The Owner Spends 60 Hours a Month on Bookkeeping. Is That Really Necessary?
By ProfitWise - a Visa Business Plans company
A recent Reddit discussion caught our attention. Someone preparing to purchase an IT services company discovered that the current owner was spending approximately 40 to 60 hours every month on invoicing, bookkeeping, taxes, and other administrative tasks.
Understandably, the prospective buyer was concerned about inheriting such a time-consuming process and asked the community for suggestions.
It’s a situation that raises an interesting question: How much time should a business owner reasonably expect to spend managing the financial side of a company?
After all, most entrepreneurs don’t start businesses because they enjoy reconciling bank accounts, following up on unpaid invoices or organizing receipts.
Yet these responsibilities can gradually consume a surprising amount of their time.
How Does Bookkeeping Become a Part-Time Job?
Consider a small IT services company with several employees and a growing customer base.
The owner handles customer invoices, records expenses, monitors payments, reconciles bank accounts and prepares information for the accountant.
Initially, these responsibilities may take only a few hours each week. However, as the company grows, the number of transactions increases, more customers need to be billed and financial administration becomes increasingly complicated.
Over time, the owner may find themselves spending evenings and weekends catching up on paperwork.
The problem isn’t necessarily that the business has become too complicated. Sometimes, the processes simply haven’t evolved alongside the company.
For example, invoices may still be prepared manually, customer payments tracked in spreadsheets, and receipts entered individually into the accounting system.
Each task might seem manageable on its own, but together they can add up to dozens of hours a month.
What Is That Time Actually Costing the Business?
Let’s assume the owner spends 50 hours a month managing financial administration.
That’s 600 hours a year, or the equivalent of 15 full-time workweeks.
Now consider what the owner could accomplish with some of that time.
Perhaps they could meet with prospective customers, improve operations, develop new services or focus on employee training.
There’s also the question of whether the owner’s time is being used effectively.
If the business generates $150 in revenue for every hour of billable consulting work, spending 50 hours on bookkeeping could represent a significant opportunity cost.
Of course, not every hour recovered would necessarily become billable. But the example illustrates why owners should consider the time they devote to administrative work when evaluating their business operations.
Would Automation Solve the Problem?
Automation can certainly help.
Many accounting systems can connect directly to bank accounts, generate recurring invoices, track outstanding payments and organize transactions.
For a business that relies heavily on manual processes, these features can substantially reduce the time required for routine administrative work.
However, automation isn’t a substitute for accurate bookkeeping.
Transactions still need to be categorized correctly. Bank accounts must be reconciled, unusual entries investigated and financial reports reviewed.
For example, an automated system might import a payment for new equipment, but someone still needs to determine whether the purchase should be recorded as an expense or an asset.
Similarly, a customer payment might appear in the bank account without being properly matched to the corresponding invoice.
Automation can make financial administration more efficient, but it doesn’t eliminate the need for oversight.
Before Buying a Business, Look at Its Financial Processes
There’s another interesting aspect of the Reddit discussion: The person asking the question was preparing to acquire an existing company.
When evaluating a business acquisition, buyers naturally concentrate on revenue, profitability, customers and employees.
But the company’s administrative processes deserve attention, too.
Does the business have an organized accounting system? Are customer invoices issued promptly? Are outstanding receivables monitored? Are the financial statements reliable and available on time?
And perhaps most importantly, how much does the company depend on the current owner to keep everything running?
If the seller personally manages every financial task, the buyer may inherit responsibilities they weren’t expecting.
The cost of improving those processes, whether through software, professional support or additional employees, should be considered when evaluating the acquisition.
What We Look for When Reviewing a Company’s Bookkeeping
When we begin working with a business, one of the first things we want to understand is how its financial information is being managed.
We examine how transactions are recorded, how accounts are reconciled, how invoices and payments are tracked and whether the financial statements accurately reflect the company’s operations.
We also look for unnecessary manual work and opportunities to make existing processes more efficient.
Sometimes the accounting system is already capable of handling many tasks that the owner is performing manually. Other times, the company needs clearer procedures, better organization or more consistent bookkeeping.
Once the records are accurate and the processes are functioning properly, our monthly meetings give business owners an opportunity to review their financial performance, understand changes in revenue and expenses, and discuss any concerns.
The objective isn’t simply to reduce the time spent on bookkeeping. It’s to ensure that the business has reliable financial information without requiring the owner to personally manage every transaction.
And for someone spending 40 to 60 hours a month on financial administration, that’s certainly worth examining.
