When a small business owner first starts out they are often looking for ways to reduce expenses to get going. One of the bigger expenses can be setting up and maintaining your books. Often times business owners will look to a family member to keep their books for them not realizing the pros and cons that go along with this decision.
I’m sure you’re thinking why wouldn’t I let my spouse do my books, they’re free which is important when there isn’t any income in the business yet and I can trust them because they are working towards the same goals that I am. But there are some serious concerns to take into consideration before allowing a spouse or family member maintain your bookkeeping for your small business.
Things to consider:
- Industry knowledge – Most bookkeepers specialize in a niche and are able to answer industry specific questions. If your spouse or family member has never worked in the industry they may not know some of the issues that can come up and how to handle them appropriately. Each industry has specific bookkeeping metrics to look at that will help them to make better business decisions. Having a bookkeeper that is knowledgeable about those metrics will help your business succeed!
- Accounting experience – Many family members don’t have any professional accounting experience and this can be a huge barrier to producing a quality set of books each month. This can often cause unnecessary stress as well when they aren’t sure exactly what they are doing. Using your financial statements to make better business decisions is essential for moving forward with your business. Be sure to check with your family member and ensure they have a solid understanding of the Generally Accepted Accounting Principles (GAAP) to ensure your books are handled correctly.
- Business decisions – Many business decisions are made based on issues identified in your books. A simple data entry error could end up causing your business hundreds or thousands of dollars. For a new business this could be make or break. This data entry error could just be from lack of knowledge about how the accounting system works. Having a professional bookkeeper who knows the ins and outs of the bookkeeping software is important because they will be able to catch these errors easier since they know what they are looking at.
Saving a few dollars in the beginning by hiring a family member may not make the most sense moving forward with your business. Consider reaching out to a few bookkeepers and learn about their services before deciding on a family member.
For more information do not hesitate to ask.