In a recent Forbes piece, two technology and business experts said that for small businesses to have accurate accounting practices and books, they should focus on personnel.
Some people may think that hiring family members is a perk of owning a small business, but technology and business writers Tim Devaney and Tom Stein said that doing so could result in accounting errors. Hiring someone who isn’t a relative may be more expensive than bringing on family members, but doing so can cut out many headaches that could crop up by hiring someone based on their kinship rather than their professional abilities.
“We see it all the time, having your spouse or your brother in law do the books on the cheap,” Chris McKee, founder of a financial firm, said in an interview with Devaney and Stein. “People do it because they’re starting a business, and they get a lot of people in the family involved. Maybe their wife or husband kept the checkbook at home, so they figure they can do the accounting.”
Ponying up to pay someone a full salary right off the bat to take care of accounting tasks may seem counterintuitive, but bringing on the right person could ensure financial success, as well as keep the IRS out of your hair. This is particularly common for small businesses that are seeing some growth and need more than just a junior financial employee, Devaney and Stein said. Not only can skimping on this hire result in errors to small business owners’ books, but it could hinder any more future growth.
“You can save a little on salary, but later you have to go back and fix all the mistakes, which can be a very expensive proposition,” McKee said. “And all that time you’ve been making bad business decisions because you didn’t have a handle on important metrics like gross margin.”
Realize the need for help
New business owners might like to think they can do everything on their own, even if they don’t have financial experience, but this is a major mistake. Completing all accounting and financial tasks takes time, especially if they are to be done right, and business owners who don’t hire someone to take care of them might soon be spending all day tending to the books.
The same can be said for mixing personal and business finances. Doing so may seem like an OK idea in the beginning – whether you buy coffee in bulk for the home and office or get a printer for the home and use it for business documents – but McKee said blurring the lines isn’t a good idea. Soon, an owner may be purchasing everything with the business card, possibly raising red flags for the IRS.
Small business owners who realize the importance of hiring the right person to take care of financial tasks but may not have quite enough in the payroll can seek increased working capital from nontraditional lenders like National Funding. Ease of access and more flexible payment terms are just a few perks that such lenders offer.