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I was making $10,000 to 20,000 per month at thirteen years of age. Quite the achievement for someone so young. Yet despite this, I made one of the worst decisions of my life that had a huge impact for years after: I decided to do my own bookkeeping and accounts.
Terrible idea. Not because I was a teenager but because I had no experience or expertise. Even if I did, it would still have been an enormous risk because I was too close to everything. I didn’t have the ability to zoom out and make rational decisions. This isn’t a mistake only I have made, though, and it isn’t one reserved for young entrepreneurs. I see business owners of all ages and types make it. It’s understandable because the costs associated with hiring a bookkeeper or accountant are roughly the same whether you make $5,000 per month or $50,000. Once you reach a certain level, it makes sense to hire someone. It’s an easy decision. Yet until you reach that level, you’re bound to ask: “Can I not just do this myself?”
Why you shouldn’t do your own bookkeeping and accounts
No matter what level your business is at, one of the first things you should look at to outsource is your regular bookkeeping and accounts (at a minimum). For starters, keeping an organized record of your finances is important for tax purposes. Unless you know what you’re doing, you run the risk of slipping into big trouble if you’re ever audited.
Yet it goes deeper than this. As a business owner, your job is to work on your business. You need to appreciate the finer details of what’s going on inside it but also have the ability to zoom out and focus on the big picture. If someone tracks, records and organizes your finances, you have access to what you need when you need it. Whereas if it’s you who takes care of all this, you run this risk of missing something or simply overlooking it.
So although it may seem easier to do the finances yourself and, on the surface, cheaper, you need to step beyond this mindset and go in search of a few essential hires.
Related: Do This to Make Your Money Work for You in 2022 and Beyond
The five financial people you need to hire
Over the years, I’ve learned there are five essential financial people you need in your business (and life overall). You don’t need all of them in the beginning and some don’t become important until further down the road. Yet, at some point, you need to consider all five:
1. Bookkeeper
For most businesses, this is the first financial person you hire. Your bookkeeper tracks what goes in and out of your business. They don’t make decisions, but their work allows you to make better ones. Hiring someone to do this not only saves you time but ensures you keep more accurate records and keeps you accountable with your money.
2. Accountant
With a solid bookkeeper, you gather all the information your accountant needs to give you the right monthly, quarterly and yearly insights into your business. Having access to this information further empowers you to make better decisions. Yet this person also makes sure you keep everything above board, paying what you need to and when.
3. Tax planner
The first two hires are essential. The sooner you find them, the better. Your tax planner is a little different because it doesn’t make sense until you reach a certain level ($250,000 plus per year). This person is important because your accountant is likely too risk averse. They don’t want to make their life harder, and they don’t want to put you in a potentially tricky situation. But as an entrepreneur, you need to take risks. This is where a tax planner comes in because they help you explore how to get the most out of your money (as well as how to pursue your vision and scale your operations).
4. Financial advisor
Similar to a tax planner, your financial advisor helps you explore investments, increasing your wealth now and in the future. However, don’t rush into hiring this person. I see too many entrepreneurs making this step too early, taking money out of their business (that they control) and having someone else advise them to put it into other businesses (that you don’t control).
Related: 5 Tips for Finding the Tax Advisor Who Will Save You Millions
5. Tax lawyer or attorney
This final person is worth having on board because they keep you and your business protected, and ensure you’re as tax efficient as possible. It’s not the sort of person you need to think about in the early days, but this person is worth their investment once you reach seven figures.
No matter where you are on your journey, it’s worth spending some time thinking about these five roles now. A few of them are essential. If you already have a bookkeeper and/or accountant, evaluate if they’re doing a good job or if you need to make changes. Whereas if you don’t, now is the time to explore both.
The other roles aren’t as important. Yet they will be at some point. Getting clear on them now saves you time later — but also expands your vision so you can run a more organized, sustainable and profitable business today.
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