Solopreneurs face many challenges, and one of them is dealing with accounting and taxes. As a business of one, many find it difficult or time-consuming to manage their bookkeeping. Moreover, experts suggest that it is not a good idea for solopreneurs to manage all accounting and tax tasks themselves. Instead, consider the following ways to handle accounting, including the advantages and disadvantages of each option.
Hire a Bookkeeper
Although you can read many tips on bookkeeping, they cannot replace a professional. There are differences between a bookkeeper and accountant you should know before hiring. A bookkeeper focuses on daily tasks, such as keeping records and receipts organized. On the other hand, an accountant goes beyond these daily tasks and helps with in-depth duties, such as figuring out your savings or tax strategies.
You can determine if your small solo business can manage adequately without a bookkeeper or if you even need one. First, be honest with yourself and ask if you can keep up with daily bookkeeping tasks. Second, check if struggling with bookkeeping is affecting your business and personal life. Figure out if the lack of a bookkeeper is holding your business back and taking time away from other important tasks. Hiring a bookkeeper will cost money, but it will save you time.
Hire an Accountant
Accountants are more qualified than bookkeepers and usually have a bachelor’s or master’s degree. They can take on more financial responsibility than a bookkeeper and develop a financial strategy that supports your business growth. Accountants are also trained in tax and financial law.
If you want someone even more experienced, consider hiring a certified public accountant (CPA). A CPA must pass both educational and licensing requirements that vary from state to state. In general, they are considered more knowledgeable than a typical accountant. They can also prepare audited financial statements, file reports with the Securities and Exchange Committee (SEC) and represent you in front of the IRS during an audit, which are all things a typical accountant cannot do.
If you are struggling to determine if it is time to hire an accountant, consider using a pros and cons list. It will cost money to hire a person and time upfront to do the interviews. However, you will benefit from getting expert advice, tax compliance and auditing help.
Outsource
Hiring a bookkeeper or accountant comes with costs, including recruitment costs, salaries, office space, furniture and equipment. You will also need to purchase accounting software, accommodate disabilities, provide vacations, sick days and other employee hiring necessities. By outsourcing your accounting, you can avoid many of those costs.
Outsourcing means you are not hiring a full-time accountant to join your business. Instead, you are using the services of an accountant on an as-needed basis. This keeps office expenses to a minimum since you do not have to provide space for the person to work with you. An outsourced accountant does the tasks without receiving a full-time salary and benefits.
Sign up for a Hybrid Accounting Platform
A hybrid accounting platform like Collective gives you the best of both worlds. You can outsource accounting and still get a professional to help you. This Collective review explains it allows small business owners to manage accounting functions, get taxes done and form S Corp and LLC business entities. In addition, you are assigned a member relationship manager who is on hand to assist with any queries or tasks.
The collective.com review also explains that it offers tax help, including quarterly tax estimates, individual income tax returns and business income tax returns for both the state and federal. There are tools and training on how to use the available resources.
Benefits of Not Doing Your Own Accounting
There are multiple benefits to not doing your own accounting as a solopreneur. The first is not being forced to do something you do not enjoy or have experience in. Tasks that are not in your zone of genius or excellence are always more difficult to complete and take more time.
The second benefit is being able to focus on other areas of your business, such as scaling. If you are spending hours every week tracking invoices, then you are missing out on marketing and sales opportunities that can help you grow. Outsourcing accounting gives you the chance to focus on revenue-generating activities instead of daily tasks like collecting receipts.
The third benefit is being able to have a professional handle the accounts. A professional has the expertise and knowledge to avoid mistakes that many solopreneurs make. They also know how to save money and avoid tax penalties when possible. They can do the work faster and easier than a solopreneur. By handing off the accounting to someone else, you can focus on other things.;