• Ellie Cooper

Should I outsource my accounting?

In this article, we will go through your personal accounting skill level, as well as your business goals.

There are different stages of a business, and everyone starts at a different point. You may have a low-budget, one-person business where you wear all of the hats and try to reduce your spending as much as possible. Or, you may have a full team of people, with lots of funding, and your main goal is to expand as quickly as possible.

This also varies industry to industry. If you provide an online service by yourself, you may have very low costs at the beginning, you will likely be a sole trader, you keep pretty much all that you make, and you may not make enough in the first year to even need to think about paying taxes. If you produce a product, and you are a team, however, you may have high costs, payroll obligations, and hopefully you will sell something and therefore will have an end profit figure (if you’re lucky, it will be positive).

I know, you have a million things to think about right now, and one thing you definitely do not want to do is be faced with a large tax bill at year end that you don’t really have the funds to pay for, or worse still, face a fine. You always want to make sure that your foundations are strong, and ensure that as you grow, you don’t have to start back from the beginning and waste precious time that you could be focusing on your current stage.

So, when do you outsource your accounting?

A lot of this will depend on your current skill set. Maybe you have a business degree, so understand the basics of cash-based accounting and double entry. Perhaps you’re an artist, and hate anything numbers and would rather be spending your time creatively. The first thing to do is figure out your basic knowledge. There are 4 levels that I see in my clients:

Level 1 – I understand nothing. I do not know what double entry means, I do not know the basics of a profit and loss, and I do not want to.

Level 2 – I understand the basics of cash based accounting. I am able to talk about profit and loss pretty comfortably, and I would be able to create a double entry for a transaction for marketing materials that came out of my bank. (Debit, marketing costs, Credit, bank account). I don’t, however, know much about accrual based accounting. I couldn’t tell you how to account for a transaction that I am supposed to receive in the future.

Level 3 – I am pretty decent at accounting; I can tell you how to account for a transaction that I will receive in the future, and I feel pretty comfortable creating a profit and loss statement, as well as a balance sheet for my company.

Level 4 – I have an accounting degree. I’m up to date with the accounting regulations in my country, and feel comfortable filing my businesses taxes if I need to.

Once you figure out your level, you also need to figure out your businesses goals. There are 4 goal-stages (that do not necessarily come in order) for each business:

Goal stage a – I am new to business, I want to increase my client base, and I want to spend as little as possible as I am not making much money yet.

Goal stage b – I am happy to invest my money (or retained earnings) back into my business to grow my client base and increase profit.

Goal stage c – I am content with the number of clients I have, or maybe even can’t take anymore clients on, and I want to focus on reducing costs, finding tax breaks, and investing my money more wisely.

Goal stage d – I feel quite stuck with my business, I am not sure on my next move.

Now that you know your level, and business goals, you can figure out whether or not to hire a professional to help you with your financials.

As always with business, things are constantly changing, so your goals may change (as well as your levels, if you take a course, or spend a lot of time out of the finance industry) so it’s important to continue to evaluate your situation.

Find an accountancy firm, or person, that is flexible, reliable, and can give you the service that you need for your business. So often, I find businesses that neglect the financial side of their companies, only to find themselves with a massive bill at the end of the year, fines, and sometimes, they don’t even realize they are in massive debt.

At Cooper Financials, we offer bookkeeping and financial advice to small companies so that they can figure out what next steps they need, feel at peace with their finances, and feel confident when speaking to potential investors, clients, and friends and family if asked about their financial status.

All of our services are 100% flexible, so if at any point you change levels or goals, you can add or remove services to suit that. We are here to help you succeed, and whilst we do love numbers, you are not just another number to us.

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