When Should You Hire a Bookkeeper Instead of Doing Your Books Yourself?
Running a small business means wearing a lot of hats. You may be the owner, salesperson, customer service representative, operations manager, marketer—and, if you're like many small business owners, the bookkeeper too.
Doing your own bookkeeping can make sense when your business is small and your finances are straightforward. It can save money, help you understand your cash flow, and give you a better feel for how your business operates.
But there comes a point when doing your own books stops being a good use of your time.
The question isn't necessarily, "Can I do my own bookkeeping?"
The better question is:
"Is doing my own bookkeeping still the best use of my time?"
For many business owners, the answer eventually becomes no.
At Knobbe & Associates, CPA, we work with small businesses that want accurate financial records without spending hours every month categorizing transactions, reconciling accounts, and trying to figure out what their financial statements actually mean.
Here are some of the biggest signs that it may be time to hire a bookkeeper or CPA to help with your business books.
1. Your Business Is Growing
One of the biggest signs that you have outgrown DIY bookkeeping is simple: your business is getting busier.
When you first start a business, you might only have a handful of transactions each month. Keeping track of income and expenses may take less than an hour.
But as your business grows, so does the bookkeeping.
More customers mean more deposits. More sales may mean more payment processor transactions. Hiring employees creates payroll transactions. New vendors create more bills and expenses. Business credit cards add another account that needs to be monitored.
Suddenly, bookkeeping that used to take 30 minutes a month can consume several hours.
Growth is a good problem to have—but your bookkeeping system needs to grow with your business.
If you're spending increasing amounts of time maintaining your books instead of working on your business, outsourcing your bookkeeping may be a smart investment.
2. You're Spending Too Much Time on Bookkeeping
Your time has value.
If you're a business owner who could be generating $50, $75, $100 or more per hour through sales, client work, management, or other business activities, spending several hours every month doing bookkeeping may not be the most efficient use of your time.
Let's say you spend five hours every month maintaining your books.
That's 60 hours per year.
Those 60 hours could potentially be spent finding new customers, improving your operations, developing new services, following up with leads, or simply getting some of your personal time back.
Bookkeeping is important—but that doesn't mean you personally have to do it.
One of the biggest benefits of hiring a bookkeeper is getting your time back.
3. You're Behind on Your Books
If you're constantly saying, "I'll catch up on the books this weekend," that's a warning sign.
Maybe you're three months behind.
Maybe you haven't reconciled your bank account since January.
Maybe your accounting software has hundreds of uncategorized transactions.
Or maybe you only update your books when tax season approaches.
The problem with falling behind is that your financial statements become less useful.
Your income statement might not accurately reflect your current profitability. Your balance sheet may contain errors. Your accounts receivable could be outdated. And you may not have a reliable picture of how much cash your business actually has available.
Bookkeeping is most valuable when it is current.
If you are consistently behind, hiring someone to maintain your books can help you get caught up and establish a regular process going forward.
4. You Don't Know How Profitable Your Business Really Is
One of the most important purposes of bookkeeping isn't simply keeping the IRS happy.
It's helping you understand your business.
If someone asked you today, "How profitable was your business last month?" would you know?
What about:
How much revenue did you generate?
What were your largest expenses?
How much cash did the business generate?
How much do customers owe you?
How much do you owe vendors?
Are your expenses increasing faster than revenue?
Which products or services are most profitable?
If you don't have reliable answers, your bookkeeping may not be giving you the information you need to make decisions.
Good bookkeeping gives business owners a clearer financial picture.
Instead of guessing, you can use your financial statements to make informed decisions.
5. Your Business Has Multiple Bank or Credit Card Accounts
The more accounts your business has, the more complicated bookkeeping becomes.
For example, you may have:
A business checking account
A business savings account
One or more business credit cards
A line of credit
A payment processor
A business loan
Payroll accounts
Investment accounts
Each account needs to be properly recorded and reconciled.
It's easy for transactions to be duplicated, missed, or categorized incorrectly when you are managing several accounts.
Regular account reconciliation is particularly important because it helps ensure that your accounting records agree with your actual bank and credit card activity.
If you're struggling to keep multiple accounts organized, professional bookkeeping can save you considerable time and reduce the risk of errors.
6. You Keep Mixing Personal and Business Expenses
This is one of the most common bookkeeping problems for small business owners.
You use the business debit card to buy something personal.
You accidentally pay a business expense with your personal credit card.
You transfer money between accounts without recording what the transaction was for.
Then, months later, you're trying to figure out what everything was.
Ideally, business and personal finances should be kept separate.
If they aren't, bookkeeping becomes significantly more complicated.
A bookkeeper or CPA can help establish a system for properly recording owner contributions, owner draws, distributions, reimbursements, and personal expenses.
This is particularly important for businesses structured as LLCs, S corporations, partnerships, and corporations.
7. You're Unsure How to Categorize Expenses
Accounting software has made bookkeeping more accessible than ever.
But software doesn't necessarily know how your business should account for every transaction.
Is that purchase office supplies?
Equipment?
Repairs and maintenance?
A deductible business expense?
An owner distribution?
A loan payment?
A capital asset?
Something else?
Categorizing transactions incorrectly can create inaccurate financial statements and potentially cause tax problems.
This is where having someone with accounting knowledge can make a significant difference.
The goal isn't simply to put every transaction into a category. The goal is to categorize transactions appropriately and consistently so your financial statements accurately reflect your business.
8. Tax Season Becomes a Nightmare
If tax season means spending an entire weekend trying to make sense of your books, it's probably time to reconsider your bookkeeping process.
Your tax return is only as good as the information going into it.
If your books are incomplete or inaccurate, your tax professional has to spend additional time sorting through transactions, correcting errors, and determining what your numbers should actually be.
That can increase your tax preparation costs—and create unnecessary stress.
Keeping accurate books throughout the year can make tax preparation significantly smoother.
Even better, good bookkeeping can allow your CPA to identify potential tax planning opportunities before the year ends, rather than simply reporting what happened after the fact.
9. You Have Employees or Contractors
Payroll and contractor payments add another layer of complexity to your bookkeeping.
Once you begin hiring employees, you may have payroll taxes, benefits, workers' compensation, retirement plans, reimbursements, and other transactions to track.
If you work with independent contractors, you also need to maintain accurate records of payments and potentially issue Forms 1099-NEC.
The more people involved in your business, the more important accurate bookkeeping becomes.
10. You Want to Make Better Business Decisions
Perhaps the biggest reason to outsource bookkeeping is that your financial records should help you run your business.
Imagine having a monthly financial package that clearly shows:
Profit & Loss Statement:
How much revenue did you generate, and where did your money go?
Balance Sheet:
What does your business own and owe?
Cash Flow Information:
Where is your cash coming from, and where is it going?
Key Financial Trends:
Are revenue, expenses, and profitability moving in the right direction?
When your books are accurate and current, you can use that information to make better decisions.
You can determine whether you can afford to hire an employee.
You can evaluate whether you need to raise your prices.
You can identify unnecessary expenses.
You can determine whether the business can afford a major purchase.
You can plan for taxes.
And you can better understand whether your business is actually becoming more profitable.
DIY Bookkeeping Isn't Bad—Until It Becomes a Problem
It's important to make one thing clear:
Doing your own bookkeeping isn't inherently a bad idea.
For a new business with relatively few transactions and straightforward finances, DIY bookkeeping can be perfectly reasonable.
The problem occurs when business owners continue doing everything themselves long after the business has outgrown that approach.
Think about bookkeeping the same way you think about other business functions.
You might be able to build your own website.
You might be able to design your own logo.
You might be able to handle your own marketing.
You might even be able to do your own bookkeeping.
But eventually, you have to decide where your time is most valuable.
The goal isn't to do everything yourself.
The goal is to build a business that operates efficiently.
How Much Does a Bookkeeper Cost?
The cost of bookkeeping varies depending on the size and complexity of the business.
A business with 50 transactions per month will have very different bookkeeping needs than a business with 5,000 transactions per month.
Factors that can affect bookkeeping costs include:
Number of monthly transactions
Number of bank and credit card accounts
Payroll
Accounts receivable
Accounts payable
Inventory
Sales tax
Industry
Accounting software
Financial reporting needs
Instead of looking at bookkeeping strictly as an expense, consider it an investment in your business.
If professional bookkeeping costs $400 per month but saves you 8 hours of work, that's $50 per hour of time you're buying back.
And if better financial records help you identify a pricing problem, unnecessary expense, or tax planning opportunity, the value can be even greater.
When Should You Hire a Bookkeeper?
There isn't one specific revenue number or transaction count that means every business needs a bookkeeper.
Instead, look for these warning signs:
You should consider outsourcing your bookkeeping if:
You're consistently behind on your books.
You're spending several hours every month doing bookkeeping.
You don't understand your financial statements.
Your business has become significantly more complicated.
You're mixing personal and business expenses.
You have multiple bank and credit card accounts.
You're preparing for significant growth.
You have employees or contractors.
Tax preparation is becoming increasingly stressful.
You aren't confident your books are accurate.
You want better financial information to make business decisions.
If several of these sound familiar, it may be time to get some help.
The Bottom Line
Bookkeeping isn't just about entering transactions into accounting software.
It's about creating accurate financial information that allows you to understand and manage your business.
When your business is small and straightforward, doing your own books may make sense.
But as your business grows, your time becomes more valuable—and your financial records become more important.
At some point, outsourcing your bookkeeping can allow you to spend less time staring at spreadsheets and more time doing what you actually started your business to do.
At Knobbe & Associates, CPA, we help small business owners keep their books organized, understand their financials, and build better financial systems.
Whether you need ongoing monthly bookkeeping, help getting caught up, or simply want to discuss whether outsourcing makes sense for your business, we're happy to help.
Your business is too important to run on guesswork.
If you're spending too much time on your books—or you're not sure what your books are telling you—let's talk.
Ready to Stop Doing Your Books Yourself?
Contact Knobbe & Associates, CPA to discuss your bookkeeping needs and find out whether professional bookkeeping is right for your business.
Serving small businesses in Ankeny, Des Moines, Carroll, and throughout Iowa.
