Small business accounting
Payroll, profit margins and costs: They’re all necessary elements of small business accounting, but they’re things that you, as an owner, may not be entirely comfortable taking on.
And why should you? As an owner, you should focus on strategic innovation and helping your company grow. Yes, the number-crunching and forecasting is critical to the growth and success of your business, but it shouldn’t be on you to provide and interpret those numbers. You can turn to several types of financial specialists to do this work for you, but that can quickly become daunting. Do you need an accountant or a CFO? Will a bookkeeper do?
Like any other position you need to fill, when determining how to do accounting for a small business your first step should be hiring the right person for the role.
Those on a budget and in need of fast help often turn to bookkeepers to handle small business accounting. The name is somewhat self-explanatory: a bookkeeper handles your books – that is, your financial records. They record all transactions your company undertakes, but their work generally stops at assembling the financial information – showing you what’s happening, but not suggesting particular strategies or making forecasts. Their duties may be somewhat constrained by state regulations.
An accountant is the “middle rung” on the financial ladder. They have typically completed four years of college. An accountant may work with a bookkeeper by preparing reports based on the data a bookkeeper has compiled, or they may work alone. Like a bookkeeper, an accountant can record all your company’s transactions, but they are capable of handling larger, more sophisticated exchanges and also preparing financial statements. A bookkeeper can arrange the facts; an accountant can analyze reports and deliver the data they contain to those running the company.
Your CFO is your Chief Financial Officer. Typically this is an executive-level role that goes beyond minding the books or analyzing data, though they may have bookkeepers and accountants working underneath them. The CFO often has a firm hand in company strategy; they understand the company’s financial past and present, and by combining existing records with current data, can anticipate what the company’s future might look like depending on what actions you take.
Who should I hire to do my accounting?
Each financial role serves its purpose, but if you can only hire one person, consider this: The biggest difference between a bookkeeper, an accountant and a CFO is language.
Bookkeepers and accountants are primarily concerned with the numbers they deal with each day – that’s the language they speak. They may give you financial reports that track every penny that has gone in and out of your company throughout the year, but unless you have their financial background and education, odds are you’re going to look at those numbers and not see anything resembling data you can use. What good is all that information if you can’t understand it?
A good CFO speaks both languages. They take the numbers and translate them into information a business owner can use to steer the course of the company. The CFO is the one who can show you when you have the income to hire, when you need to trim budgets and forecast what the next year will look like.
The right person in this role isn’t just handling small business accounting. They’re a guide for the company, someone who can look at your past and present and forecast your next step from there – in short, someone who steers you away from mistakes and helps you make critical, financially sound decisions.