I know. Running your own business can eat up all of your time.
If you have a small business, you are probably doing everything from sales/marketing, customer service, and balancing the books.
At what point do you delegate some of those tasks?
For example, do you need a bookkeeper for your business?
Here are nine reasons for hiring a bookkeeper. At the end of this post, all nine reasons are summarized in one graphic.
This is a worthwhile exercise for many tasks in your life.
Figure out what an hour of your time is worth. It could be as easy as taking your annual earnings divided by 2000 (40 hours x 50 weeks) or a subjective number like what is that hour worth to you? I’ve had weeks where I wouldn’t take $1000 to give up an hour with my daughters.
Now, if you have a choice of having someone mow your lawn, clean your house or doing it yourself, you can compare the cost of hiring someone to your hourly rate.
As a result, if an hour of your time is worth $300 per hour and you can hire a bookkeeper for a whole month for that same amount then why not turn it over to them?
I once bought a drawing program and spent probably 40 hours learning how to use it for a graphic I needed. It looked horrible.
I contacted someone on Fiverr and received a beautiful graphic for a price cheaper than the software I bought, and that didn’t include all the other hours I spent using it or going online to look up how to use it.
Lesson learned: let someone else handle what you don’t (or want to) know.
Hey, not everyone enjoys working with numbers like I do.
If you dread trying to balance your bank account balance to what the bank shows or trying to determine why the balance your top customer shows as outstanding against what they show, why not turn that pain over to someone who can do it for you?
When it comes to financials, isn’t it nice to have someone else double-checking the accuracy so you don’t have to worry when you do your taxes, wonder if you have enough money to meet next week’s payroll or if you’re spending too much on office supplies?
What price would you put on that peace of mind? Compare that to the cost of hiring a bookkeeper.
Let me ask you a question.
If you had 20 hours to spend on your business, what do you think would bring you more to your bottom line over time?
Saving a few hundred dollars a month by doing your bookkeeping tasks yourself, or spending those 20 hours drumming up new business or talking with your current customers?
The latter right?
New business should by far bring in more money than the amount you’ll saving on bookkeeping.
How do you make sure your bills are paid on time and not duplicated, or not paid too early? Who gets a 1099?
Many things can go wrong with your bill payments. You can forget to pay your vendors, pay them late, pay them too early or pay them too much or too little.
Any of these mistakes can jeopardize your credit, your vendor relationship, cut you off from future purchases or leave you without enough cash to manage the rest of your business.
A good bookkeeper can do all of this management for you.
I remember having a paper route as a kid and dreading having to ring the doorbell to collect the customer’s payment.
Most people don’t like doing this. If you don’t like it, or if you don’t have time, let a bookkeeper do it for you so your business will have its cash in your bank and not in your customer’s bank.
Payroll is one of those tasks you must delegate to someone who knows what they are doing.
Bookkeepers can either do the whole process for you or coordinate with a payroll service to have it done for the business.
There are too many rules, regulations, tax changes, and potential for errors to make this an area to skimp and save on.
Income tax filings are best left to a CPA, but bookkeepers can help by preparing supporting documentation needed by the CPA and by preparing and filing other tax returns like sales and use taxes.
These are returns that most states require to be filed monthly or quarterly and many bookkeepers can do them for you at a rate much lower than your CPA would charge.
From the time and money savings, to the focus on expertise and greater cash flow, a bookkeeper makes good sense for your business.
For a limited time, I do have an opening for another client in my bookkeeping business. If you're interested in talking to me so you can enjoy some or all of the benefits listed above, please click the link to my contact form
How to Have a Good Day by Caroline Webb
The Art of the Start 2.0 by Guy Kawasaki
Bold by Peter H. Diamandis and Steven Kotler
The Entrepreneur Roller Coaster by Darren Hardy
80/20 Sales and Marketing by Perry Marshall
How to Win Friends and Influence People by Dale Carnegie
Influence by Robert Cialdini
Essentialism by Greg McKeown
As a Man Thinketh by James Allen
The Obstacle is the Way by Ryan Holiday
Zero to One by Peter Thiel
Switch by Chip Heath and Dan Heath
Sounds impossible, doesn’t it?
You know you should make one of your goals this year to improve your finances. But how can you do that when you’re never sure how much money will be coming in?
The experts simply say to prepare a budget. If you don’t, you’ll overspend, you won’t have enough to retire, your credit score will suck, and you’ll never have the things you desire. So just budget, they say, and your financial problems will be solved.
But hey, your income changes every month. You’re not like all those people who get a fixed salary or a set rate per hour for forty hours a week. You’re a freelancer. One month you kill it, and the next you’re scrambling to get something in the bank account.
How can anyone with an income that fluctuates do a budget, especially someone like you who has no time at all?
There is a solution that works for others, it doesn’t take long to implement, and I will show it to you.
Let’s get started.
For the FREE companion spreadsheet that goes along with this post, click the link at the end of the post.
To begin with, you need to determine the bare minimum you need each month to pay your bills. Not all expenses, just those you truly have to pay—the mortgage, car payments, utilities, credit cards, and so on.
Ignore, for now, all of the expenses that are optional like going to restaurants, taking vacations, or buying your nephew a graduation gift.
You can do this review by looking at a month or two of expenses, but it is better to look at a whole year.
Looking at a whole year will catch expenses that only happen once a quarter, a couple times per year, or just once a year. If you pick the wrong month to look at, you could miss those expenses.
Again, only look at the expenses you absolutely must pay.
Once you’ve done that, add them up and divide by the number of months you looked at and that’s the number we’ll use. That’s your baseline.
Transfer enough money into your checking account until you have your baseline. If you have too much in there already, transfer the difference out of checking into your savings account, but if you have too little then transfer enough savings into checking. When all is done, your checking account should have your baseline amount in it on the first of the month.
Don’t have enough in your savings to build up your checking account? Go back and review your expenses. You either have to cut expenses or figure out how to increase your income.
NOTE: If this is just a temporary issue, then we will discuss later how you can set up an emergency fund to help cover expenses during the months when your income is low.
Now that you know how much you need on average each month, do you regularly make enough to cover that?
Look at your earnings for the last twelve months and average them.
Does your average monthly income exceed your baseline for expenses? If so, you’re in great shape. If not, you need to either reduce your expenses or increase your income, or you are going to get in a hole over the long term.
After you do the above, forecast your earnings for the next several months. Do you foresee any months where you won’t meet your baseline? If you do, then make sure you have enough in your savings to cover it. If during your review you noted that your income was below your baseline from November through February, for instance, then you should keep at least four times your monthly baseline amount in your emergency fund to cover those months in case it happens again. In addition, you won’t be able to spend any money over this baseline amount, to ensure that you’ve got all your basic expenses covered.
If you earn more than your baseline, where will you put the difference?
It could go into any of the following (in no particular order except for the first item, which is the most important):
1. Increase your emergency fund (you want 3-24 times your baseline amount, or at least enough to cover you when your income is low)
2. Fund saving for large purchases (new house, car, vacation, wedding, computer, etc.)
3. Treat yourself (put an extra $300 into your restaurant expenses, add some funds to your baseline amount in your checking account next month, go out for coffee twice a week instead of once)
4. Start a play fund or education fund and use these amounts to invest in yourself or reward yourself for you hard work
5. Give to charity
6. Fund retirement accounts
7. Pay down debt
Make sure the first place your extra income goes is to fully fund your emergency fund. With a fluctuating income, you want to make sure you have savings for the months where you don’t make your baseline.
1. Keep separate bank accounts for personal, business, checking, savings, and your emergency fund (some banks, like Capital One, make this very easy to do by giving you one savings account that you can divide into sub-accounts and label them “emergency fund,” “vacation fund,” and so on).
2. Hire a bookkeeper and a tax accountant. It pays to pick people who are specialists. Generally these are two different people because your CPA probably won’t want to do your bookkeeping.
It’s also less expensive to have a bookkeeper maintain your records rather than a CPA.
3. Set aside money for your quarterly business taxes right away. Don’t wait until they are due. This way you won’t be scrambling or borrowing to pay your taxes.
4. Try to avoid impulse spending. When you find something you want to buy, delay the purchase a week and see if you still want it.
5. Prioritize your spending. If you’re income is high enough in the prior month that you can afford some discretionary expenses, put the money toward what you value most.
6. Live off your spouse’s income. If you’re fortunate enough to be able to do this, you can dump all of your earnings into savings.
Hopefully you are excited and can see the value in taking these steps. Most of the work is up front, and once you review your finances and get your accounts set up properly you won’t have to do much going forward. Just make sure your checking account has enough to cover your baseline expenses and whatever else you budget for discretionary expenses, then transfer the rest to savings, starting with your emergency fund until it is at the desired level. The key to your success will be only spending out of your checking account.
If you would like to download an Excel spreadsheet to help you crunch the numbers, click the link HERE and you can download it.
Don’t wait. There isn’t a better time to start than right now.