Accounting · Bookkeeping

How do you securely have a bookkeeper?

Matthew Campbell General Purpose GO Hacker at DigitalOcean

November 16th, 2014

How do you have someone keep up your books and handle general accounting, without being able to write checks and take money. How do you go about hiring such a person? What kinds of things to look for to have some make sure they are trustworthy for such a task?

Susan Heider Enrolled Agent

November 16th, 2014

Matthew,

I think the first the thing you have to decide is how much of the accounting you want to do yourself. I've used Quickbooks since it came out in the early 90's and it's what I usually recommend but there are other programs out there that could work for your situation. You don't say what type of business you have, how large it is, or what kind of record keeping you do/need done; these can be important factors in deciding on a bookkeeper. In order to keep tabs on things, whatever accounting system you use HAS to be something that you understand and can pull any information you need from it without having to ask your bookkeeper.

Having your CPA do your books AND do your taxes, while it may seem logical, is always more costly and in my opinion doesn't allow for proper separation. I handle the accounting for a small business; I am also an EA, a Tax Professional. I told my client straight up that while I was more than capable of doing his taxes that I didn't feel it advisable to do both his bookkeeping AND his taxes. So at year end, I balance all of his accounts, make copies of statements, reconciliations and other pertinent data and give him a package to take to his CPA. His wife handles the bill paying and writing the checks, I just enter that data and take care of other things like posting the payroll that is processed through a separate agency.

When it comes to deciding whether or not someone is trustworthy, in part it depends if you're looking to hire an in house employee or using someone who is a professional bookkeeper. If you're looking for a part time in house employee, then your normal hiring protocols would be fine. If the bookkeeper can't write checks or take money, they can't, practically speaking, embezzle from you which I believe is your primary concern. Both an in house employee and a professional bookkeeper should be able to provide their experience / job references. A good way to check their discretion is to look at their facebook public view and then as a friend (if they will accept a friend request from you or long in to let you review the past couple of weeks). Someone who talks smack about clients or their employers is someone to avoid.

Lastly, you need to look for someone who will work with you and be willing to work with your CPA. CPAs often have a static account listing that they prefer their clients use when giving them info for taxes. They could potentially charge more if they have to figure out what your odd accounts names mean. Look for their experience, credibility and discretion and not so much about them having a college degree. Accounting software makes things incredibly easy these days and there may be a very good bookkeeper out there that doesn't have a piece of paper. (FYI yes, I do have a degree, one in Accounting and Finance, so this isn't a tainted opinion).

John Sweet Business Strategy, Technology and Innovation

November 16th, 2014

It sounds like you should design some internal financial controls appropriate to your business. The most important thing you can do is to "segregate accounting duties." Have one person balance the books, another person with authority to approve bills for payment, and another person who has signing authority to write checks. (Further, as Melissa Barton mentioned, it is a rare bookkeeper who actually wants the ability to sign checks themselves.)  There are other controls you can easily implement, such as to require two signatures for any payments over $1000; and to conduct occasional audits of spending behavior (even if this amounts to selecting just 5-10 transactions a month at random, and critically examine each one to see that your internal controls were followed). Employees should never make exceptions to your internal controls, except for those rare and few cases where they have express permission from you. Don't grant many exceptions because you want your employees to develop good habits that will protect your internal financial controls.

I am by no means an expert here, and I am sure there are others here and elsewhere who you can give better advice. Find a professional CPA with experience working with organizations of your size -- this is where you can get the best advice that's specific to the needs of your business and its plans for growth. As a supplement, you can talk with a representative of your bank who can direct you to both bank and non-bank facilities to help you implement good check-writing policies and other internal financial controls. I hope that helps!

Melissa Barton Owner at Simplebooks|Quickbooks Proadvisor Services and Small Biz Mentoring

November 16th, 2014

Matthew, I am speaking as someone  who handles others money.

An experienced bookkeeper who has given you references and undergone a background check like any of your other employees is the first start.

If you go over the profit and loss and balance sheet at the end of each month and look over the bank statements you should be able to find anything questionable.

a bookkeeper never wants the ability to sign checks themselves. It's essental to have checks and balances in place to make sure responsibility is shared.

In the 25 years that I've been doing this, the only cases of embezzlement that I've seen have been with co-owners or family members of the owner, not the bookkeeper. Interesting, huh?

Jiemin Li Entrepreneur and Investor

November 16th, 2014

Segregation of duties is important to avoid potential problems.  Three points checking system, a financial controller, an operator, and an auditor, is effective. The bookkeeper, an operator, doesn't sign checks, he/she can prepare the checks for the financial controller to sign.  In small firms, the owner/CEO might take the responsibility of the financial controller. An outside CPA performs semi-annual review of the books and work on tax filling for the company. 

You can find a part time bookkeeper. One of my employees got the Quickbook certification and started her own bookkeeping business a couple years ago and doing well.  For basic bookkeeping, you can also have your CPA to setup the account ledger and train your office manager/assistant to use it.  

As the company grows, you can always adjust your internal control to meet the growing demand in the future. The key is to make sure your system is designed with the segregation of duty in mind. 




Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

November 16th, 2014

Starting out even Quicken for Business, assuming your legal structure is simple and you do not have "exotic" line item expenses or revenue sources, works well. Quickbooks is favored because it is really aligned with GAAP principles and processes and automates some of the entries between the various basic financial schedules (cash flow; ;balance sheet; P&L; /A/R; A/P; etc). If very simplistic and using cash basis even a simple spreadsheet will give you what you need to track expenses. 

However the key thing for most companies is future cash flow, so having a model that projects revenues and expenses, is critical. And if you are billing customers the cash cycle (time between billing and receiving payment) can make or break your ability to stay open. I would try to keep it inhouse and use these simple tools before outsourcing to a bookkeeper.

Chris

Melissa Barton Owner at Simplebooks|Quickbooks Proadvisor Services and Small Biz Mentoring

November 16th, 2014

Matthew, you would probably pay a premium to have your cap office do your books. I would recommend having an outside bookkeeper do your books. You can have a remote access situation where you both have access to your files and then you can decide how much you want to do on your own (pay bills, etc) and how much you want them to do.

If you use Quickbooks I would recommend finding a Proadvisor 


Matthew Campbell General Purpose GO Hacker at DigitalOcean

November 16th, 2014

Thanks for all the feed back, currently most of our income comes from consulting. We have 7 consultants in US. However we recently expanded into Thailand and are doing a more product oriented business. So we have multiple currencies that we have to deal with. I think I'm going to start with Quickbooks and get a part time fully remote bookkeeper and I'll probably learn quickbooks also so I understand the basics. 

Matthew Campbell General Purpose GO Hacker at DigitalOcean

November 16th, 2014

@Melisa I have a CPA for doing my taxes, is it fairly typical to move bookeeping over to them, or does it make sense to get a real book keeper. I probably only need someone part time for my current volume, keep that in mind.