A Bookkeeper Should Be Your First Hire

What is the point of working so hard to market your product or service but fail to invoice, collect payment and also record expenses which reduce your tax?

New business owners will pour their money into sales and marketing, product development, smart offices and equipment, but do not see the value in having financial expertise and support.

It is very tempting to start a new business as a “family business” with your spouse “doing the books and administration”. Very few families get this right. When it comes to financial decisions the stronger partner will force their will on their spouse. It is bad for the business and bad for family relationships. It is also very difficult for other staff members.

Bookkeepers and Business Owners should have a healthy love/hate relationship. You, the owner wants to choose how to spend the money, and your bookkeeper will keep putting the brakes on.

You need a balanced view of the risks and rewards.

To give your new business the best chance of success (or abandon the dream before spending bucketloads of money), I suggest the following strategy.

Planning Phase

Presuming you have done your market research to confirm that your product/service is a viable business opportunity and you have done at least a rough cashflow forecast for 6 months your next step is to:

1. Build a relationship with a qualified and registered accountant who understands local tax requirements and laws. Yes, it will be expensive but a few hours of their time will save you loads of money and heartache later.
   1. Let him/her walk you through the process of choosing the right business structure and register you with all the various tax and government departments.
   2. Set up your Chart of Accounts (income, expenditure, assets, liabilities etc and allocate them to the right categories) in your computerised accounting system. Avoid using spreadsheets for invoices if possible. They quickly become unmanageable. Most accounting packages have a free option to get you started. 
   3. Take on any brought forward balances if you have already been trading.
   4. If you use stock, do a stocktake and load the items and quantities.
   5. If you are registered for VAT, ensure it is properly set up
   6. Customise your customer invoices and statements so that they have all the necessary information required by your tax authority.
   7. Discuss your budget and cashflow so the accountant can pick up anything that looks strange. 

Action Phase

1. Hire a bookkeeper
   1. Ask your accountant to help you draw up a job description and let him/her go through the CVs with you and sit in on the interview process. 
   2. Applicants sometimes claim to be bookkeepers because they have done a few invoices or captured bank statements but don't understand accounting.
   3. Do NOT use your receptionist to do the books unless s/he is a bookkeeper. While your business is small, your bookkeeper will possibly have time to assist with administration - but not the other way around.
   4. Your accountant will probably not mind and, probably very happy if the bookkeeper asks advice. This will you save money and the accountant time when doing the financial statements.

NEVER ALLOW YOUR BOOKKEEPER / ACCOUNTANT SOLE ACCESS TO YOUR BANK ACCOUNTS

Many clients I have trained over the years came to me because their bookkeepers were given free rein and the business owners lost huge amounts of money. 

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