Should You Outsource Your Bookkeeping?

It might be tempting to try and do the bookkeeping yourself. But getting a team of experts could save you precious time and resources.

Some businesses have internal solutions for financial management. And in smaller companies, even the owners themselves can weigh in and tackle the task.

Such an approach could work for the business for a while. But it might not be the best option, especially once the company starts growing.

To answer the titular question, it’s more ideal to outsource your bookkeeping, or at least consider doing so. Here are the essential reasons why outsourcing might be a good idea.

Reason #1. Time Efficiency

Your team already has a list of responsibilities. If you don’t have a dedicated accounts team, your team will probably spend their precious work hours taking care of the financials as well.

The time your team spends on bookkeeping tasks means you get less time to focus on your company’s vital operations, such as improving sales or bringing in new leads.

Additionally, if neither you nor your employees are trained or experienced, dedicating company resources to such tasks can be considered wasteful. You’re diminishing your business capacity and distracting your team with a job outside their skill set instead of focusing on your strong points.

Outsourcing will save you time and get your financials in order sooner. Simply put, leave the bookkeeping to the professionals.

Reason #2. Decreased Costs

If you consider hiring an employee solely for bookkeeping, or you’ve already done that, notice that outsourcing could save you a significant amount of money.

There are indications that companies hiring bookkeepers/accountants save around 40% of the costs compared to those that have in-house accounts department.

The calculation is very straightforward – by outsourcing your bookkeepinh, the only cost you have is the service price. On the other hand, keeping a full or part-time employee comes with additional expenses, not to mention taking away various resources better spent elsewhere.

Reason #3. Lesser Risk of Fraud

Small and medium-sized companies suffer significant losses due to employee fraud.

Larger businesses have better control over their metrics, with dedicated departments that monitor all transactions. A small business will usually lack this kind of control, which results in a higher risk of fraud.

When you decide to outsource your bookkeeping, your company gains access to an affordable CFO service that will have no problems detecting fraud signs. You can get an objective analysis of the financials as the bookkeeper is entirely independent of your company.

Reason #4. Professional Service

Professional bookkeepers have an obvious advantage in financial dealings – they know accounting. Your business will be in safe hands with using a service that’s familiar with all relevant codes and laws.

From a technical standpoint, a bookkeeper will have every resource necessary to perform the job – from expert employees to the best accounting software. These resources won’t be available to your company without additional expenses and hefty time investment.

Finally, a professional bookkeeper could offer you some useful, impartial advice that you couldn’t get from anyone other than an expert.

Focus on Business, Not Bookkeeping

Once the burden of bookkeeping is lifted from your shoulders, you can expect work efficiency to improve in several ways.

Outsourcing your bookkeeping is cost-effective, saves time, and lets you focus on the more important matters where you and your team can be the most productive.

Why You Need Business Insurance

Entrepreneurs have a mindset suited for risk-taking, but accidents and unexpected expenses are still part of the job. Business insurance is the best way to guard against unnecessary losses and allow a startup to continue to grow.

Every business owner should expect the unexpected. Anything can happen as they grow their business, as taking risks is something they do often. But small or large, they stand to lose plenty if they do not have backup plans in store and insurance to cover unexpected expenditures.

A business insurance policy can help a business owner recover from a devastating mishap or event. Fortunately, business insurance covers small business owners, even those who only treat the business as a side-job.

Here are some scenarios where you need business insurance.

Scenario #1. Protection Against Losses

A business can be open to and liable for an array of losses, ranging from environmental hazards like a fire to workplace and customer injuries. In fact, it is not uncommon for an unexpected event to wipe out a start-up to the extent of permanent closure.

There are multiple types of business insurance and the most common include those that protect against workplace accidents and property damage. However, there are some types of losses that no insurance will cover, which may include losses resulting from war, contamination, or government seizure.

Scenario #2. Legal Protection

If your start-up works with other legal entities, a client might sue you to absolve themselves of liability. Furthermore, any breach of contract can lead to litigation if other conflict resolution attempts do not pan out. Start-ups can also be liable for customers who have an accident on the premises.

More than just legal bills, a court can easily assess enough damage to put your company into bankruptcy protection, but not if you have the types of business insurance that cover legal fees and damages.

Scenario #3. Leasing Property or Equipment

Once a start-up outgrows the garage or home office, most property leases will require the company to have at least business liability insurance.

If the business has insurance, new clauses might have to be added to the policy if you want to lease new office space and secure room for growth. In this case, leasing expensive new equipment to go with the new area will also require insurance coverage to protect both the lessor and the lessee.

Scenario #4. Fair Participation

Public gatherings that promote businesses, such as job fairs, trade shows, and conventions, also rely on participants having sufficient insurance coverage. Without it, a start-up might not even be able to attend an event, which can severely limit its scope and client reach.

Since these gatherings are an excellent opportunity to promote a brand and ensure visibility on the local stage, it would be a shame to miss out for not having insurance.

Peace of Mind

Newly established businesses often struggle as is, so insurance costs can seemingly outweigh the potential risks that come with insufficient coverage. However, insurance is one of those things that you may think you don’t need until you really need it.

The truth is that business insurance protects against unexpected losses and can give employees the security needed to keep working their hardest at making the brand’s vision come true.

Why It’s Important to Separate Your Personal and Business Finances

There’s so much to think about when starting a new business and many entrepreneurs simply put off opening a separate business bank account until later. If you’re a sole trader, legally you don’t have to separate your personal and business finances, but it’s definitely sensible to do so. Yes, keeping track of multiple accounts may seem like extra work but in the long term keeping your personal and business finances separate will make it a lot easier to manage your money.

Accurate Financial Records

If you use the same bank account for personal and business expenses, you’re guaranteed to find yourself with a headache when tax season rolls around. It can take hours to go back over your accounts and try to remember which transactions were business-related. It’s also a lot easier to make mistakes, which can come back to bite you later on in the form of a fine or an audit. Separating your personal and business finances renders tax season much more straightforward.

In addition to this, mixing your personal and business finances makes you more likely to create inaccurate cash flow projections or miscalculate your profits. This can then result in overspending or a skewed view of your growth. These mistakes compound over time and your murky records may land you in hot water.

Mental Separation

In order to create a successful business, you need to treat it like a business from day one. Keeping your business and personal finances separate goes a long way in helping you to do this. It creates a sense of professionalism and helps you to actually feel like a serious business owner. Furthermore, clients will take you more seriously when they make payments to your company bank account.

Financing Your Business

Having a separate business account makes it much easier to secure finance for your business. When attempting to obtain business credit, any lender will require evidence that your enterprise is financially healthy and that you manage your money well. If your statements show a confusing combination of business and personal transactions, you’re unlikely to be taken seriously.

Furthermore, mixing your personal and business finances can negatively affect your credit score which may prevent you from obtaining both personal and business credit in the future. It’s much more prudent to separate your finances early on so that you don’t end up in hot water and can maintain a safety net.

Preparing for an Audit

An audit may be the furthest thing from your mind right now, but in the future you may face one and it’s vital that you’re prepared to do so. When your business undergoes an audit, it’s crucial that you provide accurate, easy-to-follow financial records that demonstrate that you are an honest and law-abiding organisation. If your records are confusing, you’ll have to endure a barrage of admin and office visits in order to set them straight, and you may face a hefty fine.

Protection Against Fraud

Cybercrime soared during the covid-19 pandemic and online fraud is something you should take seriously as a business owner. Of course, having your bank account breached is always bad news but if you use a single account to manage your personal and business finances, you’ll essentially be hit twice. Separating your personal and business finances offers more of a safety net against cybercrime and may allow you to continue operating even if one of your accounts does fall prey to fraud.

Summary

Separating your personal and business finances is an essential step in ensuring the financial health of your business. Not only does maintaining separate accounts render it far easier to keep accurate records, it can also help you to grow your business by securing credit and creating a sense of professionalism that puts you in the right mindset for success. It’s a worthwhile step for any new business owner to take, and when tax season rolls around, you’ll be very glad that you did.

5 Simple Ways for Start-ups to Improve Cash Flow Management

Cash is king in business and good cash flow management is essential for the success of your start-up. Think of cash flow as blood flow and you’ll understand just how vital it is to the health of your business; without it, you’ll die. That sounds bleak, but it really is important to manage your cash flow well from the very beginning and protect your business against any problems along the way.

Even if your business is very profitable, you’ll struggle to cover your costs without sufficient funds available. However, at the same time, an excess of cash suggests that you’re not re-investing enough into scaling your business. Finding a balance takes accuracy and attention, but it can be done by following the steps outlined below.

1. Regularly Prepare Cash Flow Statements

Before you can start planning for the future you need to get a clear picture of where you are right now. This is where cash flow statements come in. A cash flow statement provides an overview of how much cash is coming in and going out of your business. This then allows you to perform a detailed analysis of the financial health of your business.

A cash flow statement requires a lot of data and so a cash flow calculator can be very useful in helping you prepare this document. You also might want to think about hiring an accountant to ensure that your statement is accurate, since getting this wrong can lead to bigger mistakes down the line.

2. Create Cash Flow Projections

It’s important to understand what your cash flow is likely to look like in the months to come so that you can plan ahead and manage your finances wisely. Realistic cash flow projections can help you to invest your money at the right moment and account for any potential pitfalls along the way. This process can be time-consuming and complex, so again it’s worth using accounting software or enlisting the help of a professional. These projections are incredibly valuable when it comes to scaling up your business and so they’re worth investing in.

3. Prepare a Safety Net

Any entrepreneur will tell you that it pays to have a safety net, particularly when you’re scaling your business. Investing in growth can lead to short-term negative cash flow which is perfectly okay, so long as you’re prepared for it. A cash reserve will help to smooth things over when you’re having cash flow problems and ensure that you have enough funds available in order to pay suppliers and staff. It’s also worth investigating whether a credit card or line of credit could be beneficial to your start-up to help you keep operations going when cash runs dry.

4. Plan For the Long Term

As important as it is to have a handle on where you are right now, your business won’t be this way forever. After all, the ultimate goal is to grow out of the start-up stage – and this means big financial changes. Furthermore, there are many factors outside of your control that could affect your cash flow in the future, such as inflation, recession or late payments from clients. It’s always best to be prepared for the worst so that your business is protected against any eventuality. Take some time to research and forecast potential changes in market conditions that could impact you in the future. Again, it’s worth consulting your accountant for advice that could help to protect your business.

5. Stay On Top of Invoices

It’s important to manage cash inflow effectively and sadly, you can’t just bank on customers always paying you on time. You need to ensure that you send invoices in a timely manner, set clear payment deadlines, send reminders and chase up late payments. If you have a large customer base, this can be a time consuming process and it may be worth looking into accounting or invoicing software to take care of this for you. Not only does this help you to manage cash inflow accurately, it also frees up your time for more valuable pursuits.

Cash Flow is Key to Your Success

There’s a lot to think about as an entrepreneur but managing your cash flow well is one of the most important ways of ensuring the financial health of your business. Not only does this help you to protect your start-up against market changes and late payments, it enables you to invest your money wisely and at the right moment. Good cash flow management isn’t just about protecting your business from collapse, it’s also vital to help your start-up to grow and flourish.

How to Find Funding for Your Start-up

Making your dream a reality requires financial support. Luckily, there are ways to secure the necessary funding and start heading towards your goal.

Starting a new business takes vision, determination, and, most importantly, funding. The financial side of things can be the biggest hurdle for many new entrepreneurs as the initial challenge might seem overwhelming.

Yet, there are many available options for procuring the necessary funds that will get your start-up going.

The most important thing when considering financial support is to not expect a solution through some magic wand. Your idea might be exciting and fresh, but that doesn’t mean investors will be waiting in line to provide you with the money.

Securing the needed funds for your start-up will require serious, careful consideration. Have a look at the possible options and decide on one or more that are most available and most attractive to your start-up.

Option #1. Borrowing From Friends or Family

It’s quite common for people launching a start-up to borrow the initial financing required from friends or family. In fact, almost 40% of new entrepreneurs get their ideas off the ground this way, and there are good reasons for it.

People close to you may be more likely to accept the investment risk and they’ll be less likely to pressure you when it comes to showing results and paying off the debt. This usually won’t be the case with other investors.

Option #2. Getting a Grant or a Loan

If borrowing from friends or family isn’t a viable option, government grants could be the next best thing.

There are plenty of cases where governments offer support for new businesses, as the attendant economic growth is in the government’s best interest. This is especially true for younger entrepreneurs and technology start-ups.

Another option is to apply for a start-up loan at a bank. But keep in mind that banks are cautious with business loan applications and they will likely require you to have existing assets and good credit history before considering your application.

As an alternative to bank loans, there are lending companies that will be more forgiving about the whole deal. However, this should be the absolute last option as some alternative lenders can be predatory.

Option #3. Keep the Day Job and Bootstrap

What sounds like the least tempting option might also be the most realistic way to fund your start-up.

If there are no other options to find funding, the best investor for a start-up will be the very person launching it.

This is a challenging method that will require you to pay for the start-up yourself, which is what bootstrapping means. It entails working on the project in your spare time or saving money from your salary until you’re ready to cover the initial expenses.

The good side of this approach is that you’re not relying on anyone else but yourself – there are no debts or pressure.

It’s a low-risk, high-effort situation and many successful businesses were initially funded using this method.

Find the Best Way to Achieve Your Goal

Securing funds for a start-up can be stressful and require a lot of work. However, there are several ways to find funding and start bringing your idea to life.

With careful consideration and the necessary dedication, you’ll be on the right path to making your dream a reality.