Your brother-in-law needs a job, and you have a business that needs more help. Do you hire them?
I know… that’s a loaded question.
Hiring family can be a great move for your start up business or it could be an utter failure. There are several points to be made as to why hiring family can be risky business. In this post we draw out a few; here are some reasons why hiring family to do your bookkeeping is not always advised:
He Can Handle the Basics of Quickbooks, What More Do You Need?
You need someone interested in Bookkeeping. When it comes to fully understanding Balance Sheets and Income Statements, things can get really boring. Boredom leads to complacency which more than likely leads to a bunch of mistakes. Mistakes in bookkeeping are difficult to correct, costly to your decision making abilities, and expensive to fix.
It goes without saying that he should have a great knowledge of bookkeeping, and where necessary, the essential qualifications. Understanding accounting language and having the skills and education to undertake the role is a huge part of the job. You need to know the different guidelines and rules to manage your books properly. Knowledge of compliance keeps money inside your business by minimizing errors and lost time. Here are the areas of knowledge your bookkeeper should be proficient in:
- Setting up software as per your business process.
- General Ledger Maintenance
- Daily, Monthly, Quarterly, and Annual Bookkeeping Tasks
- Write-up Journal Entries
- Bank / Credit Cards/ Transaction Posting
- Bank / Credit Cards/ Accounts reconciliation
- Customer Order Processing
- Manual Journal Entry Processing
- Sales Invoice Processing for Customers
- Purchase bills postings (Expenses / Assets Categorization)
- Inventory / Stock ledger maintenance
- Accounts Payable Management
- Accounts Receivable Management
- Financial Reporting (Weekly / Monthly / Quarterly / Yearly)
- Cost center Management and Related Reports
Accuracy is critical to the bookkeeping profession. A single error of one digit can cause tremendous problems, and attention to detail is a skill that bookkeepers should possess. The ability to figure out the problem quickly and making little or no errors is something that the bookkeeper and the small business rely upon.
What Risks Could You Be Taking?
Most of our clients come to us with what they call “A Small Clean Up Job” and 50% of the time we are able to uncover double the amount of errors they thought there were.
Your Company’s Snap Shot
Without good records, that snapshot will be out of focus. Inaccurate bookkeeping results in inaccurate reports about your cash flow. Your business may be struggling financially and you won’t be able to clearly see what’s causing the problem, or worse, you may not be able to tell that there is a problem.
Miscalculating profits or costs due to bad bookkeeping could take your business down. Overestimating your profits when filing taxes increases your taxes owed, while underestimating them can lead to an audit and fines. Incorrectly categorizing assets and expenses can lead to your paying more in taxes than you need to.
Even small errors can grow big over time if it’s not caught early. Innocent mistakes may go unnoticed until it causes irrevocable damage to your finances.
They’re lots of things that can raise red flags with the IRS that will initiate an audit. Deductions and expenses that don’t add up are leaving you completely vulnerable to an audit. Even if you have saved all your supporting documents, audits are very time consuming and stressful.
You never know when you need to look to someone for lending. Having messy books will greatly reduce your chances of being approved for a loan. This might not be a big deal, unless the reason you need a loan is in a state of financial emergency because of the financial mess your bookkeeping has gotten you in.
So… Think Twice Before Hiring Your Brother-in-Law
He might be a really great guy, and he might even be right for the job! But what if he doesn’t “check all the boxes” we stated in this post? Then you might want to think twice before pulling the trigger and on boarding him to your team. Ultimately, the right person will be qualified, trained, and interested in the numbers. Hire the right bookkeeper, they will make all the difference!