One of the most important aspects of growing your business is accounting. Knowing how much money comes in and how much goes out is crucial to the success of your business. In a typical small business situation, the business owner wears many hats, and they become the sales team, service provider, technical support, accountant, and general manager.
When businesses begin to grow, opportunities to hire others to fulfill these roles become apparent. This is when a business owner needs to decide on which positions to fill first as they look to expand. If the work is labor-intensive, it might make sense to find an employee that can fill that role. If the bottleneck is taking inbound calls, then maybe a secretary or answering service would be appropriate.
In time, the business will grow, and these roles eventually become filled. When this happens, the business owner can move forward with growing the business. This growth, however, is dependent on two significant variables, fulfillment, and money management. Without fulfillment in place, the work won’t get done, and you won’t get paid. Without the ability to properly manage your money, you can’t possibly allocate funds in a way that supports financial growth. This is why accounting should be a priority for all businesses, from small to medium, and large companies.
As revenue is generated, it’s easy as a business owner to become distracted by unnecessary expenses. Knowing when to set money aside, and when to invest in the business is imperative to your growth. Building out a complex website for $40,000 doesn’t make sense when you don’t have the internal infrastructure to support the potential inbound leads that the site might produce. That is a salary for many and would be better spent on staff.
Having an accountant to keep track of expenses and payroll will help your business avoid operating at a loss and keep the company turning profits. Most small businesses fail because they ignore the financials, and by the time they realize what has happened, they are already operating at a loss. To avoid this, you need help because you can not do it all yourself!
In this day and age of internet and outsourcing, you don’t necessarily need to hire an in-house accountant. Having the ability to outsource that work is convenient for many business owners who don’t operate in a typical brick and mortar environment. Many businesses these days operate online, allowing for more flexibility with the work schedule. As owners travel and enjoy the fruits of their labor, they don’t have time to manage staff and accounting. The same goes for bookkeeping and payroll, and these management services can all be outsourced.
So which of these services should you outsource first? Accounting, bookkeeping, or payroll? That depends on your needs as a business owner. If you have strengths in one area, and weaknesses in another, then outsource yours to your weakest points.
What To Expect From A Bookkeeper
For most small business owners, a bookkeeper is sufficient in the beginning stages of growth. Extensive financial documentation, financial transactions, and preparation of your financial statements are typical duties for a bookkeeper.
What To Expect From An Accountant
You will need an accountant if you plan to grow your business. Depending on the line of work you are in, an accountant may be your priority. If there is a complex business structure with multiple LLC’s, or additional entities generating revenue, an accountant will need to keep financial records in order. You will need a skilled accountant, as there are many crucial differences if you decide to go with S-Corp instead of an LLC business structure. Reading great content about this topic, like this guide from HTSALLC, will provide you with enough information to better understand this process. If you plan on running payroll internally, you will also want to allocate this task to your accountant.
Understanding Cash Vs. Accrual Accounting
The two primary accounting methods are cash accounting and accrual accounting. You will want to look into this and consult with your account about which approach is right for you and your business. Many small businesses can choose either method for their accounting records, while others are legally obligated to use accrual accounting. Your accountant can help you identify the process you should be using.
If you have employees, then you have payroll. While there are plenty of software applications that allow you to manage payroll easily, it still becomes a distraction and can easily be outsourced. Some companies specialize in Payroll and HR services that offer affordable solutions for businesses to outsource their payroll. Companies like Paycom Payroll LLC provide payroll solutions for businesses of every size. As a growing business, outsourcing payroll is something that should be on your list of priorities.
Anyone that has built and grown a business will tell you how easy it is to get caught up doing everything yourself. In the startup stages, hiring a bookkeeper, accountant, or payroll service may be too costly. As the business grows, though, these should be priorities. You will need these services throughout the year and especially for your year-end tax planning.