Starting a business is an exciting journey, but it also has its own difficulties to navigate. Every new business requires an executive decision on how they will keep track of their finances. Financial management, in particular, is critical for a startup’s expansion because it includes everything from managing cash flow to adhering to tax obligations.
As a new business owner, you might be asking yourself whether bringing on board an accountant or a bookkeeper first would be more helpful. Let’s discuss the topic in detail and explore all the ambiguity around it.
Understanding the Difference Between an Accountant and a Bookkeeper
It is crucial to understand both factions before deciding which service to hire first.
Bookkeeper Service
A bookkeeper’s main function is to document daily financial activities like sales, purchases, receipts, and payments. Financial records are the responsibility of bookkeepers who prepare the relevant reports and ensure that the business’s books are balanced. Bookkeepers may also oversee payroll, monitor business expenses, and make sure that receipts and invoices are properly labeled and filed.
Accountant Service
Knowing the financial health of a business is a multifaceted process. Only a good accountant can handle, anticipate, forecast, and devise plans accordingly. Accountants perform tax compliance, offer business and financial advisory services, and prepare necessary tax documentation while ensuring compliance with the law. Typically, accountants rely on the information produced by bookkeepers to provide business insights and offer recommendations that would guide the owners in making key decisions about finances. While both roles are vital for a startup, the decision of which one to hire first often depends on the stage and needs of your business.
Why a Bookkeeper Might Be the First Choice
In most startups, it is customary to hire a bookkeeper first. The primary reason is that bookkeepers are responsible for performing repetitive tasks and processes that maintain the integrity of your records.
Here is why a bookkeeping service is important for a startup:
Accuracy in Financial Records
A bookkeeper will keep track of a business’s finances by monitoring and reconciling its income and payments. This helps in ensuring that the business has an organized financial system from the very outset. The process ensures you do not need to worry about having a tangled web of finances later on, something which is crucial for the sustainability of most startups.
Easy Tax Season
Tax season no longer becomes a hassle as your bookkeeper keeps the financial documents updated and organized. Structured documents streamline the process for your accountant, enabling efficient tax return filing.
Cash Flow Management
Your bookkeeper ensures that money is being received and spent in accordance with the business’s cash flow. For new businesses, cash flow is often a concern, so having a professional who keeps track of things.
Financial Reporting
With the help of your bookkeeper, basic financial reports can be easily accomplished, such as profit and loss statements and balance sheets. Being equipped with these reports enables you to gain insights and snapshots of the financial condition and helps in making crucial decisions.
When to Bring in an Accountant
An accountant provides more advanced services than a bookkeeper, who manages day-to-day tasks. As soon as your startup is operational and financial documents are in order, it is best to seek an accountant for strategic planning.
Here are some reasons why you might need an accountant:
Tax Preparation and Filing
Accountants can aid businesses in adhering to tax obligations and laws. They will prepare and file all your returns in a timely manner, which helps the startup remain compliant.
Financial Advice
There is a need for an accountant when seeking business funding, investments, or even debt. An accountant’s advice on financial matters impacts positively on the business.
Year-End Financial Statements
These are mandatory documents that aid in obtaining loans, meeting investors, and providing comprehensive data compilation. Financial statements prepared by accountants will significantly assist the emerging investors in evaluating the startup’s operations from a financial perspective.
Financial Forecasting
With the help of an accountant, businesses can achieve their long-term goals by making accurate projections and forecasts.
Outsourcing Accounting Services for Small Businesses
Hiring a full-time bookkeeper and accountant might seem unnecessary when launching a business. Instead, many startups go for outsourced accounting services for small businesses. These services offer a variety of benefits to the entrepreneurs:
Cost Efficiency
With outsourced accounting, you do not incur the overhead costs of hiring full-time employees. Startups on a budget can benefit from paying only for the services rendered.
Access to Expertise
Outsourced accounting services for small businesses give access to a variety of expertise as firms employ professionals from different fields of accounting. This helps you not to have to manage a large team while still receiving quality services.
Scalability
Your progressing business is also changing your accounting needs. With outsourcing, you can scale your services as required without hiring or training new personnel.
Focus on Your Business
With accounting and bookkeeping off your plate, you can dedicate yourself to running and expanding the business.
Choosing the Best Accounting Company for Your Startup
As a startup, you may find yourself needing a new accounting service provider. It is wise to look for a company that understands the intricacies of working with a startup.
The best accounting company will offer tailored solutions, whether you need bookkeeping services or accounting services.
Your business will greatly benefit from a strong and reliable accounting firm, which will ensure that the startup is on solid financial ground and provide ongoing support as the business grows.
Regardless of when you opt for a bookkeeper service or full-service accounting solutions, the right firm will help you navigate the decisions that will lead to business success.
Conclusion
5K Advisory offers various plans for startups, businesses, and organizations. They offer the bookkeeper the first service to ensure all finances are recorded and in line with the accounting service.
The expert team of accountants is well-versed in how to handle small businesses and startups with their limited budgets.
When looking for outsourcing accounting services for small businesses or a more comprehensive solution, pick the best – 5K Advisory services.