There are three basic challenges with bookkeeping in a small business. First, it costs too much and doesn't always get done right or on time. Second, it becomes an overwhelming chore that cuts into the time you should be spending on running the business. Third, doing the job right takes skills and systems that need to be upgraded each and every year. More often than not, your lonely bookkeeper is not keeping up with new ideas and has little to offer the business aside from tallying the numbers.Here are three advantages of outsourcing your bookkeeping.
Outsourcing your bookkeeping helps you get the job done right and on time and can actually save you money. It increases your own efficiency at work and can provide information and insights critical to the success of your business. One of these insights is that by using the Profit First beekeeping method you increase business profitability right off the bat.
This is the most common reason that folks outsource their bookkeeping. A small business typically does not have enough bookkeeping to keep one person busy. So, it is really a part-time job. If you have a full-time employee doing your bookkeeping, they are costing you too much money for the work they are doing. If you assign them other work to make full use of their time, then all too often, the other work consumes their time and the bookkeeping is not up to date or is inaccurate.
When you outsource your bookkeeping, it is done correctly and on time by professionals and not part-timers. And, you only pay for the time spent keeping the books.
If you have been doing your own bookkeeping, it will be a relief to outsource the chore. Now you can pay more attention to your core business. You can focus on bringing in clients, increasing sales, and improving your cash flow. However, this does not mean that you should ignore the results of your bookkeeping until it is time to pay taxes. A key advantage of outsourcing your accounting to a professional is that you get accurate, timely, and insightful reports that are critical to running a profitable business. When there are cash flow problems, you can deal with them promptly. And, when part of your business is showing unexpected profits, you can focus on further improvement and profits in that area. And, if you are outsourcing to someone that uses the Profit First bookkeeping system, you will be able to make decisions to improve the efficiency and profitability of your operations.
The fact of the matter is that a small business cannot afford to pay a highly skilled bookkeeper or accountant the salary and benefits that their skills command. When you outsource your bookkeeping, you will have the work done by professionals using the most advanced tools. As your bookkeeping needs increase with a growing business, you can increase the service to precisely fit your needs.
Unfortunately, poorly kept books can deceive you and lead to bad business decisions. More importantly, standard bank accounting methods can do the same! When you have your books done by a professional who uses the Profit First method, you will see your financials more clearly and be able to make better business decisions in a timely manner.
What is the Profit First Bookkeeping System?
Sales- Expenses = Profit is the usual way to do bookkeeping according to generallyaccepted accounting practices.
A more insightful and more profitable approach is to use Sales - Profit = Expenses.This is the same formula rearranged but it provides huge insights that will help your business.
The basis of the Profit First method is that a portion of cash flow is always allocated to profit. All too often, a small business is growing and the owner hopes that cash flow will increase as more business comes in. Then, he or she spends money to run and expand the business. Unfortunately, cash flow may not increase rapidly enough to pay for all of the expenses. In traditional bookkeeping, expenses eat away at cash flow and there are no profits. In fact, the business owner may need to take out a business loan in order to meet expenses.
By taking Profit First, the business owner does two things. First, he or she routinely puts money aside. Since there is always money in savings, there is a reserve in case of a slow month and unexpected expenses. Because he takes Profit First, it will immediately become apparent when expenses are too high. Using this bookkeeping method, the business owner is forced to make important business decisions to reduce costs and is forced to do so well before the issue becomes critical.
It is a corollary of Parkinson’s Law that business expenses will expand until all of the available money is used up. That is a common occurrence with standard bookkeeping practices. The beauty of using the Profit First approach is that you are compelled very early in the game to confront Parkinson’s Law as it applies to business expenses. This is obviously a better scenario than waiting until you are in financial trouble to do this.
If you are thinking of outsourcing your bookkeeping, consider what you currently need and what you will gain. Do not just pick a bookkeeper to outsource to. Look for someone who will not only do your books but also someone who will add value to your business. That is where a bookkeeper who uses Profit First comes into the picture. Choose someone who will help you take a profit each and every month. Choose someone who will help you spot problems and inefficiencies in your business. Pick someone like us at Exigo Business Solutions where we are Certified Profit First Professionals.
Feel free to give us a call and we can discuss your current situation and see if we are a good fit to put the Profit First methodology to work for you. (816) 394-6818.
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