The Top 5 Myths About Bookkeeping Services
by Medha Patel, on Apr 15, 2019
There are various myths that swirl about the bookkeeping profession, and while the stereotypes likely contain a grain of truth, there is certainly considerable distortion regarding the actual work of bookkeepers.
For those who operate a small business, hiring a bookkeeper might seem like an expensive luxury only the big firms can afford. After all, you would be paying someone handsomely to enter some data into a system, right? Besides, with the ubiquity and ease-of-use of accounting software, you probably can avoid dealing with this expense at least until you’ve grown into a Fortune 500, no?
Maybe, but maybe not. Let’s look at some of the most prevalent and persistent myths surrounding bookkeeping services and whether outsourcing is right for any particular business.
Myth 1: It’s just Data Entry
There is no doubt that bookkeeping does entail a considerable amount of straight data entry. However, according to the Bureau of Labor Statistics (BLS), the bookkeeping profession does much more than that.
Each individual’s duties may vary somewhat, but in general bookkeepers also reconcile accounts when discrepancies arise, produce financial reports for management, check the accuracy of entries, and even contact suppliers or customers to pursue payments, refunds, or communicate problems with the financials. Another important aspect that may fall under bookkeeping is alerting management to potential future issues, especially when using cash-basis accounting.
So while data entry does constitute a big part of bookkeeping, there is plenty of more substantive work performed by bookkeepers. In some organizations, bookkeepers might have quite broad authority to deal with reconciliation and suppliers or customers.
Myth 2: I can do it myself
Now that we’ve dispelled the “it’s just data entry” myth, the idea that bookkeeping is a do-it-yourself part of the business is a little easier to discredit. Not only will the DIYers have to perform many more tasks than just data entry, they also need to constantly track what’s happening and possibly spend several frustrating hours reconciling accounts if a single entry is incorrect.
Admittedly there is powerful, consumer-available software on the market that assists one in maintaining the books. However, learning this software and subsequently ensuring everything is entered smoothly and correctly can become a time commitment too large for the business owner. Moreover, having to track all the accounts, customers, and moving parts can get complicated quickly, leading to nagging subconscious questions like “did I forget to enter that big purchase?” or “will we have enough after that weekly payment?”
Myth 3: Bookkeepers are Expensive
Part of the reason many small business owners opt for the DIY route is the myth that bookkeepers are expensive. The BLS page linked above states a median hourly payment of about $19, and a yearly income of just shy of $40,000. To be certain, hiring a full-time bookkeeper is prohibitively expensive for many small businesses. But one tenet of capitalism is that the market will fill a niche if it exists, and bookkeeping services fill the gap between full-time bookkeepers for big companies and having no bookkeeper at all. Hiring part time will ensure the books are kept in order but also not break the bank.
Myth 4: Owners relinquish control to third parties, who may be untrustworthy
Data security is a hot topic these days, and financial privacy is built into plenty of laws and regulations. So it is only natural that some business owners recoil at the thought of handing over the keys to the financial kingdom when they hire an outsourced bookkeeper. But letting anyone in the organization review and work on the finances is opening up the business to potential fraud and attack. That includes insiders, who also have a reason to cripple a business (see “the disgruntled employee” for a demonstration).
Professional bookkeepers, and especially those that work for bookkeeping services, build their reputations on trust and security. Were a bookkeeper to divulge the financial information of their clients, not only would they be breaking various confidentiality clauses in contracts which may subject them to liabilities arising from litigation, they would endanger their entire livelihood. There are also the legal ramifications that arise from the fiduciary duties employees owe to their employers, codified in law.
Myth 5: Bookkeepers are only needed during tax time
Individuals frequently lament the difficulty of filing taxes in the United States, but many only have a single source of income, don’t claim many exemptions, deal with credits, or itemize. Imagine the headache a bookkeeper would get from trying to organize a year’s worth of data from a business that disregarded proper recording the whole year. And if a single transaction was improperly recorded somewhere in the middle of the year, the headache multiplies significantly, as does the time required to organize and reconcile. Thus we meet our final myth that bookkeepers are only useful during tax time.
Certainly they might be the most useful during tax time, but it makes life much easier if they are employed year round in order to ensure proper recordkeeping. Paying for outsourced bookkeeping services a few hours a week is better, smoother, and less stressful to the tax-filer than paying for 100 hours in a two week period just before the filing deadline.
We hope we’ve dispelled some myths surrounding bookkeeping. If you run a small or medium business, bookkeeping is crucial to your growth. Mismanaging accounts leads to unhappy tax collectors, suppliers, and even customers—especially those who are awaiting refunds. Mismanagement can quickly snowball into a business crisis if left unchecked, which may be overlooked more easily than you think. A single incorrect recording, off by two or three zeros, could paralyze the business until the transaction is reconciled, but disorganized books and little day-to-day involvement in recording can easily make the reconciliation process utterly frustrating for those who view bookkeeping as an afterthought.Eventually a growing business will need to hire a bookkeeper to deal with the sheer volume of transactions. For those on the cusp of needing one, outsourced bookkeeping services are a great place to make the first forays into the area. Whether the business needs a couple hours a week or a full-time professional is dependent on the volume of transactions, the number of customers and suppliers, and how complex each transaction is. Each business’s management must determine this for themselves, but the concept stands true: bookkeeping itself is critical to the health of the business, and bookkeepers will alleviate any pressure to manage the books alone. Don’t let the common misconceptions surrounding bookkeeping services stop you from investigating your options further.