So, you’re a solopreneur out to start and grow your own business. You feel that you don’t need anyone’s help to get started, but today we’re going to talk about one resource a smart solopreneur will always seek out: a bookkeeper.
Technology has done a great job of providing the idea that you can do bookkeeping yourself. Quickbooks, Xero, and Peachtree are all great software tools that market to small businesses that they can do their accounting without help.
Do I need a bookkeeper if I have QuickBooks?
Bookkeeping software is like an oven. It has a lot of great features, but you need a baker to use the oven, or you’ll set it on fire.
Your business’s financials is like a pie. And the IRS wants a piece of this pie. You can ignore this piece of the pie for a while, but it will get to a point when the pie is messed up.
Your bookkeeping is analogous to baking a pie. The IRS wants a taste of it, and if you don’t bake it right, they’ll make you do it over again.
Can the solopreneur take care of that piece of the pie? Of course, but do you want to? Do you want to take your precious resource of time and move it to bookkeeping?
As a solopreneur, your time is your most valuable resource. Bookkeeping is a task that must get done. The smart solopreneur knows when she needs to focus her time on her business and give bookkeeping to a professional.
However, bookkeeping needs your attention, and the bookkeeper makes sure that time is focused on your bookkeeping so that the solopreneurs time is focused on the business.
What happens to my business long term if I don't hire a bookkeeper now?
Not getting a bookkeeper immediately is like starting a football match without a scorekeeper. Just like how you can’t play sports without a scorekeeper, you can’t start a business without a bookkeeper keeping track of your business finances.
Multiple stakeholders need to know how your business is doing, including yourself. If you don’t hire a bookkeeper immediately when you start a business, you’ll have the following problems in the future:
- You could miss out on tax deductions because you were not tracking your expenses properly
- If you are audited by the IRS, you will lose substantial amounts of time reorganizing years’ worth of financial transactions.
- You will not be able to get lines of credit without your financial reports properly prepared
- You will lose time refocusing away from your core business trying to keep up with your bookkeeping.
Can I do my small business bookkeeping myself?
The small business owner is talented at wearing multiple hats, and these solopreneurs can do their own bookkeeping. But this core business process will not wait for you. Bookkeeping needs to be updated daily, and if you have other business priorities, bookkeeping tasks will pile up. The more tasks go overdue, the longer it will take to catch up. A bookkeeper who specializes with solopreneurs is likely processing financial records of multiple small businesses. They have the process flows necessary to keep up with bookkeeping.
So, while you can do bookkeeping yourself, you risk getting behind when your core business takes precedent. A bookkeeper can keep up on your records significantly more efficiently than the solopreneur because their workflows are dedicated to bookkeeping.
See our companion video “Why do Solopreneurs need Bookkeepers”, to learn more.
When does your business need a bookkeeper?
Your business immediately needs a bookkeeper when it starts making financial transactions. That can either be your first income or your first business cost. This is true even if you’re pre-revenue. As you incur costs, a bookkeeper can categorize these costs appropriately for potential tax benefits. For example, the IRS will not let you deduct a cost if it’s a capital expense. These expenses include:
- Business Startup Costs
- Business Assets
The IRS is very particular about business startup costs. They expect all costs towards starting the business as a capital expense. A bookkeeper is necessary at the very start of a business so that you don’t capitalize the wrong expenses and miss out on costs you can deduct from your taxes.
A solopreneur is capable, resourceful, and wears many hats. But a smart solopreneur knows when they need to delegate a workflow to better hands. Bookkeeping is a workflow that should be delegated to a bookkeeper as soon as the business starts.
A bookkeeper does many daily tasks that ensures that all financial records are kept up to date and that the business runs smoothly and optimally. A bookkeeper’s service allows the solopreneur to focus their energy on their core business. This removes a potential big distraction for the solopreneur and save them time and money.