Updated: Feb 8
Hiring the Right Bookkeeper
Business owners often struggle with what professional services they should purchase or hire 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 the Canadian Bookkeepers Association offers Registered Professional Bookkeeping Certification, nothing stops anyone from calling themselves a bookkeeper and providing 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.
The Services that Bookkeepers Can Provide
A good bookkeeper will spend time understanding your business before performing your bookkeeping. How the books are set up for a manufacturing business is quite different from a services business that probably has little to no cost of sales. A bookkeeper is not an Accountant but should know enough about accounting to create transactions and allocate them to the correct account. A good bookkeeper will work with your Accountant versus independently of your Accountant. They can make sure your bills are paid, your invoices are sent out on time, your employees are paid, and your HST and Payroll taxes are filed on time, just to name a few.
The compilations your Accountant will prepare will be based upon what you have handed them. The Notice to Reader itself states the statement: “based on the information provided by management”. If you assume that everything is correct and you hand your Accountant information filled with mistakes, they will prepare your statements and taxes based on what you have in your accounting system. If you do not understand bookkeeping, it is wise to hire someone with that skill set. It will save you time and money when your account compiles your statements and files your taxes.
If something stands out as offside to GAAP (Generally Accepted Accounting Principles), your Accountant will have make adjustments. If there is something specific to your business that needs to be accounted for in a particular way, Accountants will not look further unless you pay extra for their services.
Hiring the Right Bookkeeper
Over the last few years, we have found that mistakes performed by a bad bookkeeper have resulted in incorrect financial statements. This was due to transactions being put in the wrong accounts, which could also affect paying too much tax or not enough. Whether you outsource or hire within your business, this is a significant enough function that you need to investigate their background and credentials thoroughly.
We find that businesses with 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. This will 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. It can also save you consulting fees from a Management Accountant or consultant who 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 with in the past. 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.