What happens in the economy affects all businesses. Small businesses are often the most impacted by the economy, whether it is an upswing or a downswing. In a strong economy, small businesses see an increase in business that correlates to the amount of free income consumers are willing to spend on luxuries. In a weak economy, small businesses are hit the hardest by things like layoffs, conservative spending and over extension.

Economic Impact in an Upswing

All types of business tend to thrive during an upswing. Businesses have higher disposable income to put towards growth opportunities, hiring booms, expanded product menus and more. Since unemployment is lower during economic upswings, consumers also have more disposable income that they are willing to put toward non-essential products and activities. The growth in consumer traffic leads to growth in business opportunities which leads to company growth. The downside to this chain is that when the economy hits a downswing, small businesses that experienced rapid growth are more likely to find themselves overextended. This can lead to business failures and layoffs.

Economic Impact in a Downswing

Small businesses are typically hit the hardest in a downswing. Higher unemployment rates mean that consumers are less willing to sink money into luxury expenditures. They will seek out only the essentials and lower priced items. This means that small businesses see lower profit streams and may seek out financial aid. Lower profit and higher rate of borrowing dominoes into decreased ability to pay off creditors and lenders which can affect long-term financial viability. A downswing that comes directly on the heels of a period of high economic prosperity can also leave small businesses overextended. As mentioned, this results in layoffs and business failure. A smaller workforce leaves small businesses with a reduced ability to serve their clientele. Therefore, further slowing their ability to keep up with their payments or business goals.

Improvise, Adapt, Overcome

Some small businesses actually thrive in bad economies. The small businesses that do thrive often fill a niche in a high-demand industry. However, many small businesses rise to meet the demand of the slow economy. For example, during the COVID-19 pandemic, many businesses filling luxury niches in the economy turned to mask and hand sanitizer production to remain financially salient. The ability to adapt and adjust to the circumstances give small businesses an advantage over larger companies. Small businesses face significantly less red tape when looking to make a change in how they run their business. There is no need for stockholder meetings. The leadership base is smaller, which reduces the need for mass approval when looking to make a change. While small businesses are affected more by shifts in the economy, they also have a greater ability to adjust to the changes as they come.  

What is virtual bookkeeping?

Virtual bookkeeping is a bookkeeping service that happens via a cloud-based accounting software, rather than in-person. Your bookkeeper will maintain your books and keep your financial data up to date, all from an off-site location.

How can a virtual bookkeeper help my business?

The benefits of a virtual bookkeeper are endless. Here are five reasons switching to a virtual bookkeeping service is the right move for your business:

1. Expert bookkeepers without the hiring process
2. Easy data backup

Hiring a full-time accountant is expensive. There is the price of maintaining a job posting, the time lost to the interview process, and ensuring your new employee has benefits, to name a few expenses. In contrast, a virtual bookkeeper will only cost their hourly or by-project rate. With a virtual bookkeeper, you get an expert bookkeeper without the full-time price tag. Most virtual bookkeepers will access your books using a cloud-based bookkeeping software like QuickBooks Online. Cloud-based software will routinely back up any changes to your books for your records. This way, you do not have to remember to maintain a backed-up copy of your financial data, you can be sure you always have one. Using a cloud-based software typically also means that you control which parts of your financial data your virtual bookkeeper has access to. They are not able to view or manipulate any data you do not want them to.

3. Timely reports and financial data
4. Closely manage your company’s finances
5. Save time and money

Curating your financial data is your virtual bookkeeper’s only responsibility. A full-time in-house accounting staff can get bogged down with other projects and reporting, making it difficult to get timely financial data. In many small businesses, the bookkeeping is done by the business owner, making it almost impossible for you to focus on both the business and the finances. Instead, your virtual bookkeeper will be dedicated to ensuring you always have the right financial data when you need it. A virtual bookkeeping service is especially beneficial for routine financial tasks and reporting like month-end close or payroll. Since your bookkeeper will be maintaining your books virtually and often remotely, all interactions with that data will take place via your cloud-based software. This means that all changes made to your financial data and your books will be available to you in real time. A virtual bookkeeper allows you to keep all your financial information up-to-date and at your fingertips so you know what’s happening with your money at all times. Not only will a virtual bookkeeper save you expenses like hiring costs and full-time operating costs, they will also save you valuable time. In most small businesses, the business owner wears many hats. They are the owner, the support staff, even the bookkeeper. It can be overwhelming. It can also result in costly mistakes. You started a business because you are passionate about what you do. A virtual bookkeeper gives you the time and resources you need to focus on what is really important to you: your business.   Read related blogs