If you are frustrated with your bookkeeper, most likely it is the sign your business has outgrown your current set up.
It is quite common for 7 figure business owners to continuously focus only on acquiring talent to carry out their core business to keep the momentum going for rapid growth because it is an intuitive move. As a result, they overlook the backbone of their business such as Finance, HR and Operations to support growth.
Here is the bottom line: 7 figure businesses with more than 6 or so full-time employees and with a physical office should have a full-time finance person at a minimum, not a part-time bookkeeper especially if you don’t have an accounting/finance background.
In other words, your frustration towards your bookkeeper is misplaced.
Read on even if your business hasn’t made the 7 figure mark because understanding what lies ahead will save you from a headache down the road.
Do any of the below descriptions sum up the way you feel?
You are frustrated because accounting and financial management aren't your strength, and you don't feel like dealing with it unless you absolutely have to. When you finally come around to check on things, you are even more frustrated to find errors after spending hours staring at various financial reports.
You are frustrated because you feel you are in the dark with your business financials. You don't know if your pricing even makes sense, and your bookkeeper and accountant cannot answer your questions in a way that you understand in a timely manner.
You are frustrated because you don’t feel that your bookkeeper is looking out for your best interest. It seems as if he or she is just processing tasks without giving much thought.
Because of this, your collection process is slow, you occasionally find out your business is paying for things that should have been discontinued, your filing system is out of control, or you see some expenses being overpaid by mistake.
You are frustrated because you are aware you don’t have enough knowledge in financial management to train or guide your bookkeeper, but you feel you don't have a choice. In the end, you find yourself continuously demanding things to happen without providing any insight or guidance as to how to achieve them.
This almost makes you feel like you are throwing your desired outcomes into a black hole.
Identifying the Gap
In the beginning, when you are starting out, it made a perfect sense to hire a part-time bookkeeper to record transactions accurately and reconcile all accounts. You might have had a couple of bank accounts, one corporate credit card, and you weren’t running full-on payroll.
Back then, your main accounting related objective was to file taxes on time. This was easily accomplished by your accountant working together with your part-time bookkeeper. However, all this time during the growth period of your business, this arrangement stayed static while all other departments expanded. No wonder why you are feeling the pain.
Fast forward today, you have many strategic business decisions you need to make, and you cannot make them without reviewing financial data.
You may be thinking about operating in multiple states. In this case, there is a set of paperwork you may need file and a process to follow, which requires extra time for someone to execute.
You may want to fill new positions actively this year, and you want to plan accordingly. Now employees are given corporate credit cards and a number of monthly transactions for credit cards alone have quadrupled, and processes must be placed in order to manage receipts better.
You may want to explore financing options. You are also thinking about JV’ing with another company for a new project. Or you consider starting a new side business and need to understand what level of risk you can take. The list goes on.
Now you understand exactly why you are frustrated with your bookkeeper. The need for in-depth and comprehensive financial management has rapidly grown at your company.
To your bookkeeper’s defense, I am sure he or she is also fed up with the sheer workload that cannot be digested without extending an offer with additional hours.
Chances are he or she might have already told you all along that his or her workload has gone beyond the limit. Especially if you don’t have a finance background and, by default, taking the role of being an “absent dad (or mom)” who shows up occasionally to see what’s going on with your business financials, then you absolutely need a full-time finance person on your side.
First, Embrace the Cold Fact that You Need a Finance Professional
Most business owners are reluctant at this point. They do not want to spend money on the help they need. Some actually think that hiring an assistant to a part-time bookkeeper would solve the issue.
To this, I would simply say, “Good luck with that.” This arrangement is unsustainable because it is like slapping a bunch of “temporary” Band-Aids on a broken machine. This type of so-called “cost-cutting tactics” normally ends up costing more. So why bother? You just need to embrace the cold fact that you need a finance professional.
Granted, hiring an experienced finance person would cost much more than that of a part-time bookkeeper. What you may not be aware of is that this move will save you a chunk of money over time. For example, hiring for this position would help streamline accounting processes, which will avoid missed payments, slow collection, and misplaced paperwork resulting in better cash flow management.
Moreover, holding this full-time finance person accountable for all financial activities associated with your business will provide peace of mind. Imagine the day you no longer worry about day-to-day financial matters that you are unable to pay close attention to, and/or the day you no longer waste hours trying to decipher what’s going wrong by looking at reports. This is where you save loads of money, which allows you to focus on other strategic matters to grow your business.
Before getting into how to proceed with this idea of hiring a financial professional, I want to touch on another option.
There are services out there that offer to undertake entire finance function of businesses. Some are traditional accounting firms, and others are startups which maximize the use of their own proprietary platforms (in some cases) and/or other cloud-based tools to close up the distance between your business and them for peace of mind.
I do not recommend this as the one-shot solution to your current problem unless you are the one with a finance background. You may, by all means, work with an external firm to off-load majority of data entry tasks plus some A/P, A/R and payroll tasks. However, I strongly recommend you hire a full-time financial person.
After all, your business will become one of their accounts, and the challenge of not having anyone alongside you to advocate for what your business needs will not be resolved by this route alone. Depending on the firm, it may have anywhere from 200 to 500 active accounts.
These firms cannot possibly allocate a level of attention you require to discuss your financial needs. It is also dangerous to assume they understand exactly what goes on with your business day in and day out. Frankly making themselves available for frequent discussions is not part of their scope, to begin with. Hence, you still need someone on your payroll to ensure your needs are met.
Furthermore, having the point of contact on your side who speaks the same language as your outsourced firm will strengthen your working relationship with the outsourced firm. In other words, it is a win-win solution for both parties. So long as you are in the loop for the important matters, other things can be handled by your full-time finance person and the hired firm.
What Type of Experience Required for the Finance Position?
For this position, you want to ensure that candidates have ample experience with the following:
- Experience streamlining the entire accounting process by utilizing various plug-ins with scalability in mind.
- An ability to analyze data and conduct a routine finance meeting with you and all others involved.
- Experience training and running a team to build a functional finance dept.
- An ability to be the liaison between you and your accountant. Specifically, he or she is able to explain to you which data points are important and why.
- A capability to find ways to proactively improve its financial performance.
- An ability to conduct skillful negotiations and other interpersonal/soft skills.
There are many staffing agencies that specialize in recruiting accounting/finance professionals to assist your search to fill this position. It may be a good idea to work with some of them to assist you with your search.
Phase 1: Restructuring Period
Once you hire a new finance person in charge, explore options for the bookkeeping duties with him/her. Some of my clients are adamant about not outsourcing this part. Others are more open. If you are adamant about keeping everything in-house for security and privacy reasons, then you may keep your part-time bookkeeper to do data entry as well as A/P and A/R.
The most important part that you need to keep in mind is that this new finance position is not to take over the tasks your part-time bookkeeper was doing. This undermines the whole point of hiring a finance person. These tasks must stay either with your current bookkeeper or with the outsourced firm so that the finance person can focus on the tasks listed above.
If you are open to outsourcing bookkeeping duties, there are boutique CPA firms that offer bookkeeping as part of their services, and they may charge fixed monthly fee aside from the fee to file taxes for your business. Also, there are other types of firms which manage all the back office functions including bookkeeping, HR, payroll, and other admin related tasks as I mentioned earlier in this post.
They are also known as “business management firms.” If your accountant does not offer bookkeeping service, then this can be an alternative. The only downside with this option would be that you have no control over which associate manages your books.
The turnover rate for bookkeeping positions can be high at any given firm, and it may be unnerving for you to learn that as many as 3 associates have gone through your books in a year. However, if your finance manager keeps a close eye on the books, this should not be an issue.
Phase 2: Adjustment Period
There will be a time where you need to make your bookkeeper full-time or you hire someone who is available to be a full-time employee to compensate for growing accounting tasks as the next step.
I recommend you and your finance manager have conversations regularly to see what the next 2 quarters look like in terms of accounting related workload.
Phase 3: Expansion Period
At this stage, you consider adding another bookkeeper so that the current one takes over A/R, and the new person takes care of A/P. This is a natural progression designed to move the current bookkeeper up within your organization with more responsibilities.
It works perfectly as no employees want to stay stagnant at the same position for a long period of time.
If you are outsourcing, discuss ways to ensure your finance manager get enough support from your outsourced firm. Once again, consulting with your finance manager regularly to avoid having to make decisions on the fly is vital.
The timing of phase 2 and 3 depends on a business. The arrangement made under phase 1 can last up to 2 years without making any changes at some companies. If your business is going through a rapid growth stage, it may only last for a year. In any event, scaling your finance dept. becomes easy and much more streamlined if you invest in a capable and experienced finance manager during the phase 1.
Consider this as a gift that keeps giving as it will be sure to relieve you from constant frustration and stress. On the other hand, if you skip this part and keep hiring multiple bookkeepers or junior accounting professionals, you would only create chaos and confusions for the entire company. If you don’t believe me, go ahead and give this a try.
Don’t forget to send me an email in a year to tell me how you are maintaining your sanity although I already know how that goes.
Too often, businesses fail to build solid back office functions while scaling. Subsequently, this stalls the growth of your business.
It is tragic as this can be easily avoided by doing some advance planning based on your long-term business goals. Simply put, what worked for a 6 figure business would not work for a 7 figure business.
Recognizing the importance of shifting your mindset from being a small operator to becoming a player of an established organization is so essential, yet sadly, this is a topic that does not get discussed enough. From this point on, being “creative” with your staffing strategy can actually hurt your chance of scaling your business.
As always, I would love to hear what you think. Feel free to comment below.