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How to Run Your SMB Without a Bookkeeper

4 Mins read

Owning a small business puts you in charge of everything, often on a shoestring. Here’s how to hold down the bookkeeping fort until you’re ready to hire a bookkeeper.

No matter how big a small business’s idea may be, its resources and assets are limited early on. Even billion-dollar companies start in garages and on dining room tables. Early office furniture is often secondhand, and if there’s office coffee at all, it’s drip from the local supermarket. The company founder and the first employees work long hours and bounce between tasks. Everyone may take turns answering the phone, making a delivery, or emptying the trash. Few of these tasks go directly to the top line. All of them have to get done.

Perhaps the most important of the must-do tasks is keeping the company books. First and foremost, tracking expenses and income is your business scorecard. You’re winning when your income exceeds your expenses; you’re still striving while your expenses exceed your income.

The complexity of the task will vary depending on the type of business you’re in. A consultant will need to track fewer things than a retail brick-and-mortar shop owner with shelves full of items of many different kinds and prices and multiple transactions per day. A music tutor will have fewer things to track than a contractor. No matter your business, you need it to generate a profit to make the risk and effort worthwhile.

Why it’s important to do books regularly

Tracking all of these things is vital in other ways, too. By looking at the records you keep, you’ll be able to see opportunities or discover insights that can make the business more profitable and help it grow. For instance, if you’ve got a food truck, you may discover that you do half your cash business at a particular location. You may be able to reduce your fuel expenses while improving your revenue by serving the most popular locations. If you own a shop, you may discover that a particular line of merchandise sells best. Yes, you might figure these things out without looking at your records, but having the data in front of you and consulting it regularly will help you see these trends sooner and more profitably.

The downside of not doing books regularly

It would not be uncommon to put the books aside when you’re busy and have more things to do than hours in the day. Sometimes you simply have a deadline or a new client presentation. However, doing that too often works against you, even if you win that new business.

Without accurate records, a plumbing contractor might price materials incorrectly and bid too low. Not only would that mean a thin profit or a loss on that job, but a more profitable job might be missed by being occupied on other work. Worse, word amongst other contractors about your comparatively low prices might lead the pool of possible customers to judge the plumbing business as low-quality and cost additional work or only getting referred to the cheapest gigs.

Inadequate recordkeeping can also lead to the inability to grow your business when banks decline a loan application for missing or sketchy documentation. Income tax preparation and payment are at the top of the problem list when good financial records aren’t kept. Poorly managed expense records can mean unclaimed legitimate deductions because you can’t remember the expense or find the receipt or invoice that documents the deduction. That would lead to a greater tax liability — or IRS penalties, fines, or maybe even jail time if you claim a deduction for which you can’t produce receipts when audited.

Ways to get books done

Given bookkeeping must be done, who should do it? Should the business founder do it, taking time away from performing the tasks that will generate revenue and grow the company? Solopreneurs often choose this option, adding it to their list of burdens — a list that can slow business growth or increase burnout.

One technique that could help here is something called deep work. This is committing to a time for distraction-free work (no email, no texts, no phone calls, no collaborative platforms). While this article is about finding time to do bookkeeping, deep work can be used to most effectively tackle myriad small business tasks. Other strategies include time blocking, the 80-20 rule, or the debated Pomodoro Technique.

Alternatively, you could train someone already on payroll to do your basic bookkeeping, hire a bookkeeper part-time, or contract an external bookkeeper.

A digital document management platform is a well-tested and beneficial solution for a small or medium-sized business. Such a platform relies on any number of ways to capture data. Invoices and receipts can be scanned, captured from email attachments, emailed directly, or uploaded from a computer. Basic accounts can be set up from the start so that organization is quick and easy. Documents can be reviewed from anywhere because they’re in the cloud. Key reports can be generated for up-to-date insight and decision-making. Likewise, these can be shared directly with a lender or a tax accountant when needed.

Making this choice gives a business owner flexibility. You can handle the bookkeeping yourself in less time than you could by manually entering data into an accounting notebook or spreadsheet. Or if you’ve got a clerical employee — even part-time — a document management platform can significantly reduce the time they spend capturing transaction data and organizing supporting documents. These choices are helpful and can reduce your workload until you’re able to add a dedicated bookkeeper.

The result

Deciding how much of your time to devote to bookkeeping comes down to a cost-benefit analysis. Will spending time reviewing receipts and spreadsheets mean not performing key tasks like finding new business? If you know you can generate more money by meeting prospects than you’ll save by doing the bookkeeping yourself, look for a solution outside yourself as soon as you can. The digital document system is a timesaver with a relatively small cost, often less than an hour’s time for a bookkeeper. For that small investment, your taxes will be more straightforward, you’ll know exactly how your business is performing, and you’ll be able to produce the growth you’d like to see.

Jim Conroy is the CEO of The Neat Company.

Bookkeeper stock image by Rawpixel.com/Shutterstock

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