The decision to hire a bookkeeper can be an important one.  A start up family business is typically tight on cash on low on work; so “rolling up the sleeves” to do all of the menial work is part of the process.

However a growing family business will quickly employ new staff.  And a first generation family business might be great at detail work.  Quite often important but not urgent work will be deferred so you can focus on simply making money.  And the decision becomes – is it better to employ a bookkeeper to do all of this?

The following questions are important..

Do I need a bookkeeper or an accountant?
Both roles are important.  An accountant can help you structure your reporting systems, detail the chart of accounts, create smart technology systems and get the strategy correct for your business reporting obligations (regulatory, lending and family obligations).

A bookkeeper is ideally placed to implement the strategy and maintain a clean data flow.  So this could include:

  • Preparation of invoices for clients
  • Reconciliation of bank accounts.
  • Maintenance of contact lists.
  • Processing payroll.
  • Sending debtor statements.
  • Maintaining stock records.
  • Paying suppliers.

The maintenance and implementation of your business data is critical to success.  You will change staff, need invoices reversed, follow up payments and make sure creditors are paid on time.  If the bookkeeping is not first class the accountan’ts role will very quickly become a “cleaner” of data – which is costly and reactionary.

A bookkeeper typically spends more time at the “coalface” of a family business.  So the information flow, and blockages of information, is often seen first-hand.  In this sense the strong communication flow between the bookkeeper and the accountant is critical to the success of a business.

When should I hire a bookkeeper?
Typically a business with a micro transaction (say less than 4) a month can remember everything that is going on.  However if you are dealing with more than 10 transaction a month (so 30 every quarter) then it is time to consider hiring a bookkeeper.

And when hiring the bookkeeper it is not simply comparing the hourly rate of a bookkeeper to what is your income generating rate (however most often the business owner is worth more).  A bookkeeper is typically much faster than a business owner when doing the “work” so an owner should consider the cost of the work done by the bookkeeper and benchmark that cost to their own effective hourly rate if they were to do it – and then add in a premium for the safety net of knowing that the work will be done.

However in answer to the question – the best time to hire a bookkeeper is at the beginning when the work and reporting obligations have been scoped by the accountant.

Should my accountant be my bookkeeper?
In almost all situations the answer is no.  A key role for the bookkeeper is to monitor the service levels of the accountant and a key role for the accountant is to monitor the service levels of the bookkeeper.

If the same entity does both you lose an ability to make a supplier accountable to you.

If you engage an accountant and a bookkeeper who are independent of each other, but who work collaboratively with each other, you have a much better change of creating a great outcome.

And if an accountant is doing bookkeeping you almost always pay too much for it.  And if the bookkeeper is doing accounting you almost always get a sub-par job done.

Is any old bookkeeper enough?
Sadly the word “bookkeeper” is used by anybody who has done a 30 minute online course.

Your bookkeeper must be a “Registered BAS Agent” so they can help with the preparation or lodgement of your BAS.  If the person is not registered they are operating illegally.

Further, your bookkeeper should operate through a business that employs a few staff – otherwise you can run the risk of key business information “disappearing” if your bookkeeper goes through a moment of crisis.

And if your bookkeeper is paying the bills and keeping the Tax Office happy – the moment of crisis of one individual can become the moment of crisis for all of your business.

Outsource or in-house?
At every stage of a business life cycle the decision will be made to either insource or outsource the role of an accountant or a bookkeeper.

The short answer is that when your business is large enough to warrant a full time employee committed to do the work then that is a prudent approach.  For example – large companies employ full time legal counsel to do legal consulting rather than pay exhorbitant legal fees.  However the presence of an in-house lawyer never eliminates the need to engage an external law firm.

Importantly however is that an internal person is only given one window to look at – you.  Whereas an external advisor has the capacity for additional views and creativity that can then be added onto the business.

So if you do employ a full-time person to do bookkeeping or accounting work – a generous budget must be added onto that persons wage to ensure you still get the outside view.  Alternatively different elements of a role can be taken in-house and the higher end work (like reviewing reports or bank reconciliations) can then be outsourced to an external bookkeeper or accountant.

What should a bookkeeper not do?
In a family business a bookkeeper will often become a very handy person.  The business books are typically similar to all of the personal books a family has to manage.  And paying a supplier in the business is not dissimilar to paying the cleaner or the nanny at home.

This temptation has to be avoided.  If you have an employee bookkeeper in the family business who also works for the family – you put them in a difficult role.  At some time conflict in your family will arise (all healthy families argue) and you want to keep the family business professional.

If you have staff, who are intimately involved in the family personal finances, it is nearly impossible to insulate that person from family arguments.  By getting a bookkeeper into the family you are significantly impeding the family business from becoming a professional family business.

The choice and scoping of the different work components between your bookkeeper and accountant is important.  And getting a collaborative approach between these two critical roles is a key step forward in getting a clear understanding of exactly where your business is at today so you can feel safe about planning for the future.

At Westcourt we engage with great bookkeeping businesses who work together with us for family businesses.  And we do this so we can make family owned businesses great.



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