What to consider when engaging a bookkeeper

by Kimberly Perkins, Green Apple Resources, LLC, NH

Most entrepreneurs, especially those just starting their venture, believe they can keep their own bookkeeping records. Given the plethora of robust accounting software packages available on the market, it is easy to see why this is the case. And controlling cash flow, the lifeblood of any business, is a natural and often very personal responsibility of every business owner, including the monitoring of expenses, writing checks, and balancing every account.

While these arguments are appealing, there is a point when it may be prudent for the business owner to consider shifting responsibilities to a professional bookkeeper.

A bookkeeper can save you and your company money, by offloading any record keeping you have been doing yourself, and by making things easier for your independent CPA. By helping to prepare year-end documents needed by the CPA, the bookkeeper can format these reports in a way that is convenient for the CPA and his/her own systems. With an open dialog between your CPA and bookkeeper, you can determine those tasks that have been the most time consuming part of your CPA’s work on your account. Moving forward, you can figure out the best ways to supply your CPA with the most complete information needed and in the most convenient format.

In fact, a good bookkeeper will help you make sure that you don’t wind up paying your CPA firm to untangle or reconstruct potential accounting messes. Like the car mechanic said in an old Quaker State Oil television commercial, “you can pay a small amount now to change your oil, or,” with a sly smile, “you can pay me later”.

Finding a bookkeeper that is right for your business and determining those procedures which can be delegated to this new partner requires some thought.

Clearly defining what you expect from a bookkeeper is essential in guaranteeing a successful, productive relationship. And not doing so is certain fuel for failure. If you are not quite sure what to expect from your bookkeeper, discuss it with your CPA or other business advisor.

Here are some examples of what a bookkeepers can do for you:

Now that you’ve engaged a bookkeeper, as with any vendor or staff person, it is recommended that you periodically check their work, assess their performance, and consider whether they’re meeting your job expectations. Naturally this requires you have defined specific objectives and duties to be performed. For example,

• Bank reconciliations are to be completed within 3 days of receiving the bank statements;
• Financial statements are to be completed and provided to management within 7 days of month-end;
• Sales commissions are to be calculated and presented for review 3 days before payday.

When assessing your bookkeeper’s performance, there are simple benchmarks that you can test against. Below are a number of questions that will help you in gauging the effectiveness of the bookkeeper’s work.

• Are my financial statements consistently prepared and presented in a timely and professional manner? Are my financial statements ever more than two periods behind with no justification?
• Is the bookkeeper’s workspace organized such that others can quickly determine the status of any work in progress?
• Are all bank reconciliations in written form and prepared for each and every bank statement and for each account?
• Do the bank reconciliations show a balance that differs from those on the financial statements or general ledger?
• Do the accounts receivable or payable aging reports or listings show an amount that differs from those on your financial statements?
• Does the bookkeeper appear secretive or does he/she try to keep others from knowing what they do or how they do it?
• Does the bookkeeper continually cart files and company records home (is this a no-no)?
• Do computerized accounting reports consistently contain hand written corrections and notations?
• Do customers frequently complain about payments not properly posted to their accounts? Do vendors complain of late payments that result in the business paying interest and penalty fees?

Clearly, there are benefits to working with a bookkeeper. While most entrepreneurs have learned, by hook or crook, that no one is going to watch out for their money better than themselves, it is also easy to become so absorbed in the day-to-day activity of building your business, creating products, winning sales, and marketing promotion, that you might take your eyes away from the books. But there is also a risk, especially when considering handing access to your businesses financial records and procedures to someone else.

The following tips will help protect against potentially underhanded activities from a bookkeeper or others with similar access to your records:

• Only grant signature authority on business checks to officers of the company;
• Limit access to on-line banking and accounting system passwords, and change these passwords frequently;
• Avoid frequent telephone or on-line transfers between your bank accounts or credit lines;
• Require that financial records remain on office premises at all times;
• Look for, and be wary of any behavior on the part of the bookkeeper that suggest a defensiveness when responding to questions from you or your CPA;
• Limit access to your credit card information;
• Notice if unexpected mail-order packages are received at work;
• Review the appearance of your accounting records looking for disorganization or other errors.
• Question any and all late payment notices or tax delinquency notices.

In the end, your bookkeeper will become a vital member of your business team. Having current and accurate financial records will help boost and sustain your confidence and knowledge about your business performance. Information is power, and having a good bookkeeper maintaining your books gives you the power to keep your business on the right track.