CALL US: 360-754-5848
4 Risks When a Family Member Does the Books
As a small business owner, you probably find yourself attempting to handle as much as possible on your own or with the help of your spouse and family members. When it comes to the bookkeeping, many family businesses just starting out may not have the budget to hire someone else to do all the bookwork. A family member may be all you can afford right now. But this carries its own risks.
Minimize the risks and maximize the benefits of using family for daily bookkeeping work by understanding the inherent hazards and how to conquer each. Here are a few of the most common concerns and how to mitigate them.
1. The Family Member May Not Know Accounting
Most people who volunteer for or are asked to do the bookkeeping for a family business aren't accounting professionals. This presents the most immediate problem in that they must figure out how to do the job — learning usually done through trial-and-error on the job.
Even if the person doing the books has some experience, arrange for them to get some training by an experienced accountant. This professional will set up the company books the right way and establish good practices. You may also want to schedule professional assistance learning the software, such as from a Quickbooks ProAdvisor, so your family member can learn the entire system rather than just parts of it.
2. The Family Member May Be Personally Liable
Did you know that when you have a person with some stake in the business handle tax remittances, they can be held liable for them? Generally, a person who is deemed a 'responsible person' for the business through ownership and active involvement could see their own assets at risk if they don't properly remit taxes. Defend against this by working with an accountant to oversee all the tax remittance processes.
3. The Family Member May Not Have Time
If the person you use to do the books is doing so in their spare time, they may not always be able to do tasks in the timeliest manner. This is an understandable problem, and you can handle it in a few ways.
One good solution is to work with an outside bookkeeping service to do certain tasks that no one has time for — like daily invoice entry or month-end accruals. You may also contract with the bookkeeping service to do overflow tasks if your family member gets overwhelmed or behind. Finally, another family member might be cross-trained to take on some work when the need arises.
4. The Family Member May Not Be Honest
One of the reasons many small businesses use family members to do accounting is that they trust the person more than a stranger. However, this trust is not always well placed. This close relationship may cause someone to feel freer to skim small amounts from the business or use company funds for personal purchases, for example.
Best practices in accounting always call for checks and balances. One person may receive cash, for instance, while another one counts it. Your accountant can provide some of these checks and balances when they perform audits, have access to your accounting software, or meet regularly to go over financial reports.
Even on a tight budget, your small enterprise can ensure the best management of its accounting. When you recognize some of the obstacles caused when a family member must handle the books, you're able to meet these challenges and overcome them.
Want more help getting things off to the right start? Start by consulting with Bliss & Skeen CPA today. Our accounting team offers an array of services for businesses on any budget and at any point in their growth. Call today to make an appointment.
