Why Hire a Service?
Many people who are unfamiliar with the paperwork end of business may think that financial accounting and bookkeeping are one and the same, but when it comes to small business the two can be very different in the services they provide.
Here's why:
In a small business a bookkeeping service is often responsible for:
- Issuing paycheques to employees, completing R.O.E.'s & T4's, and remitting source deductions
- Daily, weekly, or monthly recording of all sales, expenses, and related payments
- Reconciling all customer, supplier, and bank accounts
- Reporting and payment of government and WCB remittances
- Managing and maintaining all business records, files, and information
- Providing detailed financial reports to the business owner or related institutions on an as needed or scheduled basis.
On the other hand, an accountant or accounting firm generally prefers to remain in the position of tax specialist. Although many firms will perform bookkeeping duties most prefer to either out-source this type of work or have their clients hire a qualified bookkeeping service to take care of the details before financial information is brought to them.
The reason for this is on the average bookkeeping is much more tedious than financial accounting. Proper bookkeeping procedures generally involve the recording of all of a business’s day to day transactions and adjustments into specified accounts through journals and ledgers. These numbers are then summarized into yearly totals and forwarded to business’s accountant or accounting firm for use in completing the required tax forms and returns.
Is it possible to do this record keeping yourself? Possibly. But how can you be sure you've done it correctly? Although today’s technology has made available several versions of do-it-yourself accounting software, a software package cannot tell you how to categorize all of your business transactions. Do you know how assets, liabilities, equity and other accounting items interact and affect your financial information? Are you capable of dealing with uncommon situations, correcting posting errors, and making required adjustments in a proper manner? Probably not. Even if you are, if at the same time you are also able to generate sales of several hundred dollars an hour in your business does it really make good financial sense to spend your time on bookkeeping tasks?
Can a good bookkeeping service save you and your company money? Absolutely! First and foremost, hiring a qualified bookkeeper will help to ensure that you don't wind up paying your accountant to untangle and reconstruct an accounting mess. This alone can be unbelievably expensive. In fact many local accountants can tell you (but probably won't) that some of their best sources of income have been clients who have tried the do-it-yourself approach or have used an inexperienced or under-qualified person to do their bookkeeping!
A good bookkeeping service will also ensure that all your information is not only accurate but also up to date and available as needed. If your banker, accountant, attorney, or worse yet, a CRA auditor asks about your accounting records will you have the correct answers, and will you have also be able to produce them in an organized and timely fashion? If not and you have to pay your accountant $150 an hour or more to clean up a bookkeeping disaster - you're losing – and in a really big way!
In general most accountants are paid based on the amount of time they spend working on your account, and with hourly rates ranging up to several hundred dollars per hour, any and all time that can be saved is money that goes directly into your company's pocket.
Furthermore, as tax preparers most accountants are interested only in number totals for a given period so will not take the time to properly classify, enter, and account for each transaction as a good bookkeeping service will. In translation this means should you at some point face an audit, rather than of being able to provide CRA with a proper itemized breakdown of all your transactions, a great deal of your time may instead be spent sweating it out as an auditor goes through each and every one of your receipts looking for information that a qualified bookkeeper could have provided. Not a pretty picture especially considering the fact that the more time an auditor has to spend the more reasons he/she will need to justify it!
That said, your bookkeeping practices can absolutely make or break your business and with this in mind it is important to remember the risks involved when deciding where to save a few dollars. Besides that deciding to hire a professional just makes good business sense!