. Mitigation might also eat into the business’s profits.
Professional bookkeeping services will ensure that bills are paid on time, avoiding poor credit and amassed debts.
You Are Unable To Separate Personal Credit From Business
Using your own money to pay for business expenses makes it difficult to track the businesses expenses and differentiate them from your own.
It is very strenuous to go through every day’s expense and come up with a detailed record of things. Bookkeeping services can track high volumes expenses and avoid the hassle of going through receipts and bank statements to balance your ledgers.
In the end, professional bookkeeping services, whether on-site or online will save a business owner a lot of time and money by ensuring a proper account of all transactions made.
The Chief Financial Officer
As your business grows more, financial management becomes too complex for a bookkeeper alone to handle.
It also becomes a strain to develop new ideas for growth, investment, and strategic planning. At this point, it might be time to use a Chief Financial Officer.
A CFO is employed by a company as the vision bearer for all financial activities.
Their primary role is to protect the financial future of the company as well as ensure that its current state is stable.
Hiring a CFO is a big decision for any business owner and needs to be done at the right time.
Investors and Venture Capitalists
When new investors want to support your business, they may want to see detailed financial statements and well as financial plans.
It is beneficial to hire a qualified CFO at this point to sit and discuss these financial details with the interested investors.
Professional CFOs can be hired both part-time and full-time.
A Massive Increase In Annual Revenue
A professional bookkeeping service is enough for a company with a small amount of revenue.
If the amount of revenue rapidly increases, it would be wise to hire a CFO to help manage the cash flow and plan on appropriate usage.
Quite often, large amounts of cash will be misused without a professional to oversee usage.
Auditing Becomes Overwhelming
As your business grows, entities such as banks will insist on thorough audits of your financial statements.
This includes looking into even the most minor of details in company finances and can be particularly intimidating.
Hiring a CFO ensures that a professional is in charge of making certain that financial statements are up-to-date and have no discrepancies.
For a company that has grown far beyond what it once was, it becomes more and more difficult to understand and manage risks.
A CFO will help manage many of the ‘What If’ scenarios that are likely to occur. Without a CFO, you might fail to see the problem until it is too late.
The CFO will provide strategies for risk management and follow through on these strategies giving progress reports ensuring you are stress-free and available to handle other areas of the business.
So, Do You Need Bookkeeping Services or a CFO?
This depends greatly on the level of growth of your business.
A bookkeeping service is important in any business, especially small businesses. If you are unable to handle keeping your own books then it is time to seek the services of a professional.
A CFO comes in when the situation is more complex. If you need new strategies, want to pitch to new investors or lack the know-how of deeper waters in the business world, then a CFO is the right solution for you.
For more information, contact us.