As a small business owner, you wear all the hats, and if you’re like most entrepreneurs you find managing your finances exhausting, and overwhelming. You’ve heard me say repeatedly that bookkeeping is NOT a good way for an owner to spend their time.

Still, it has to get done, so you have to sacrifice yourself, your sanity, and the growth of your business in order to save some cash, right? Wrong. You are your business’s most valuable asset and if you are focusing your time on anything but revenue producing activities, working with your customers, and on strategy you are missing a HUGE opportunity to grow your business.

Delegation is hard for lots of entrepreneurs, because business owners are notorious for undervaluing themselves and their time. Delegation requires a mental shift where you to invest in the right tools and resources so that you can focus on growth. If you do it right, you should be able to use the added capacity to instantly offset any of these costs with new revenues.

The first thing you need is a good bookkeeper.

Hiring a good bookkeeper will save you time, money, and headaches, by keeping your company’s books up to date while minimizing your involvement in the process, which has a whole host of benefits. In this podcast, we’re going to zero in on the top 5 benefits of hiring a good bookkeeper, explain exactly what a bookkeeper does, and lastly why a bookkeeper is not a controller or a CFO.

5 benefits of hiring a great bookkeeper:

1. Accurate Financial Record Keeping: A good bookkeeper ensures that all financial transactions are properly recorded, categorized, and reconciled; all while keeping you organized. This makes it easier for you to visualize your company’s performance over a period of time and compare that performance against prior periods and your expectations. Without these visuals, most entrepreneurs are guessing at their financial results and making decisions based on feelings – which some are better at than others. Why not level the playing field?

A bookkeeper can also help you prepare financial statements, balance sheets, and income statements, which is necessary for any business that wants a loan or files taxes. Audits happen, and if the bookkeeping records are out of date or substandard, audits are significantly more painful. Furthermore, I have never seen a buyer purchase a business without first scrubbing down the bookkeeping records and financial statements.

2. Time and Stress Savings: As I’ve already mentioned, most small business owners I have met undervalue their time. You should focus on the things that add the most value to your business. While the data that good bookkeeping produces is extremely valuable, gathering and compiling that data is a huge time suck that you probably hate and which you can definitely delegate to someone else.

A bookkeeper can take a load off by keeping your company’s records organized and ensuring that the financial position of the company is entered and up to date, and they can usually do it way more efficiently and effectively than you can. This reduces your stress and allows you to concentrate on other aspects of your business.

3. Tax Compliance: I know a lot of entrepreneurs who have been in hot water with the CRA, and it isn’t a pleasant experience. The CRA can be a very intimidating creditor, their lending rates are higher than the banks, and they have the power to repossess your assets and garnish your bank accounts when you don’t pay up.

Tax compliance is the main reason that a large portion of small business owners even have a bookkeeper and prepare books and records at all. While that sounds a bit crazy, it is very common for smaller business owners to not use their bookkeeping records for strategic decision making; they simply do it because they have to in order to keep the tax authorities at bay. While most bookkeepers are not qualified to understand all the ins-and-outs of our country’s tax rules, they are good at making sure the data is ready to submit to the government. Bookkeepers also keep business owners on track to make sure that tax deadlines aren’t missed. Lots of bookkeepers will prepare some of the tax compliance like payroll remittances and GST/PST filings.

4. Valuable Insights and Informed Decision-Making: Cash is king, and knowledge about your cash flows is power. This knowledge allows you to better understand the flow of cash in your business, plan for the future and thus make informed decisions for your business (which are based on data rather than on emotions).

A good bookkeeper doesn’t just maintain financial records; they can also provide valuable insights into your business’s financial health. By generating financial reports and conducting some basic analysis (using tools which are built into all modern accounting software). This analysis can help you identify trends, risks, patterns, and potential areas for improvement.

Bookkeepers compile and provide data to controllers, CFOs and business owners so they can develop budgets, pricing strategies, and ideas to help manage cash flow.

5. Financial Guidance: While a bookkeeper’s role may not encompass strategic financial planning like that of a CFO, their expertise can still offer valuable guidance. A good bookkeeper can help you understand financial statements, explain financial concepts, and provide recommendations based on your business’s financial performance.

So now that we have answered “why a bookkeeper is so important”, let’s talk about what, specifically, a bookkeeper does.

A bookkeeper is responsible for managing a small business’s financial data, including all income and expenses, and reconciling this data to external sources, like bank, credit card statements, CRA accounts, and loan accounts. They track invoices, record receipts, enter bills, recording payments and reconcile your balance sheet accounts.

Now we know what a bookkeeper does, why is it so common in small business land for private company owners to expect their bookkeepers to do so much more than this?

Small business is fast-paced, and entrepreneurs often wear all the hats to ensure smooth operations, and to “save money”. It is normal to seek cost-effective solutions and maximize resources, however expecting your bookkeeper to fulfill the roles of a controller and a CFO usually leads to significant challenges and almost always hinders your business’s financial success. So why do small business owners commonly make this mistake? I think it comes down to education about the key differences between bookkeeper, a controller, and a CFO, and about the potential pitfalls of expecting one person to fill all three roles.

There’s typically an expectation gap where small business owners believe, as I did until a couple years ago, that a capable bookkeeper can handle all financial aspects of an accounting function effectively. This major misconception can lead to unrealistic expectations and disappointment when critical tasks beyond bookkeeping are missed.

Bookkeepers, controllers, and CFOs all require distinct training, skill sets, experience, and expertise. A bookkeeper is skilled in maintaining accurate financial records, operating software, organizing data, processing transactions, and basic financial reporting. Controllers possess a deeper understanding of accounting principles, accounting systems, financial analysis, and compliance. CFOs have solid financial backgrounds, however they may not have knowledge about the day-to-day process that a bookkeeper or controller possesses. CFOs are strategy people and have experience looking at big problems and figuring out solutions to those problems. They are typically the ‘idea’ people.

Controllers are different than bookkeepers because they ensure accuracy, compliance, design controls and ensure adherence to them. They oversee bookkeepers, perform audits and quality control processes, analyze financial data, and provide management with accurate and timely financial reports. A controller ensures that accounting information (like receipts, expense reports, inventory management, payroll, etc…) is flowing through the organization properly. The system of how financial information flows in a company is called its “accounting controls”, hence the name: Controller.

CFOs are different from bookkeepers and controllers in that they are more focused on strategic financial planning and decision-making. The CFO plays a strategic role in driving the business’s long-term financial goals and decisions. They analyze financial data, create budgets, develop financial forecasts, identify growth opportunities and manage financial risks.

While it is nearly impossible for controllers and CFOs to do their jobs properly without good bookkeeping, expecting a bookkeeper to assume the roles of a controller and CFO usually introduces several risks to your business, including:

1. Limited Financial Insights: Without the expertise of a controller and a CFO, you will likely miss out on valuable financial insights and analysis that can drive business growth and profitability.
2. Compliance Risks: The absence of a dedicated controller increases the risk of compliance issues, errors in financial reporting, and potential legal and tax consequences.
3. Missed Growth Opportunities: A bookkeeper may not possess the strategic vision and financial expertise required to identify growth opportunities and make informed investment decisions.
4. Inefficient Resource Allocation: Overburdening your bookkeeper with additional responsibilities can lead to decreased productivity, increased stress, and potential burnout.
5. Owner dissatisfaction: If I had a nickel for every time an owner of a small business came to us dissatisfied with their previous bookkeeper because they couldn’t “do it all”, I’d have a lot of nickels. It is always a humbling experience when we put a proposal in front of a business owner that includes bookkeeping, fractional controllership, and fractional CFO because that is usually the first time they have ever been offered these services and not just “bookkeeping”. The accounting industry is guilty of setting false expectations and we are, by and large, getting this stuff wrong. This is VERY common, and the business owner is not to blame for their lack of education, the accounting industry is.

It is completely understandable and normal for small business owners seek cost-effective solutions. Expecting your bookkeeper to fulfill the roles of controller and CFO will almost always be detrimental to your business’s financial success. While I know it seems like a big pill to swallow; it is not uncommon for companies to spend 2-3% of their revenues on a solid accounting department.

The good news is that with products like GURU by Achen Henderson, you can have access to these roles on a part-time or ‘fractional’ basis and build out your accounting department for 50-70% of the cost of, and be up and running way faster than, doing it on your own. Using services like GURU gives you access to pre-vetted professionals who have experience in your industry, who work together well, and who have experience upgrading accounting departments for small businesses all the time. They understand where you are as a small business owner, because they only work with small business owners.

By understanding the differences in these roles, acknowledging the need for a qualified professional in each role, and investing in the help you need, you can build a stronger financial team and position your business for long-term success.