As an essential business function, bookkeeping is an everyday task for businesses. It acts as a mirror that reflects what exactly is happening in your business in terms of finances, payments, cash flow, etc. The importance of well-maintained books cannot be overstated; it can make or break a company. However, as a one-man army of newly started businesses, it can be tempting for business owners to DIY (Do It Yourself) bookkeeping, resulting in significant consequences down the road. Moreover, common outsourcing accounting and bookkeeping myths can also be the culprit behind keeping entrepreneurs like you away from embracing bookkeeping expertise. As a matter of fact, businesses can manage their bookkeeping on their own is easier said than done. Although, if you have decided to take up the challenge of DIY bookkeeping, then you must consider the following 3 questions:
1. How much time can you dedicate to bookkeeping as a business owner?
Processing payroll or a massive volume of transactions, meeting bookkeeping deadlines, or keeping all financial records in the books may require more time and effort than you can spare while performing other duties.
2. Do you have bookkeeping expertise?
Maintaining accuracy in bookkeeping is of utmost importance. Inaccuracy can cause a colossal impact, especially while paying taxes or making critical financial decisions. Managing a business’s finance without proper bookkeeping training and experience can be risky for company growth and cause irrevocable damage.
3. Can you analyze and predict the financial potential of your business to shareholders or investors?
When it comes to presenting a company’s financial information to investors, you don’t need a bookkeeper, but the potential financial benefits of investing in your business can’t be presented well without an expert bookkeeper or accountant. Giving financial figures might be difficult without a professional bookkeeper or finance expert.
These questions may look daunting, but they are crucial to deciding between DIY bookkeeping and professional bookkeeping service. Taking up a bookkeeping service can make a massive difference in the entire business process. It can allow business leaders to focus on the company’s core functionality while fulfilling the following primary responsibilities:
- Keep financial records up-to-date
- Reduce minimize expenses
- Drop tax penalties
- Put up your business credit
- Collect receivables
- Find business problems
- Help to keep up Healthy Cash Flow
- Manage Payables
- Arrange financing and load applications
- Tax preparation
Yet, some businesses take the risk of DIY bookkeeping and face the following challenges.
Inadequate Accounting Knowledge
Even though bookkeeping is always overlooked, it is complex and time-consuming work that demands a certain level of expertise. Moreover, you are neither a bookkeeping expert nor QuickBooks certified Proadvisor. Therefore, there are high chances that you will probably make costly mistakes while practicing DIY bookkeeping. Accounting software might prove a good tool, but it also requires a steep learning curve to use it full-fledge.
Missing Taxation Deadline
Bookkeeping is considered more as a chore than a crucial business process. Hence, while looking after the core business functionality, bookkeeping gets overlooked, resulting in missing out on important deadlines. When you are not hands-on in bookkeeping duties, you can feel overwhelmed and miss out on crucial tax filing deadlines. As a result, you might have to pay penalties or even appear in court.
Inability to Keep Accurate Records
Especially, small and medium business owners often find it challenging to have time and skills to maintain financial records. Probably, it is because they don’t do this daily, and on top of that, it requires their dedicated time. However, when it comes to DIY bookkeeping, maintaining error-free records is essential and burdensome too.
Lack of Time
The enthusiasm of starting up a new business drives a lot of entrepreneurs to take up unnecessary responsibilities to save as much money as they can. In fact, time is the real money for start-ups as they need it the most for business growth. Therefore, instead, work on your business, not in your business.
Unsolvable Cash Flow and Accounts Payable Damages
Every business needs observation and monitoring of the cash flow, especially companies under pressure. DIY bookkeeping can put more stress and make it more difficult for you to focus on the business. Most businesses have standard monthly expenses ranging from internet, rent, employee salary, liability, phone expenses, etc. Without a dedicated and careful review of bank, vendor/supplier statements, and credit cards, you won’t understand the money spent. All in all, it is challenging to handle the cash flow while running a business.
DIY is a creative concept that opens the doors to new learning, interests, and apprehensions. However, when it comes to your business’s finance, you must call the experts who will not only keep the errors away but optimize the process to make it efficient and effective. If you are also one of those business owners who are struggling through the DIY bookkeeping challenges, in that case, it’s time you should look for a scalable bookkeeping solution to streamline your accounting books, tax, and payroll processes. To take the right move, here is a quick read you can go through, Bookkeeping & Accounting, In-House Vs. Outsourced – The better option for you.