9 Warning Signs You Need To Hire A Virtual Accountant

Are you procrastinating about whether to hire a virtual accountant or bookkeeper? Here are nine very common warning signs that you need one or the other.

Many small-business owners start out trying to minimise their outgoings by doing many tasks themselves. They’re energetic, ambitious and love to “control a tight ship”.

Inevitably, their responsibilities and workloads increase as their businesses expand. The do-it-yourself (DIY) approach often becomes unsustainable as the number of hours they work increases to cope with the extra burden. Nowhere is this more evident that DIY accounting.

Familiar Constraints With DIY Accounting

Managing your own bookkeeping may be easy when you first start. You might have just a few invoices to prepare and send out; a handful of bank transactions to reconcile and only a few bills to pay.

Your trusted friends – Excel and on-line templates – are enough for you to begin with. But as your business expands, so does the paperwork. You’ll have more invoices to send out, more bills to pay and more bank transactions. You might even have GST, VAT or sales tax returns to complete.

You probably didn’t start your business to spend so much time as a bean-counter or bookkeeper. Eventually, you’ll become worn out managing your own accounts and dealing with the myriad other jobs.

You’ll probably even resent doing your own bookkeeping and feel it’s the last thing you should have to worry about.

Have you reached that point now? This article highlights nine common warning signs that it’s time to hire a virtual accountant.

COMMON SIGNS YOU NEED TO HIRE A VIRTUAL ACCOUNTANT

Time Is Limited

Time waits for no-one. Not even busy small-business owners. Expanding business means more customers and therefore more invoices to be prepared and much more administration and bookkeeping to attend to.

Focus and prioritise what’s urgent and important.

The “To Do List” Never Gets Any Smaller.

Smart small-business owners know they can’t do everything themselves. Instead, they focus and prioritise on what’s urgent and important. They focus on utilising their skills and delegating or outsourcing other activities. Outsourcing accounting activities to a virtual accountant service provider is becoming more common.

You Have No Time For Business Development

If you’re managing your own accounts, you’re probably taking longer than a more qualified person. But, it’s also inhibiting you from growing your business and increasing your income.

Important activities like business development, marketing, talking with customers, etc might be being ignored.

Determine how much time you spend on your bookkeeping. Then consider what critical business activities you could focus on if you freed up that time by hiring a virtual accountant.

You Miss Important Tax Deductions

Many business expenses can be legitimately deducted from your income. Expenses, such as home-office expenses, telephone and internet, motor vehicle expenses and much more can be claimed to reduce your tax bill.

The chances are that many DIY accountants have omitted a few tax deductible expenses because they haven’t tracked them. It’s very easy to overlook them if you’re scrambling at the last minute to collate the information you need to update your accounts.

Fortunately, help is at hand. Most bookkeepers know about these deductions and will identify any that have been overlooked. They’ll use their skills and experience to categorise these expenses and help reduce your tax bill.

The Monotony is Killing You

Are you exhausted and overworked? Is your creativity and innovation being inhibited by performing cumbersome tasks, such as bookkeeping?

Are you exhausted and overworked?

If you are, consider outsourcing to a reputable virtual accounting service provider. They’ll free up your time so that you can reignite the passion you had when you first started your business.

You’re Not A Bookkeeper

Chances are you started your business using the skills and experience you gained over the years. You may be the world’s best plumber, graphic designer, builder, etc but you can’t be an expert at everything.

If you know that you don’t have the passion or skills to manage your own accounts, don’t. If you know you’re always overlooking important tax deductible expenses, hire a virtual bookkeeper to give you some peace of mind.

“It’s Tax Time – I Need To Update My Accounts”

Do you wait until tax season to update your accounts?

Do you begrudgingly send your excel cash book, bank statements and receipts in a shoe-box to your accountant? Is your only interaction with them returning your signed tax return?

This is common for many small-business owners. It might seem an ideal approach but there are several issues with it:

They rarely have current or up-to-date accounts, including profit and loss statements, to help guide their business decisions.

They’ll inevitably pay more in professional fees. They need to send their accountants all of their financial records (invoices, receipts, bank statements, etc). Their accountants will need to categorise their income and expenses, rather than a bookkeeper who could have done so for less.

They’ll create unnecessary stress and anxiety that could have been avoided if they didn’t leave everything to the last minute.

Your Cash Flow Is Unpredictable

How often do you ignore paying yourself at the end of the month because you’ve run out of money?

Of course, there can be many valid reasons that cause this, such as slow-paying customers, unforeseen overheads, insufficient customer works, etc. However, the outcome is the same – you have a cash flow problem as your income is not enough to cover your outgoings.

Bookkeepers monitor who owes you (debtors or accounts receivable) and who you owe (creditors or accounts payable). They follow up on debtors with timely reminders, helping you stay on top of your cash flow.

Many accounting software providers provide the functionality to create cash flow reports to help you monitor where your money is going.

You’re Paying A Chartered Accountant for Bookkeeping

Accounting and bookkeeping are not the same thing. Chartered Accountants prepare tax returns, and offer tax and financial advice. They plan, forecast, analyse and interpret financial information.

Bookkeepers record and categorise financial transactions

Chartered Accountants are typically more qualified and train for several years. Are you paying them to record and categorise your financial transactions? If you are, you’re probably overpaying them. And even if you are doing the task yourself, a bookkeeper may be able to do it cheaper than what your time is worth.

Out Of Date Accounts

Do you have piles of receipts, invoices and payments that you haven’t reconciled yet? Is your backlog getting bigger every month as you postpone this daunting task?

You may be postponing your accounting and begrudge having to do it. But chances are there are other reasons you’ve been delaying it.

Perhaps your systems are overly complicated, requiring too much time-sapping manual work which also invariably increases errors.

Outdated accounts makes it much more difficult to manage and track your cash flow. It’s harder to know who you owe and who owes you. It’s even harder to determine how well your business is doing.

A bookkeeper alleviates these issues by managing your day-to-day accounting and by providing regular financial reports.

Conclusion

DIY accounting serves many small business owners reasonably well when they first start out. But eventually, a DIY approach becomes counter-productive. As businesses expand, the intensity and scope of activities inevitably increases.

At some point, the passion and drive small-business owners had is stifled with greater responsibilities and ever-growing To Do Lists. This additional burden is often, sadly, the catalyst for many small-business owners to return to employment.

This article suggested nine warning signs that small-business owners they should heed before it’s too late and when to hire a virtual accountant.