Looking to hire an outside bookkeeper? Here are three red flags to look out for

Your friend recently met a guy named Fred at a business conference, and Fred said his accounting firm was looking to work with more small business clients. Knowing that you were looking for a bookkeeper your friend passed along his card. So, you called Fred, and he told you all about his company, all the services they can offer (they can do your taxes too, hurray!), and then he gave you an estimate for monthly bookkeeping that was almost half of two other recent estimates you received. So you hired him.

Three months later your books are a flaming hot mess. You login to Quickbooks and see that none of your new customer accounts have been added. New customer payments are being inadvertently matched to existing customers invoices, so it looks like you owe existing customers refunds. Unposted transactions are piling up and the ones that are posted are in the wrong expense accounts. You run a P&L report and see you are killing it so you breathe a little sigh of relief…but wait, rent and wages paid aren’t listed in the P&L, so are you killing it? You call Fred. He says he’ll check with Mary, because she is the one doing your books, and get back to you.

Names are made up, but it’s real scenario. Fortunately, the bookkeepers that will almost certainly do a bad job for you, will tell you without telling you before you hire them in one or more of the following three ways:

1) They don’t get to know your business. 

Fred did all the talking (selling) and didn’t ask a single question about your business. While all businesses have a standard formula - money comes in, money goes out, hopefully more of the former than the latter - small businesses in particular are all different. If the potential bookkeeper does not ask questions about your busines: what it does, how it works, what your goals are and why, etc., this is a BIG red flag that they don’t have the accounting competency required to keep accurate, compliant, and also informative books.

2) Their monthly bookkeeping rate is 40-50% less than other estimates. Fred’s price was almost half the other two estimates you got. Having owned several small businesses I know how tight operating margins are and I understand the temptation to go with the cheapest option for anything. But bookkeeping services are the internal wiring of your business and too important to be decided on cost alone. Good bookkeeping takes time and expertise and if the bookkeeper or their firm doesn’t charge adequately this is a warning sign. Be sure to ask for a detailed itemized list of what bookkeeping actions are included in the monthly service.

3) The person keeping your books is NOT your contact at the company

Fred is not the person doing your books, Fred may not have any accounting experience at all, he may only do sales. Having separate sales staff from accounting staff is not a red flag in and of itself. It becomes a red flag when you’ve been led to believe that your contact at the firm is actually your bookkeeper. Good accounting firms introduce you to your bookkeeper after you’ve signed on as a client and allow you to contact them directly.

These are the major red flags to watch out for when you are hiring a new bookkeeper.