Important things to know before hiring a Debt Collection Agency21 Nov,2020 Read More
Posted by maxbpoblog Nov 23,2019
Entrepreneurship comes with its own set of challenges. One of the major concerns is to manage the cash flow and keep the books. Sometimes, entrepreneurs are so much focused on the product that they do not keep a check on the cash flow. This trait can turn out to be very costly. According to a stat, 29% of the businesses do not reach into their 4th year because they run out of cash.
Often, entrepreneurs consider accounting and bookkeeping services a liability for the company. Product is the most important aspect, it’s true. But, operations do not run without cash.
Bookkeepers and accountants do not have a direct contribution to the revenue of the company. They manage expenses and costs of operations that help maintain a healthy cash flow in the company.
Whether you like them or not but your business needs them for sure. Often, bookkeeping and accounting are confused with each other.
Let us clear their functioning before we learn more about accounting and bookkeeping services.
Bookkeeping is the process of the record-keeping of every financial transaction of the company. Bookkeepers keep the record of sales, expenses, cash and bank transactions in a general ledger.
The process of recording transactions is known as posting.
A bookkeeper may also generate invoices and/or payroll. They do not prepare financial statements.
The main aim of bookkeeping is to keep accurate and correct records for accounting tasks.
While bookkeeping contains more of the clerical tasks, on the other hand, accounting is about decision making.
Accounting is the measurement, processing, and communication of financial and non-financial information about economic entities such as businesses and corporations.
In other words, accounting is the process of the production of financial information. It allows us to see things like how much money you or your company earns, what is the net worth, what are the expenditures, and what measures you can take to make more money.
Now you know the difference between bookkeeping and accounting.
But, still you have got questions and they should be answered.
You are still wondering, “I am an entrepreneur, I can learn some accounting skills. So…”
You are right. You can learn a little accounting and bookkeeping skills because learning never stops for an entrepreneur.
Your finances need to be put into the right operation and the accounts department is not a wise choice at the moment.
The team is already very much focused on the right areas. Product-building has already taken a lot of money and marketing needs more of that.
John is a young and charismatic man who makes toys for kids. He makes toys and sells them into a local market. He keeps his daily earning record in his diary.
One day, he wakes up in the morning and finds out that his product has become an internet sensation. Someone had posted a video of their kids playing with the toy that was made by John.
Now, there is a huge demand for toys made by him.
He wants to encash this momentum and decides to open a small-sized factory to make toys. He calculates all his expenses and costs and applies for a business loan in the bank.
However, he sets up a meeting with a loan officer. The meeting does not go well. The loan officer throws a jargon of heavy accounting keywords wrapped into questions at him.
He couldn’t tell how much profit he had made in the previous financial year. Also, he does not know about his assets’ value or his debts.
The interview does not go well and he loses his chance at grasping a big chunk of the market that was ready for his product. Social media had done marketing for him.
Had he got someone to keep accounts for him, he would not have faced such a situation.
This story was not to bring down the spirit of someone who likes to manage one’s accounts themselves. But, this is the real story of thousands of next to-be big companies that fails due to lack of bookkeeping and accounting expertise.
Accounting and bookkeeping are the show-runners of any business. Rather than being a liability, accounting and bookkeeping can help you build assets.
Now you know how important both the services are, but one more question that occurs to your mind would be,
This dilemma often occurs. It depends on the scale of your business. If your business is a small scale general store located in a small locality, only bookkeeping will work fine for you.
But, if you are planning to scale that business into other cities and you have a vision, then go for both, accounting and bookkeeping services.
This suggestion is for any business owner who wants to grow in general. Not only like Walmart or Amazon or Microsoft level but also even if you want it to be the best in your town. Then you must have a dedicated accounting and bookkeeping team.
The size of the team depends on the nature and size of your business.
Now that you are aware of the importance of opting accounting and bookkeeping services, the next question you might have is,
Again, it depends on how you want to run operations in your company. Quite often, during the initial phase, business owners want to keep everything under their control.
They head several departments in their organization. However, as time passes and each department scales. It becomes difficult to keep an account of the whereabouts of every department.
Then they hire chief for each particular department which helps the company to grow and scale into a profitable business.
Every department contributes towards the assent creation of the company. But, accounts and bookkeeping department does not contribute towards the creation of assets.
It does not mean that this particular department is of no use. We have talked enough about its importance. The accounting and bookkeeping department keeps a record of the assets of the company.
Every business has its heydays and dull-days. One such dull-day can make the accounting department a liability.
Resources spent on hiring and maintaining an in-house team are not worth the risk. It also diverts a company from its core business.
These points make it clear that hiring an in-house team can be a major risk. So, the in-house accounting and bookkeeping services team is out of the picture.
This leads us towards the next doubt you might have,
The answer is simple, to avoid the above-mentioned risks. Outsourcing them will save a lot of monetary funds for the company. That fund can be used towards the betterment of products/ services of the company.
You do not have to hire a few professionals after a long interview process. Instead, you get ready to perform, a team of experts at a very affordable price.
There are experienced companies that outsource accounting and bookkeeping services and act as an asset for the company.
For an entrepreneur, scalability and stability are the two most important objectives. Hiring an in-house team may or may not provide both of them but outsourcing will surely help the company to thrive.
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