How You Know it’s Time to Take Your Accounting to the Next Level

You started a company. You’ve been working hard – REALLY hard – and the hard work is starting to pay off. Maybe you’ve made your first (or first few) hires, or have rented an office space. Things are starting to feel pretty legit. In fact, it might feel like you’ve begun to outgrow some of the infrastructure you set up at the beginning to get your company off the ground. Although provisional, get-it-done bookkeeping often works when you’re starting out, the quicker you scale, the quicker you’ll outgrow those systems. This can leave you exposed to things like not collecting your customer payments and issues with tax reporting, but it also means you’re missing out on the opportunity for your numbers to help drive your overall business strategy as you grow.

So, how do you know when it’s time to take your accounting to the next level?

1. Your income and your cash are looking different

Often at the start of a small business, you’re collecting cash fairly quickly after performing work. However, as time goes on and the number and sophistication of your customer relationships increase, it’s possible that you’ll begin to collect cash either before or after work has been completed. Similarly, your expenses might be pre-paid or paid in the month or so after they’ve been incurred. This means that the amount of money you’ve earned and the cash you have in the bank are often not the same number. Understanding both is important to planning for large expenditures and for tax liability. If you’d like to know more about the typical difference between profitability and cash, check out our article about cash vs. accrual basis accounting.

2. You’re paying a significant number of independent contractors

As the number of third-party vendors and independent contractors you work with increases, so does your exposure on some of the common pitfalls for small businesses: purchasing enough worker’s comp insurance to cover independent contractors, tracking and executing their payments according to agreed terms, calculating their 1099-eligible payments, and importantly identifying if any contractors are acting as W-2 employees and should be paid as such. In bare bones bookkeeping, these contractors are items on a list of transactions – with thoughtful and expert accounting, you can make sure that you’re avoiding any potentially costly compliance issues upfront.

3. Your business model is project-oriented

If you read our post about project accounting, you’ll see that project accounting is a very specific type of accounting and has its own set of demands. Especially if your project include a high volume of costs against the revenue, there are specialized ways to account for the profit on each project (project revenue minus project-related costs), and to report on it. With a project-based business model, if you’re not keeping close track of the estimated and actual income and costs on each project – and, more importantly, if your financials aren’t reflecting those numbers – you’ll potentially receive some nasty surprises come tax season.

4. You’re tired of “owning” your books

No shame in that. There are probably better uses of your time and talent than signing checks, paying credit card bills, or managing hourly bookkeepers. If it feels like a heavy lift to get accurate, prompt, and valuable financial information, you probably don’t have the support you need.

If any of these sound like you, know that it’s a great problem to have! Needing to up-level your accounting means that your business is blossoming. Now it’s time to let the pros help. Contact us today.