A small business owner and employee

10.25.2023

What to Expect from Bookkeeping Services for Owner / Operators

When you’re the owner or operator of a small business, you know just how much work it takes to keep your business running. From hatching long-term strategies to ensuring your business is adhering to all laws and regulations, a business leader’s day-to-day is stacked. 

 

Of course, some of the most crucial responsibilities have to do with your business’s finances. As most business leaders quickly realize, proper financial management doesn’t just involve paying bills and cashing checks: it requires business leaders to execute cash flow management, handle budgets, and oversee financial planning and reporting to ultimately ensure the business is profitable. These tasks fall under the umbrella of bookkeeping. 

 

Good bookkeeping is essential for any business’s health and future financial success. And instead of taking on the burden and pressure of these responsibilities individually, many owner-operators outsource bookkeeping to financial professionals.

 

In this article, we’re diving into what you can expect from bookkeeping for owner-operators and why your business can likely benefit from outsourcing these services.  

 

The Role of Accurate Bookkeeping in Profitability

 

Bookkeeping for owner-operators plays an integral role in a business’s bottom line. Yep, it’s true: good bookkeeping is inherently tied to profitability.

 

It provides a clear picture of the financial health of an organization and helps identify areas where money is being spent or wasted. Accurate bookkeeping helps businesses stay on top of their finances by providing essential information for decision-making.

 

Here are some of the ways bookkeeping plays a direct role in profitability:

  1. Data-informed decision-making: Accurate bookkeeping provides owner-operators with up-to-date information on the financial health of their business, allowing for informed decision-making. This can help identify where costs can be cut and where resources can be allocated more efficiently.
  2. Expense management: Proper bookkeeping includes tracking all expenses and ensuring unnecessary costs are minimized. By clearly understanding where money is being spent, businesses can make adjustments to reduce unnecessary expenditures.
  3. Budgeting and planning: Accurate bookkeeping helps owner-operators create realistic, useful budgets and accurate financial projections. This can help them set achievable financial goals, steer their organization to success, and ensure their business is on track to achieve its targets.
  4. Tax compliance: Bookkeeping ensures a business meets its tax obligations accurately, reducing the risk of penalties, fines, or overpayment. 
  5. Investor and lender confidence and funding: Accurate financial records can inspire confidence in investors and lenders, leading to increased access to funding.
  6. More accurate forecasting: When your books are accurate and up-to-date, so are your financial forecasts. Your business should be turning to forecasting processes (such as qualitative forecasting and cash flow forecasting) to predict its financial future, and these forecasts will be created with data from your books. 

 

In short, by maintaining accurate and up-to-date financial records, owner-operators can identify areas where they can cut costs, make adjustments to their pricing strategies, and plan for future investments.

 

Essential Bookkeeping Concepts for Owner Operators

 

Understanding essential bookkeeping concepts is crucial for the success of any business, and owner-operators are no exception. By knowing the fundamentals of bookkeeping, you’ll have a solid foundation in these financial principles and be equipped to take control of your finances.

 

Understanding Debits and Credits

 

Debits and credits refer to the amount of money moving into and out of your business accounts. These concepts are part of the double-entry accounting system, which states that every financial transaction impacts at least two accounts. Debits refers to the money that is coming into an account (which can either increase an asset account or decrease a liability), while a credit is the money that’s exiting an account (which can decrease the amount in an asset account or increase the amount of a liability).

 

Recognizing and Categorizing Expenses

 

As a business, it’s crucial to recognize and categorize every expense so that decision-makers can understand exactly where funds are going. When expenses are properly tracked, business owner-operators can best manage their funds and reduce unnecessary excess costs. 

 

For example, it’s common for marketers to waste money on things like ineffective channels and strategies. One survey also found that nearly 10% of every dollar businesses spend is lost due to “ineffective implementation of business strategy.” When expenses are tracked and noted, decision-makers have a clear picture of exactly where their money is going.

 

Keeping Track of Revenue and Profit

 

Just like it’s crucial to track expenses, knowing how much revenue your business is earning and where those earnings are going is essential. When profit is tracked, owner-operators can understand just how successful their business is, how their decisions impact their profitability, and how exactly those profits are being spent in the business. 

 

hiline’s Got You Covered: Bookkeeping Tasks for Owner Operators 

 

Owner-operators, we hear you: you work hard to keep your business running, and you want to have a 360-degree view of your revenue, expenses, and funds. The best way to get it done is by mastering your bookkeeping and knowing which tasks are essential for someone in your position.

 

Regular Bookkeeping Maintenance Tasks

 

Accurate bookkeeping involves a series of regular processes and tasks, which might need to be completed daily, weekly, or monthly. Regular bookkeeping maintenance tasks can involve:

  • Recording transactions: Documenting all financial transactions, including sales, purchases, expenses, and payments.
  • Bank reconciliation: Reconciling bank statements with your organization’s internal financial records ensures all transactions are accurate and accounted for.
  • Expense tracking: Monitoring and categorizing all business expenses to keep a clear record of where money is being spent and identify areas where wasteful spending can be reduced.
  • Generating financial statements: Preparing regular financial statements (such as income statements, balance sheets, and cash flow statements) to assess the financial health of your organization and make data-informed decisions.

 

Year-End Financial Reporting and Analysis

 

Year-end financial reporting and analysis is when bookkeeping documents are used to generate financial reports and conduct financial analysis. These documents and insights give owners a holistic view of their organization’s performance in the previous year and where it’s heading. With this information, owner-operators can make strategic decisions to steer their organization in a desirable direction. 

 

Annual Budget Creation

 

Your business’s budget is a crucial document that outlines how funds are designated to be spent in the following year in your organization. Business budgets are typically created once a fiscal year and can be created using insights from your business’s books, which can clarify how much money is needed in certain areas of your business.

 

Employee Expense Management 

 

Your employees’ business expenses must be continuously tracked, managed, and paid out. Ongoing employee expense management includes verifying and categorizing expenses, tracking receipts, and reimbursing employees in a timely fashion and is a crucial part of the bookkeeping process.

 

Outsourcing Bookkeeping vs. DIY

 

While it’s possible to handle bookkeeping and all its associated responsibilities in-house, another option is to outsource to accounting professionals. In today’s work landscape, outsourcing is extremely common for various tasks and functions, particularly when it comes to accounting tasks. One survey found that 37% of small businesses outsource their accounting and IT services. 

 

Why would an organization choose to outsource its bookkeeping services? Here are some of the key reasons:

  1. Expertise and accuracy: Outsourcing bookkeeping allows owner-operators to benefit from the expertise of professional accountants and bookkeepers who are well-versed in accounting practices and can ensure accurate financial record-keeping and reporting. 
  2. Cost-effectiveness: Outsourcing your bookkeeping needs can be more cost-effective than hiring full-time professionals. 
  3. Better-allocated resources: Outsourcing bookkeeping frees up your internal team to focus on more meaningful and impactful tasks. In many cases, owners are trying to juggle bookkeeping responsibilities, and with outsourcing, they can get this valuable time back.
  4. Reduced risks of errors and fraud: Outsourced bookkeepers are experts at what they do. They’re financial professionals who will give you the most accurate results possible. 

 

Tips for Choosing the Right Bookkeeping Service

 

To choose the right bookkeeping service, it’s best to go with qualified experts with robust accounting experience and financial qualifications to do the work. Be sure to also look for a bookkeeping partner who understands and evaluates your business’s specific needs and can provide services that align with your business.

 

Additionally, consider one that can access and utilize comprehensive software and technology. This ensures accurate and advanced financial management and insights and seamlessly integrates your current processes and procedures. 

 

Don’t forget to consider the actual services offered. Bookkeeping is an umbrella process that includes preparing financial statements, A/P management, employee expense management, and credit card reconciliations. Be sure the service you choose contains the tasks that you need. 

 

Owner Operators Benefit From Outsourcing Bookkeeping

 

Owner-operators, you have enough on your plate without having to complete the time-consuming and repetitive tasks that bookkeeping requires. But we have good news: here at hiline, these are things that we’re not only passionate about but extremely skillful in, and we’d be more than happy to take on your bookkeeping needs.

 

Let us worry about your books so you can focus on running and growing your business. Contact us today to learn how our outsourced bookkeeping services can help your business reach its full potential.