Wednesday, April 16, 2014

The Costs and Benefits of Hiring a Bookkeeper


Many small business owners think that it is cheaper to hire part-time clerical staff than a professional-bookkeeper. Is it so? Let's work the math.

To hire and retain a part-time staff, you probably have to pay $20/hour and offer 20 hours/week, which provides the worker some sort of living wage. That is $400/week. Times 4 weeks per month, that is $1600. What kind of quality you get? Clerical? And do you need all those hours? Will there be a lot of idle time?

Compared this to hiring a professional bookkeeper with an accounting degree who has solid knowledge of accounting principles and years of working experience. Add in the skill, hence speed in commanding a software such as Quickbooks which allow them to work efficiently. The bookkeeper works much fewer hours and on as-needed basis. For a small company with up to 10 employees, one day/week is probably suffice. For a smaller company, sometimes twice a month will work. At $45/hour, 8 hours/day, you pay $360/week. Times 2 days/month, that is $720/month. If 4 times a month, that is $1440. Isn't it still cheaper? And you can count on the quality of work.

What you don't know can cost you.

I have seen a high-end real estate broker who managed multi-unit apartment buildings for his mother advanced a lot of money to pay her bills. When she repaid the loan of $100,000, the office manager posted it to income. If this mistake was not caught, what would the taxes be? If Federal and State income taxes combined are 30% -- which is low for a high income earner, that simple mistake will cost him $30,000. If the bookkeeper is paid $1500/month, her whole year of compensation is only $18,000.

I have seen an architecture firm made the project manager do the monthly invoicing. Since the project manager is an architect and his expertise was on architecture/design, he was not accustomed to bookkeeping tasks which are numbers and detail-oriented, he mistyped one of the items lesser by $25,000 and  another lesser by $50,000. There were $75,000 loss of income. Compare this to compensation paid to a bookkeeper who works one day a week at $45/hour. The monthly bookkeeping fee was only $1440.

Professional bookkeepers are more than cost factor. They provide benefits. Hence deserved adequate compensation. They cover one of the three legs of a business; i.e. operation, marketing and finance. They get regular tasks done. And provide timely and accurate reports. Not all reports are made the same. Erroneous reports not only are not useful, they are misleading. Timely and accurate reports show the business owners where they stand, how they performed. Good reports allow them to make informed strategic decisions.