It’s common for small businesses to have one member of the family running operations while another does the books. For some small businesses, this may make sense, but is it the right decision for everyone?
Here are the pros and cons of having a member of your family do your bookkeeping:
They’re passionate about the business
The one thing you can guarantee about having your spouse or family member do your bookkeeping is that they want you, and the business, to succeed. If that means a late night here or there, not a problem. If that means hours of research into new payroll solutions, they’re happy to help. You just need to be careful that all that passion doesn’t cloud their objectivity. You want to know what the numbers are telling you, not just what you want to hear.
You trust them
Opening up your books to someone can be a daunting prospect, especially at the beginning when money is tight and profits are small. Knowing that a loved one is the one pouring over your books can make it easier. But just know that every small business makes mistakes, and a lot of those are financial. While you may feel safe having a family member checking your numbers, there’s nothing in there a professional bookkeeper hasn’t seen before.
The biggest bonus of using a family member for your books is that you’re probably not paying them. Having someone handle the bookkeeping for free is a major bonus when there’s no profit coming in. But what are you going to do when the money starts rolling in? Do you have a plan to offer them a salary or some form of compensation for their work? Money can be a touchy subject, and they’ll know you can afford to pay them if they’re the ones looking at your books.
They probably don’t understand the finer points of bookkeeping
You can definitely have a family member pick up the bookkeeping fundamentals, like recording transactions and keeping track of receipts. But if you want any of the more in-depth bookkeeping functions you may be out of luck. You need a bookkeeping background if you want to create balance sheets, profit and loss accounts or a statement of cash flows. These are tools that can help you make major business decisions, and if you’re bookkeeper can’t provide them, you’re missing out on a lot of knowledge.
They don’t have industry-specific knowledge
Each industry has its own unique needs when it comes to bookkeeping. Some have specific tax requirements, some need specialized software to create estimates, others have metrics you need to focus on that can make or break your business. Hiring a bookkeeper that knows about your industry can help you with all of those things. They’ll know your tax liability, they can help bring in tools and software to help you become more efficient, and they can even offer benchmarking so you know how your business fares against others in your industry. All of this can be invaluable information for running your business.
Great bookkeeping can actually help your business thrive
Did you know a bookkeeper does more than just tell you what money you have coming in and going out? They can actually give you real-time financial information and actionable advice to help make your business more profitable. They can tell you what areas of your business you’re losing money on, and where you’re the most profitable. They can help identify your customer acquisition costs, and determine if you’re spending too much. And if you have one that knows your industry, you can get tried and true advice that’s worked for other businesses like yours. The money they can help you save, in addition to the extra profits they can help you bring in, far outweigh the additional cost of hiring a professional bookkeeper.
Fighting with your family about money
The biggest reason not to use a family member as a bookkeeper is to save yourself from some unnecessary fights. What happens if your spouse makes a data entry mistake that costs the business $500 or even $5,000? What if one of your parents loses an invoice and it never gets paid? Is that an argument you want to have? By using a professional you’re establishing a professional relationship, that means you have some recourse if mistakes are made. We even guarantee our work here at BKE to ensure your business is mistake-free.
While there are some upsides to using a family member for your bookkeeping, especially in the beginning, as your business grows using a professional becomes even more important. The money you’ll spend on a bookkeeper is more than made up for with your business growth and mistake-free books.