Bullet When should I hire a bookkeeper?

An accountant can analyze the big picture of your financial situation and offer strategic advice. He or she produces key financial documents, such as a profit-and-loss statement, if needed, and files a company’s taxes.

After tax season is over, an accountant can also act as an outsourced chief financial officer, advising an entrepreneur on financial strategies, such as whether to secure a line of credit against receivables when introducing new products.

In contrast, a bookkeeper does the day-to-day hands-on tasks: making sure new employees file all the right paperwork for the company’s payroll, submitting invoices (promptly) and following up on them, and paying the bills. The bookkeeper also tracks company expenses and can assure that every cost has been entered — and recorded correctly — into software like QuickBooks so that the business is ready for tax time along with filing any other reporting to, say, creditors or investors.

A bookkeeper can help you see trends so you can start to think strategically about where your money is going and where you can save. This is when a bookkeeper becomes valuable.

Learn more:  When to Hire a Bookkeeper

Bullet What is the difference between bookkeeping and accounting?

Bookkeeping is the process of recording all the detailed information regarding the transactions and other activities of a business. Accounting is much broader; it enters the realm of assigning the bookkeeping system, establishing controls to make sure the system is working well, and analyzing and verifying the recorded information. At Prosperity, we offer both types of services based on your company’s needs.

Bullet Does this mean I no longer need my CPA or tax preparer?

If your tax preparer is just preparing your taxes and periodically reviewing your books, we recommend that you continue using those services. Although we do not prepare taxes at Prosperity, we do work closely with tax preparers. Tax preparers specialize in tax planning and preparation. They use what the bookkeeper does to aid in tax planning; the cleaner the books, the better the advice. We specialize in preparing reports for owners and/or shareholders to aid in profit enhancement. Tax savings are limited; but, profit enhancement is unlimited. Books done and reviewed on a regular basis keep problems small; and, having a second opinion never hurts either.

Bullet I would just assume save some money by having my [wife, daughter, cousin, etc.] take care of my bookkeeping because they know more about it than I do. Why isn’t this a good idea?

Better than you doesn’t mean good. They may not know what they don’t know and it could cost you dearly. This puts a strain on the relationship.

Bullet I have QuickBooks. Isn’t that all I need?

QuickBooks appeals to small business owners because they market their product as being so easy anyone can do it. To an extent, they are right; but, QuickBooks doesn’t make you an accountant any more than word processing software makes you a best-selling author. If you don’t understand what is happening behind the scenes, you can mess up your accounting more quickly and completely using software than you ever could by hand. The worst part is, correcting accounting errors is like a game of whack-a-mole. When you fix one problem, it causes 3 more to crop up.