While I am skilled at handling various household repairs and maintenance tasks, such as fixing broken items, maintaining equipment, and keeping the pool clean, there are certain jobs I prefer not to take on. One of these tasks is flooring installation, which we always outsource without hesitation. Although I could potentially learn how to install flooring through online resources, I choose not to pursue this skill. My rationale is simple - I value my time and believe that the intricacies of flooring installation may lead to frustration and costly mistakes. Therefore, I prefer to allocate my time and energy to other endeavors.
Bookkeeping can be likened to installing flooring in several ways. While it may not be as physically demanding, it demands meticulous attention to detail and a thorough understanding of the correct techniques for the task at hand. Here are a few explanations highlighting the importance of bookkeepers in every business.
Bookkeeping is a highly technical field. Bookkeepers possess a thorough understanding of debits and credits, yet their role encompasses much more than that. Essentially, bookkeepers communicate in a specialized language founded on principles, rules, and regulations that must be strictly adhered to. The practice of bookkeeping necessitates familiarity with inventory guidelines, accepted depreciation methods, accrual versus cash basis accounting, the appropriate timing for recording revenues, the handling of prepaid expenses, managing the equity aspects of a business, and various other aspects. Proficiency in these areas demands a profound comprehension of the diverse rules to be applied according to each unique situation. Among the most crucial tasks performed by bookkeepers is the initial setup or review of a company's financial records - ranging from creating a tailored chart of accounts to utilizing different classification tools that enable business owners to gain deeper insights. These responsibilities require a specific mindset for success, as the regulations are subject to continual changes.
Bookkeeping involves intricate details. While there are numerous regulations that shape a bookkeeper's daily tasks, there are also various ambiguous areas where a bookkeeper must apply principles to unique scenarios. For instance, different cost categories in a business may be spread out over time, yet they are handled differently for tax purposes. Inventories present another scenario where bookkeeping practices may diverge from tax accounting. A proficient bookkeeper will recognize these distinctions and provide guidance on essential bookkeeping practices, while also possessing enough knowledge about tax implications to assist owners in making well-informed decisions.
Bookkeeping comes with a significant opportunity cost as it typically requires between 10 and 20 hours per month. While this might not seem substantial, consider it in terms of an owner's hourly value. If a business owner dedicates 200 hours monthly to the business, generating $40,000 in revenue, each hour of the owner's time is valued at $200. By reallocating those 20 hours spent on bookkeeping to revenue-generating activities, the business could potentially earn an extra $4,000 monthly (20 hours x $200 hourly rate), representing a 10% increase. Even after compensating a competent bookkeeper, the owner could still see an additional profit of $2,000 - $3,000 per month. Beyond financial gains, there is another less quantifiable opportunity cost - time. Engaging a proficient bookkeeper allows the owner to free up time for strategic business planning, relaxation, or quality time with loved ones. Time is a precious resource as it is limited; while money can be earned, time cannot be reclaimed.
Employing an excellent bookkeeper is a crucial business choice as they play a significant role beyond just reconciling accounts. They evolve into trusted advisors for your business, enabling you to concentrate on more critical aspects of both business and personal life.
Related Posts
