Is a bookkeeper worth it for a small contracting business?

The honest answer is that it depends on where the return comes from, and the return does not come from the bookkeeping.

Nobody ever made money from having reconciled accounts. The money is in the decisions that reconciled accounts make possible, and whether that is worth anything to you depends on whether you are currently making those decisions blind.

Here is how to size it against your own numbers rather than take anyone's word for it.

The four places the return actually comes from

1. Pricing against real cost. Most contractors price against the wage, not the loaded cost of an hour. Work out the true figure and compare it to what you charge. If your break-even billing rate turns out to be above what you charge on some categories of work, every one of those jobs has been losing money — and the size of that gap, multiplied by the hours you sell in a year, is the single largest number in this whole question.

2. Knowing which work pays. Company totals cannot tell you which jobs made money. Cost one job properly, including loaded labour and a callback allowance, and see whether the answer matches what you assumed. Contractors doing this for the first time routinely find a category of work — a customer type, a job size, a service line — that is quietly running at a loss and being subsidised by the rest.

3. Money you are owed and cannot see. Pull your receivables ageing. Total everything past sixty days. A meaningful share of that is collectable and is not being chased because nobody is looking at it. That is not a projection, it is a number sitting in your own file.

4. The problems that run for a year instead of a month. A payroll liability that stops clearing. A margin slip. A customer who stopped paying. None of these announce themselves, and the difference between finding them in one month and finding them in twelve is the whole cost of each one.

Size it yourself, roughly

You do not need precision. You need an order of magnitude.

• Pricing gap: the difference between your break-even rate and what you charge on your weakest category, times the hours you sell in that category.
• Job margin: the annual revenue of any work you suspect is underpriced, times the margin points you would recover.
• Receivables: what is over sixty days, times whatever fraction you think is genuinely collectable.
• Compliance: the cost of one bad workers comp audit finding, or one late payroll deposit, times the chance of it happening in a year with nobody watching the liability accounts.

Add those four. Compare the total to what a year of bookkeeping costs.

For most contractors past two trucks it is not close, and the reason is item one — a pricing error is not a one-off, it repeats on every job until someone finds it.

When it is honestly not worth it

You are a single operator with simple money. One account, one card, no employees, no subs, and you already reconcile monthly. There is not enough here to pay for. Keep doing it yourself.

You already have good books. If you get a monthly close with a reconciliation report and someone explains it, you have the thing this article is arguing for. Changing supplier is a value question, not a "worth it" question.

You would not act on the information. This is the uncomfortable one, and it is real. If you would get a monthly pack, note that margin fell two points, and change nothing — the information has no value to you, and you should buy the cheapest compliant arrangement you can find.

That last case is more common than the industry admits. The return here is entirely conditional on someone using the numbers.

What the fee is actually buying

Worth being precise, because "bookkeeping" is sold to mean different things:

• Transactions categorised by someone who knows a contractor's chart of accounts
• Every account reconciled, with the report kept
• Payroll and sub compliance kept current through the year
• A P&L and a balance sheet that tie
• Receivables aged while the money is still collectable
• Job-level separation in the terms of your trade
• Somebody telling you what changed and why

If an arrangement does not include the reconciliation and the explanation, you are buying data entry, and data entry is worth what data entry is worth.

The way to answer this without deciding

You are being asked to pay for information you have not seen, on the promise that it will be useful. That is a reasonable thing to be sceptical about, and it is why the free first month exists.

Have a month done in full. Look at what comes back. If nothing in it surprises you and nothing in it would have changed a decision, you have your answer and it cost you nothing — and you should keep whatever arrangement you have.

If something in it does surprise you, that surprise is the return, and you have just measured it on your own business rather than on an example in an article.

Related

• Should you keep doing your own books?
• Monthly bookkeeping or once a year at tax time?
• Why profitable-looking jobs lose money
• True cost per billable hour calculator