Use this guide to build your accounting A-team.
When you first started your business, you were probably a little bit like a garage band, living your dream and solving problems on the fly.
But as your business has grown, relying on cofounder Dave—who doubles as your CTO and company legal team—to continue paying vendors and your growing team of employees will no longer cut it.
If you want your business to continue growing, you need to set up an accounting department structure that can handle an array of accounting duties and expand with your business.
Let’s take a look at five essential small-business accounting tasks, how you should approach staffing each of those roles, and how to tell when you need help. And because your business can’t run on human effort alone, we’ll also break down how accounting software can support your team.
Small-business accounting needs people and technology
Though accounting software is a must-have for any small business, it can’t do everything. You need a human behind your software to double-check the numbers, analyze the output, coordinate between non-integrated systems, and ensure that your business isn’t ripped off by devious vendors or fraudulent employees.
At the bare minimum, you need someone to run payroll, someone to pay vendors and send invoices, and someone to handle the books every month so they’re balanced come tax time.
Cofounder Dave might be able to do all these things, but that doesn’t mean he should be doing all these things long term. But as a small-business owner, there are times you need to make do with less.
Your accounting department structure will never look like your company softball team roster. These aren’t positions on a lineup card that you need to fill; these are tasks that need to get done through a combination of roles and resources. You’ll need to show discretion as an organizational leader to figure out exactly what that combination looks like for your business and the resources you have.
You can use this article as a blueprint to build your own structure, but don’t forget to expect fluidity based on the size of your business (both in staff and volume of business) and the capabilities of your team.
5 essential accounting tasks and how to tackle them
In the sections below, we’ll look at five essential business accounting tasks, the skills you should look for to handle those tasks, and red flags that you need reinforcements. At the end, we’ll look at some ways that accounting software can help with each task, and give an example of a basic small-business accounting department structure.
Why it’s important: The U.S. Small Business Administration reports that low sales/cash flow was the number one cause of small-business closure as of 2015 (the last year the U.S. Census Bureau collected such data). What does this have to do with billing? The longer it takes for your customers to be billed, the longer it takes for you to get paid. You need to be paid so you can pay your employees and vendors. If you aren’t paid accurately and on time, your business is at risk of failure because of low cash flow.
Who should be doing it: You don’t need a CPA to handle your billing; anyone who is good with numbers and has an eye for detail should be able to handle this task. In addition to accuracy, timeliness is crucial for billing, so you want someone who is punctual and meets deadlines.
Signs you need help:
- Customers aren’t receiving their invoices in a timely manner
- Customers are being billed the wrong amount
- Customers aren’t paying the right amount or on time
2. Payments/accounts payable
Why it’s important: The Institute of Finance & Management reports that at top-tier organizations, a single full-time accounts payable professional can process almost 23,000 invoices per year. That’s about 85 invoices per working day. If you’re only paying a few bills at a time, you’re probably not keeping up. And if you don’t make it a priority to pay your vendors on time, you’ll be paying late fees or, worse, losing your vendors. You don’t want to put this off until after your electricity is turned off.
Who should be doing it: As with billing and invoicing, accuracy and timeliness are paramount when it comes to accounts payable. If your organization is on the small side, it’s OK to have one person or a small team handle accounts payable and receivable (billing). While your vendors should be trusted to bill you accurately—making this task a little less involved than invoicing—this role should be filled by someone who can double-check vendor numbers to ensure you aren’t overbilled or charged for goods or services that weren’t actually provided.
Signs you need help:
- Vendors are complaining that they’re not getting paid.
- Despite their best efforts, your accounts payable team can’t keep up and is making late payments.
- Your accounts payable professional is having to work overtime to keep up.
Why it’s important: As discussed in our article on payroll processing best practices, if you don’t pay your employees on time and you don’t pay them the right amount, you’ll start losing staff members, and then you won’t have to worry about running your business anymore.
Who should be doing it: When your business is very small (two to three employees), you might be able to get away with having your accounts payable and receivable person handle payroll as well. Once your company grows much beyond that, though, you’ll need either an experienced payroll specialist or a third-party payroll service to do it for you. What makes a good payroll specialist? In addition to being punctual and meticulous, your payroll person also needs to work well with others to resolve inevitable issues.
Signs you need help:
- Employees are routinely being paid late.
- Employees are being shortchanged or overpaid because of clerical errors.
- The employee responsible for payroll is overwhelmed and working overtime to get paychecks out on time.
Why it’s important: Balanced books are the true north of your business, and should help you sleep peacefully at night as a small-business owner. Good bookkeeping basically means that all of your bills have been paid and all of your customers have paid you what they owe, and you’ve kept clean records showing as much. While that may not sound terribly exciting, it’s absolutely vital to the financial well-being of your business in the same way that your body temperature should always be right around a nice, boring 98 degrees. If your books are off, it means that something has gone wrong.
Who should be doing it: In a way, every other task on this list ties into bookkeeping, so you need someone who is well-rounded, precise with numbers, and works well with others. While billing is responsible for sending invoices and accounts payable is responsible for paying bills, your bookkeeper is ultimately responsible for recording and keeping track of all of those transactions and balances. Your bookkeeper will also be working with accounting software almost all the time, so they need to be proficient in whatever accounting program your business uses.
Signs you need help:
- Your books aren’t balanced (there’s money earned or money spent that you can’t account for).
- When tax time rolls around, you’re missing necessary reports and receipts.
- At the end of the year, you have to sift through personal expenses to locate business expenses.
5. Tax preparation
Why it’s important: You need to pay the government what you owe, but you also need to get credit for all of the deductions you qualify for so you don’t pay more than that. You also need to get W2s out to all of your employees so they can file their taxes on time. If you don’t think this is important, just wait until the IRS comes knocking with a long list of questions that you don’t have answers to.
Who should be doing it: A professional. Ideally either a CPA on staff, or from an outside firm, who can represent your business to the IRS if necessary. While tax time comes only once per year, it’s folly to think that you only need to worry about it for a few days or weeks leading up to the deadline. Staying on top of expenses and income throughout the year, and recording them properly in terms of their tax implications, makes a huge difference when tax time comes. Your bookkeeper should work side-by-side with whoever is in charge of tax preparation to ensure that they have everything they need to thoroughly and accurately prepare your tax return.
Signs you need help:
- You’re trying to do your business taxes on your own at the end of the year and struggling to find the right reports and forms.
- You end up with a much higher refund or amount owed at the end of the year than the year before and can’t explain why.
- After you file your taxes, you get an audit notice from the IRS and you’re not prepared to answer their questions.
How accounting software can help
Automated invoicing: Say you have a client that orders 10 pounds of coffee every month. The first time they order you fill out an invoice template with all of their information, then you set it to send out the same day every month. If they want to increase or decrease their order, skip a month, or cancel, all your billing specialist has to do is go in and change the settings. But the rest of the time, this invoice goes out like clockwork.
Automated payments: Any good accounting software will remember a bill after you’ve paid it the first time, allowing your payments specialist to set up an automatic payment next time a similar bill is received from that same vendor. Advanced features include payment tracking—so you can see when your payment has been received—and automated approvals, so you don’t have to digitally sign a form every time your office manager orders more soda for the break room.
Payroll: Payroll software is complex enough that it’s a built-in feature for only the biggest hitters in the accounting software space, such as QuickBooks Online (the top tool five years running on our “Top 20 Most Popular Accounting Software” list). So instead of looking for an accounting tool that also handles payroll, we recommend trying one of these tools that integrate with popular payroll apps to make life easier for your payroll specialist by automating things like direct deposit and taxes withheld.
Automated bookkeeping: Accounting software is bookkeeping software. Bookkeeping is baked into all accounting software, keeping a clean record of all of the money coming in and out of your business and flagging any discrepancies. This allows your bookkeeper to act more as a gatekeeper, feeding data into the software and double-checking numbers rather than spending hour upon hour on tedious data entry and simple, repetitive math.
Tax preparation: Accounting software can’t do your taxes for you, but it can record and organize all the necessary data and provide the necessary tax forms so that when tax time comes around, you can click a few buttons to produce reports for your accountant instead of dumping a shoebox of receipts on their desk.
A basic small-business accounting department structure
Now that we’ve outlined the essentials, let’s look at a basic accounting department structure that your business could start with:
A setup like this will have you covered for virtually every small-business accounting need, but there is room for flexibility. You could have your bookkeeper handle accounts payable/receivable on their own if your business is small enough, or you might find that it makes more sense to have an outside firm handle payroll if it becomes overwhelming.
The important thing for you as a small-business leader is to monitor growth and adapt as needed (don’t wait until paychecks have been late for three straight cycles to get help).
On that same note, always err on the side of caution when it comes to getting professional help. You don’t know what you don’t know, and it’s much more important to get your accounting right without burning yourself out than to save a little money.
What’s your small-business accounting lineup?
While this article looked at the core accounting department positions, as your company grows, you’ll need to expand these teams and add new positions like a CFO and financial analysts to shift the focus from staying afloat to growth.
You also don’t have to be an expert in every area of your business, you just have to listen to those who know more than you. If your lead accountant tells you that it’s time to start outsourcing your payroll, listen to them.
Did I miss any vital accounting roles in this article? How do you have your small-business accounting department set up? Let me know in the comments!
And be sure to stay on top of everything from filing your taxes to following best practices in payroll processing by following our accounting blog.
Looking for Accounting software? Check out Capterra's list of the best Accounting software solutions.