You took an enormous risk starting a small business. Are you letting a lousy bookkeeper put it in jeopardy?
As a small business owner, the fear of failure is always in the back of your mind. When combined with the stress of financial management, that fear can turn into pure dread.
You’re an expert in your chosen field—you shouldn’t have to be an expert at balancing books, payroll, and forecasting, too.
And since you’re on top of things and aware, you’ve wisely outsourced your bookkeeping.
The last thing you need is an outsourced accountant tanking your trust and dreams.
We’ve pulled together a list of red flags and warning signs to help you determine what kind of bookkeeper you’ve hired.
Your Bookkeeper is Constantly Out of Reach
As a small business owner, you need answers to finance-specific questions. And you need those answers fast. When your bookkeeper doesn’t return your phone calls or emails, it’s a significant problem.
Trust is essential when it comes to outsourced bookkeeping.
If you notice long stretches between replies from your bookkeeper, it’s time to ask why. There could be many reasons for the communication lapse. The bookkeeper might be overwhelmed or lacking communication skills. Or, it could be more serious.
Maybe they don’t care?
You need to set ground rules (if you haven’t already) and communicate your expectations around acceptable communication timelines
They’re Constantly Behind on the Books
It’s easy to lose track of finances when your bookkeeper is continuously behind on the books. You might start making fatal errors like spending more than the business earns.
If your books are behind, then your business is behind. Growth is almost impossible when you’re regularly playing catch-up.
You must set deadlines to ensure that your bookkeeper is on track if you want your small business to thrive.
Your Bookkeeper is Panicked
If managing tax documents, payroll information, and quarterly payments to prepare for tax prep causes your bookkeeper to become frazzled, you have a severe problem.
A panicked accountant is a business threat.
Their panic could indicate inexperience. And the last thing you want is a bookkeeper who is in over their head
They Never Approach You With Ideas
You’re so swamped with everyday business operations that you might be neglecting growth opportunities.
Your bookkeeper should have a deep understanding of your day-to-day financials. They should also provide you with helpful feedback. Should you lower costs or increase revenue? A great bookkeeper will have the answers.
If they aren’t coming to you with ideas and solutions to help push your company to the next level, ask them why.
They Don’t Understand the Basic Terminology
This one seems like a no-brainer, but many bookkeepers don’t have the slightest clue when it comes to basic accounting terminology.
It’s not your responsibility to explain what cash vs. accrual means or the definition of accounts receivable.
If your accountant doesn’t know the term “reconciliations,” run away!
They Don’t Understand the Reports
Your books are crucial for recording financial transactions and activities like sales, purchases, earnings, payments, etc. Recorded data allows you to determine monthly/annual revenue and anticipate and calculate payroll and tax payments.
If your bookkeeper doesn’t understand your reports, accounts can be overdrawn, and you might find yourself in hot water with the IRS.
Nobody wants an IRS audit.
Failing to keep-up with numbers leaves you without a grasp of the money coming in and out of your business.
They Constantly Pass Blame or Make Excuses
It can drive you crazy. Your outsourced bookkeeper dropped the ball, and rather than getting a simple explanation, they make excuses and shift responsibility.
Managing failure and disappointment is natural. But, there is a thin line between explanation and excuse, and the latter only delays the solution and blocks progress.
As a business owner, you require a bookkeeper who can take accountability and execute a proper response to any mistake. A competent bookkeeper will be able to address an error and take control in making it correct.
They Don’t Understand Reconciliation
When your numbers are off and discrepancies pop-up, your bookkeeper probably isn’t performing reconciliations regularly – or at all.
Critical errors could go undetected if nobody verifies that your balance sheet transactions correspond with general ledger transactions.
Improper reconciliation makes you susceptible to fraud, costly bank errors, and unauthorized withdrawals.
Your Accountant Doesn’t Ask Questions
Your outsourced bookkeeper must understand how your company operates to identify cost-cutting opportunities. They also need to ask questions to have this understanding.
If your bookkeeper is afraid to ask questions out of the fear of appearing unqualified or inexperienced, they’re letting ego get in the way of good business tactics.
They’re Unable To Provide Answers To Their Work
You’ve noticed bounced checks. And this morning, you saw old transactions in your Quickbooks undeposited funds windows! What is going on?
Your accounts probably aren’t managed regularly or adequately reconciled by your outsourced bookkeeper.
When you ask your bookkeeper what’s happening, they can’t provide answers or insight.
Minor mistakes are inevitable, but a good bookkeeper is willing to go over routine tasks with you to establish what went wrong.
They Don’t Let You See the Books or Give You Access to Your Accounting System
Is your bookkeeper holding your records hostage? Is looking at your data like pulling teeth?
With today’s cloud-based accounting software, there’s no reason you shouldn’t have complete data access.
Put your foot down. Tell your accountant you want shared-access to the books. If they are reluctant to share that access with you, it’s time to work with someone who will.
They Don’t Understand Balance Sheets
The business has gone up, but your cash balance doesn’t reflect the increases. Where is that cash? The answer should be on your balance sheet.
Not everyone knows what to look for on their balance sheet or profit and loss statement. Still, an experienced bookkeeper will analyze the assets, liabilities, and equities data.
Your balance sheet is a snapshot of your business’ financial health. If you have any trouble identifying cash-flow problems, it might be time to seek another bookkeeper.
Incorrect and inconsistent coding can take hours to rectify and cost your company thousands; it’s usually an honest mistake.
But entering incorrect accounting codes is a significant problem. Coding helps classify, record, and group all your transactions.
Wrong accounting codes can cause you to miss out on tax savings. Incorrect coding might also impact tax claims. In extreme circumstances, it can indicate your bookkeeper is stealing money. Either way, misclassifications can land you in hot water.
Your Accountant Is Patronizing
Nobody likes being talked down to – the behavior isn’t conducive to a productive workplace. You wouldn’t let your staff treat you poorly, so why let your bookkeeper get away with it?
Be open with your bookkeeper. Let them know the terms with which you are comfortable speaking. You shouldn’t feel belittled because you aren’t up on the latest financial jargon.
Your Bookkeeper is Controlling
Have you noticed that your bookkeeper wants complete, unsupervised control of your business’ financial management? If so, it’s time to start investigating why.
As we’ve already mentioned, trust is critical. When a bookkeeper wants to take control of everything inexplicably, your confidence can be a little shaken.
Handing over unsupervised access to your bookkeeper is like running your company blind. Some bookkeepers wind up stealing from a business because the business owners made it easy.
Your bookkeeper should be a business partner. You can avoid theft and mismanagement through collaboration.
If you’re feeling uncertain about your bookkeeper, it may already be too late!