Most of the small business owners we know have generally started up their operation with a DIY mentality, doing everything they can on their own. Of course, unless you want to be running a solo shop forever, it’s expected that at some point you’ll need to bring in some additional support to further your growth. But it’s understandable that you’ll want to put that off until it’s absolutely necessary, and until there’s sufficient revenue to justify the expense of doing so.
However, it’s important to avoid making the mistake of thinking that since you’re running a small business, you don’t have to be as concerned about accounting as a big business would. It’s true that your startup shop is not the same, in many ways, as a Fortune 500 company. But that doesn’t necessarily mean that your accounting is going to be easier. It’s more that there are different concerns for small businesses than there are for big businesses.
For starters, when you’re running a small business, accuracy in your books is critical. It may not seem that way at first, when both revenue and expenses are low, and many times we see owners of startups who get careless about documenting expenses. Often times, business and personal finances become commingled, which becomes difficult to sort out later on, when your volume increases. Don’t take this to mean that precision is not important to larger businesses. But because of their size, if errors are made, they’re likely to be able to absorb those mistakes and recover from them quickly. But for a small business, even a small mistake can have very serious consequences.
Another difference is that smaller businesses lack the market share and consequently the clout that their big business counterparts carry. You may not be able to purchase your supplies with the level of volume discount that your larger competitors get. It’s also more difficult to obtain financing for a smaller, younger business than for a bigger company with an established track record. A smart accountant can be a big help in presenting the best picture of your business’ financial health, to get you the best terms available.
Perhaps a bigger concern for small businesses is what has been referred to as “resource poverty”. It’s not just that there’s less revenue than there is in a big business. It’s also that some fixed expenses (like your own salary, for example) represent a more substantial portion of your overall revenue. This situation leaves less resources available for other purposes, including staff and management salaries, as well as services like accounting and bookkeeping.
So, more small to medium sized businesses are turning to virtual accounting to manage their books. Rather than fall back on doing it yourself or passing the responsibility to a family member, you can outsource the work to a full team of professionals. A virtual accountant will typically cost less than hiring a bookkeeper to work in-house, and will give you access to the same level of top-notch accounting software and expertise that your larger competitors have.