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4 Things to Look For When Hiring a Bookkeeper

financial analysis Jul 06, 2021

It's only fair that I follow-up last week's blog post discussion of the importance of good bookkeeping with helping you know what to look for so you can assess your bookkeeping.

First, I have to dive into the present state of bookkeeping a little bit. Thanks to the wonderful world of the internet and various software solutions, everyone thinks that they can (and should) be a bookkeeper/do their own bookkeeping. This leads to a lot of people that don't know anything about accounting doing bookkeeping.

Now, I'm a business owner too, so I completely appreciate being at the beginning of your business journey and bootstrapping everything you can (including your bookkeeping). If that's you, here's my unsolicited advice:

 The moment you can afford to outsource your bookkeeping, DO IT. 

I realize that sounds biased since I offer bookkeeping, but I've had too many conversations with business owners that don't truly understand their financial position because they don't understand bookkeeping. They don't know what their profit is because transactions are categorized incorrectly. Their balance sheet is a mess and cash is showing as negative. And their retained earnings doesn't match any of their tax returns. 

So now, let's talk about finding a bookkeeper.

I'm going to be blunt. As with anything, there are good bookkeepers and there are some that have no business calling themselves bookkeepers.

Talk to any tax professional and they will tell you that they've had clients that are PAYING an outside bookkeeper and yet the tax pro still gets a mess handed to them at tax time.

Why is this? Because anyone can call themselves a bookkeeper. 

Before you think I'm hating on bookkeepers, I want to talk to you about accounting for a second. After three years of teaching accounting to undergraduates, I can, without a hesitation, tell you that not all accountants understand accounting. 

Accounting software and bookkeeping require an understanding of debits and credits (sorry, had to get nerdy on you). There's no way around it.

If you don't understand how a transaction impacts the various financial statements, you just can't be a good bookkeeper.  

With all of that said, here are some things to look for when hiring a bookkeeper:

  1. Background in accounting. Might sound like an obvious thing, but not all bookkeepers have been trained in accounting. They don't have to have a 4-year degree, but they need to have been taught financial accounting somewhere. They need to understand debits and credits.
  2. Tax professional recommendation. Since number 1 might be hard to discern on your own, ask a tax professional who they recommend. Since the tax pro has to deal with the final product, they'll be picky about who they refer. 
  3. Works hard to understand your business. Find someone that works hard to understand your revenue streams, where your costs come from, and what information will help you better run your business. Remember, we are moving beyond compliance and want insight. The bookkeeper has to care that you get insight. They have to care enough to shift the organization of accounts if you don't easily get the insight you need.
  4. Provides monthly documentation. Your bookkeeper should send you monthly reports. Yes, I know you can go and pull them yourself. However, the act of them sending the documentation says "Hey, I'm doing the work and I'm willing to show you that it's done". 

 Okay, I can get pretty passionate about the ways you should be served as a business owner, so I'm going to leave you with those four points. Overall, make sure your bookkeeper knows what they are doing and cares about you and your business. 


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