Who Does the Books?

When Jim Lett started his window and door business, A.B.E. Window & Doorin Allentown, Pa., he did everything himself — including the books. Soonenough, however, Lett began to outsource his bookkeeping. He still does, ata cost of between $450 and $500 a month. Generally, costsat home improvement companies that outsource bookkeeping range from $200 to $1,000 per month.

Taos, N.M., CPA Jim Stephens suggests that such a pattern is typical for manycontractors, who may not want to spend extra money on an overhead item suchas bookkeeping services when they can do it themselves. But they then discoverthat it's not all that simple.

“The first pitfall,” says Stephens, a former contractor who leftconstruction to get an accounting degree and CPA license, “is that youdon't file sales tax reports on time. And, if you have two or more employees, you'llbe required to pay payroll taxes monthly.” A second issueis time, he says. “If [contractors are] doing the bookkeepingthemselves, they're not out doing what they should be doing” — thatis, selling and installing home improvement jobs.

Steps and Thresholds Many home improvement companies out-source bookkeeping for just those reasons. Anotherreason is that they want to be assured of accurate and up-to-datefinancial records.

But as companies grow, owners frequently find themselves seeking immediate accessto financial information instead of the monthly reports typically generatedby a bookkeeping service. Later this year, Lett will bring bookkeepingback in-house, using a software program and dividing bookkeeping responsibilitiesbetween two office employees. “My CPA said my business is bigenough that we could do our own bookkeeping,” he says.

Size, as well as the degree of control over financial records and reports, arethe main reasons companies keep bookkeeping in-house or bring it back afteroutsourcing.

Swing Line Windows in Pittsburgh, which had outsourced its bookkeeping for years, recentlyhired a full-time bookkeeper. After adding a basement finishingfranchise several years ago, revenue had climbed from about $3 millionto about $6 million. That jump in volume made owner Ken Moesleinrealize he could justify the expense. Owners must be sure they “hita certain threshold” where they're consistently selling and producingat that number, he says. That makes taking on additional payroll affordable, andless risky. Recently, Moeslein promoted his bookkeeper to officemanager. One of her new functions includes managing financing programs.

Hire a Book Keeper? If you're considering hiring a full-time bookkeeper, the median salary is $34,735 fora company with fewer than 100 employees, according to CNNmoney.com. Amongother things, bookkeepers handle payroll, manage payables andreceivables, and pay bills. At many companies, they take on other tasksas well. What they don't do typically, says California CPA Steve Maltzman, whoincludes many contractors among his clients, is track and make tax payments, andprovide you with the financial reports you need to help you manageyour business. For that, you may still need the services of a CPA.