Business bookkeeping: DIY, bookkeeper, or software?
Your business’s accounting process is a cornerstone system. Establishing a foolproof process to manage your company’s funds can help you achieve success. Do you feel like your constantly playing catch up with your finances? Then it may be time to consider other bookkeeping options.
As a business owner, you're responsible for so many things. Your days could be spent interacting with customers, sourcing supplies, and managing employees. Adding DIY bookkeeping to the equation can do more harm than good to your company’s finances. This is not to say that DIY bookkeeping is always inferior. Maybe, DIY is still the best option for your business after you make a few budgeting tweaks.
Making the right decision depends on the level of service your business needs. Here's what you’ll discover from this blog post:
- All the different bookkeeping options available to you as a small business owner
- The different types of bookkeepers you can hire (no, you don’t need to hire a full-time employee for this)
- The pros and cons of each type of accounting style
What is a bookkeeper?
A bookkeeper handles financial and administrative tasks while overseeing a company’s financial data. Unlike an accountant or CFO, bookkeepers are not responsible for analyzing numbers or offering financial advice.
These responsibilities may include:
- Maintaining records of financial transactions by posting transactions.
- Ensuring legal requirements and help prepare compliance requirements.
- Developing systems to account for financial transactions.
- Defining bookkeeping policies and procedures.
- Maintaining historical records by filing documents.
Types of bookkeepers
Don’t let the word “hiring” scare you. You don’t need to invest in a full-time bookkeeper if it doesn’t make sense for your needs.
- Full-time: Ideal for medium-sized businesses that need to keep multiple transactions daily but don’t need the input of an accountant or financial analyst.
- Freelance/Part-Time: Ideal for startups or smaller businesses that either only has a temporary need for bookkeeping. Also, this could be a good option if you have too few transactions to warrant full-time upkeep.
- Outsourced: Ideal for larger companies that need a fully-trained bookkeeping team but don’t want to invest the resources to hire and train them.
- Service: Ideal for any business with a small to large set of duties for a bookkeeper but doesn’t want to hire and onboard a full-time or freelance bookkeeper.
What option is best for your business? Let’s compare…
Hiring a Bookkeeper
If you and your employees (if you have any) don’t have the available resources to handle accounting, then hiring a bookkeeper is a good option. The role of a “bookkeeper” is flexible. It can range from someone who just enters financial data to someone who helps prepare tax information.
- Saves Time: Hiring a bookkeeper saves you time to invest elsewhere. Bookkeeping is always something your business is going to need.
- Increased Accuracy: With a bookkeeper, you’re less likely to make mistakes that can cost you when reporting income to regulators, paying taxes, or handling financials with customers. Reason number one, a bookkeeper is trained in handling finances while you likely are not. Reason number two, they dedicate their time solely to finances, while you likely wear multiple hats.
- Forces You To Systematize: It’s difficult to make good decisions in your business when you don’t fully understand your numbers. A bookkeeper will present you with a full data set to help you analyze your business. Where are you leaking money? Where are the hidden opportunities? Is this activity or market profitable?
- Data Risk: When you hire a bookkeeper, sensitive information may be at an elevated risk. Data like bank information, passwords, and account numbers are in more hands.
- Cost: The immediate cost of hiring a bookkeeper will always be more expensive than doing it yourself. Another potential risk is the long-term cost. Some bookkeeping services will try to lock you into a long-term contract, so you need their services for longer.
- Accountability: You already accept that running a successful business means trusting others. You place high trust in a bookkeeper because they hold the keys to your most pertinent info. Their decisions or mistakes all fall on you regardless of if they’re good or bad.
If your business doesn’t do a high volume of transactions due to a high order value or being a startup, you may do your own bookkeeping. No magic number of transactions or time investment qualifies you as needing to pay for accounting help. These pros and cons should help you come to a decision.
- Deeper Understanding: By doing your own bookkeeping, you can dive into the nitty-gritty of your finances. For many business owners, this may be the only time you take an honest look at what's working and what's not. You can make projections, cut out wasteful expenses, and renegotiate terms when right. All of this starts with knowing your numbers.
- Save Money: You will save money by doing your own bookkeeping. Hiring a professional bookkeeper can cost $100s, if not $1,000s, monthly. In the beginning stages of business, this is just too much. If the cost is a significant chunk of your income and you’re happy where your business is, then DIY is perfectly ok.
- Do Things Your Way: By doing your own bookkeeping, you can control every aspect of what gets done, when, and how. Knowing what you’re doing can be an advantage when it comes to finding industry-specific tax deductions or saving for a capital expense. Bookkeepers aren’t available 24/7, meaning your finances may be behind lock and key. Doing things yourself means you always have access to your finances.
- Time: The biggest con of DIY bookkeeping is that you will spend a lot of time doing it. You can spend time marketing your business, training employees, or strategizing. As your business grows, you should ideally spend less time on administrative tasks.
- Mistakes: Without professional accounting experience, you’ll likely make mistakes with your books. You’ll unintentionally omit information when submitting taxes or flat-out compile your finances incorrectly. Mistakes can lead to you misinterpreting how your business is doing. Worse, they can lead to fines or penalties from the IRS.
- Missing deadlines: If you’re busy, adding balancing the books to your to-do list will only make it worse. You need to be organized with every document, or else you can miss deadlines while looking for them. For many business owners, it’s one of two options. Either spend too much time to be error-free and meet deadlines, or not spend enough time, procrastinate, make mistakes, and miss deadlines.
- Scalable: If your business finances are repetitive, they’re likely scalable too. This means that as your business grows, your ledger will grow too, but your time investment for accounting won’t.
- Affordable: Accounting software is usually cheaper than hiring a human bookkeeper. Their plans are straightforward, so you know what you’re getting.
- Faster: Again, if your business has straight-forward finances, using accounting software can save you time. Instead of logging repetitive expenses and incomes individually, accounting software can integrate with your bank and/or payment processor to pull transactions. When you need financial information, you can simply log in and view it.
- Confusing: Using accounting software to balance the books may seem like a happy medium between hiring a bookkeeper and DIY. Accounting software can confuse you just as much and waste your time. If you don’t want to take the time to learn certain accounting skills and systems, you can still make mistakes.
- Specialist Needs: Most businesses can fit their finances into accounting software. If your business has specialized needs, accounting software may not do enough for you.
- Security: Any information stored electronically can be hacked, manipulated, or accessed by third parties. The only security measure you can take is setting a strong password and two-factor authentication. Hackers may not target your account but all the accounting software customers.
Less time budgeting, more time “businessing”
It’s tough for many small business owners and entrepreneurs to accept that many of the tasks they do recurringly are holding their business back. If you’re wasting time repeating tasks or doing work below your pay grade, your business will struggle to reach its full potential. Sometimes, it’s smart to get help from either a professional or a tool designed for your specific problem.
One such tool business owners use to save time and money is ComplYant. With ComplYant, you can check off worrying about tax deadlines from your list. Get due date reminders for one or more businesses, and know your filing & payment deadlines for income tax, sales tax, property tax, business licensing, payroll tax, and more.