Updated: Jan 5
Business owners often struggle with what professional services that they should purchase or hire for internally for their business. The problem with bookkeepers is like any profession, all bookkeepers are not created equal. Though there are college programs for bookkeepers and there is the Canadian Bookkeepers Association that offers Registered Professional Bookkeeping Certification; there is nothing that permits anyone to call themselves a bookkeeper and provide bookkeeping services to the public.
Many business owners assume that bookkeeping is nothing more than someone that performs data entry into their accounting system and possibly takes care of paying HST and administering payroll. In some cases this may be true, but if this is the case, they are most likely not a professional bookkeeper and can end up costing you a lot more in back-end fees with your Accountant at the end of the year to straighten out your books before they compile your statements or do your taxes.
A good bookkeeper will spend the time to understand your business before performing your bookkeeping. How the books are setup for a manufacturing business is quite different than a services business that probably has little to no cost of sales. A bookkeeper is not an Accountant but should understand enough about accounting in order to create transactions and allocate them to the right account. A good bookkeeper will work with your Accountant versus independently of your Accountant.
The compilations your Accountant will prepare will be based upon what you have handed them. Stated within the Notice to Reader is: “based on the information provided by management”. If you assume that everything is correct and you hand your Accountant information filled with mistakes, they are going to prepare your statements and your taxes based on what you have in your accounting system. If something stands out as offside to GAAP (Generally Accepted Accounting Principles) your Accountant will make adjustments, but if there is something specific to your business that needs to be accounted for in a specific way. Accountants are not going to look further unless you pay for their services to do so.
Over the last few years, we have found where mistakes performed by a bookkeeper has ended up with the financial statements being incorrect because transactions were put in the wrong accounts which could also affect paying too much tax or not enough. This is an important enough function whether you outsource or hire within your business, that you need to investigate their background and credentials thoroughly.
We find that businesses that have good bookkeepers tend to have a better handle on their financials and a better understanding of where they stand. We find that they usually have a good relationship and work directly with the Accountant for the business. When this happens you will find the business financials are very clean and easy to follow if help is needed and problems within the business need to be investigated. Not only does this save you on accounting fees (because it should take less time) at the end of the year with your financial Accountant that generates your statements and your taxes, but will also save you in consulting fees from a management Accountant or consultant that comes in to help you uncover and resolve a particular situation in your business.
Before you hire a bookkeeper, ask your Accountant if they can recommend one that they have worked in the past with other clients. If they cannot provide a name, make sure that you check client references from businesses that they have worked in the past and find out what credentials they have. You could also look to organizations such as the Canadian Bookkeepers Association, the Canadian Institute of Bookkeepers or the Institute of Professional Bookkeepers of Canada for guidance.