When to Hire a Bookkeeper

Occasionally,  I am asked to refer a bookkeeper.  The one time I was able to make such a referral,  the whole thing blew up in my face.  I introduced a former  student in the business plan course that I sometimes teach to a restaurant owner friend.  Unfortunately,  Ms. bookkeeper  flaked out and never came through.  The restaurant owner and I are still pals, thank goodness.  The bookkeeper’s contact info has been deleted from my files.

A couple of months ago,  a member of one of the CEO forums that I lead hired a bookkeeper whom I’ve known for 20 years (the referral was not mine).  Because my colleague is a smart cookie,  she decided to review the financial statements that were generated by her new bookkeeper.  Right away,  there was a problem.  A significant data entry error was made— yet somehow the bookkeeper managed to make the numbers balance.  Fortunately,  my colleague  was able to recognize the problem and call  it to the bookkeeper’s attention.

The interesting thing is,  her now former bookkeeper is highly regarded by many.  She has a sub-specialty in forensic  bookkeeping and regularly testifies in court proceedings.  So I guess that’s where she learned all the tricks! My colleague was mortified.  Thank God that was not my referral.

I deduce from these incidents that a  reliable bookkeeper may be difficult to find.  A sharp and trustworthy bookkeeper is a hugely valuable  asset for your business.  They can spot and resolve  money drains  and alert you to money saving practices  that you never knew existed.  A good bookkeeper is worth their weight in gold.

Like many Freelancers,  I keep my own books.  I  invoice,  make  deposits,  pay bills,  record transactions in Excel,  receive the 1099s and pay the taxes.  June 15 is fast approaching, quarterly tax time folks!  I manage to stay on top of things.

Nevertheless,  at some point it may become too expensive to perform certain administrative tasks.  Working and looking for work are the primary focus of the self-employed.  Our time and energy are best applied to making sales calls,  networking,  prospecting,  staying visible and generating income through our projects.  When administrative tasks encroach upon the time available to make money,  it then becomes  cost  effective to outsource those functions.

It is the responsibility of every business owner to develop a basic understanding of the  financial statements.  Our ability to make sound business decisions depends upon it.  A good bookkeeper (and accountant) will further analyze the data and provide more sophisticated advice for you.

Because they possess intimate knowledge of your financial history and flow of business capital,  bookkeepers know where you are most vulnerable and know  where the bodies are buried.  A dishonest or sloppy bookkeeper can really hurt you.  The best way to protect yourself  is to know what’s  going on,  so that like my colleague,  you can read  financial  statements and periodically review your bookkeeper’s  work.  You’ll  have a fairly good idea of what the numbers  should  look  like and know what questions to ask  if  things don’t quite add up.

To get started on the path to understanding financial docs,  I recommend  that  you  first examine the Pro Forma Cash Flow statement.  It’s like  a  household budget and is easy to read.  Pro Forma Cash Flow gives  reasonable  estimates of expected business income and expenses  for  a given month.  Go next to the Cash Flow Statement,  which might be generated either monthly or quarterly.  This document shows what was actually spent on business expenses and how much money was actually paid to you.

From those statements,  move on  to the Profit and Loss.  It’s  not much different from the Cash Flow Statement.  Notice that several categories on the P & L are also found on the  Schedule C tax form,  Profit or Loss  From a Business.  Lastly,  take a look at the Balance Sheet and notice it’s resemblance to a bank statement.  The Balance Sheet records your net worth at a given time,  the tally of business assets and liabilities,  and is usually generated quarterly.

Next week,  learn what you can do to make sure that the bookkeeper you hire is both a top drawer professional and appropriate for your business needs.

Have a good week,



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