Why DIY Bookkeeping For Your Company Is A Bad Idea
For most new businesses, economic constraints are a major concern. As a result, they consider do-it-yourselves (DIY) as an excellent opportunity to save money. Moreover, the fact that they do not need a license or certification to do their bookkeeping prompts business owners into believing that tasks are simple and straightforward.
While some business tasks can be performed by anyone, the safest option is to hire accounting and bookkeeping experts. However, if you continue to choose the DIY route, keep in mind that poor bookkeeping practices can stunt your business growth and land you in trouble.
To prevent any permanent damage to your business finances, the experts at Birch Accounting & Tax Services Ltd. have listed four reasons why DIY bookkeeping for your company is a bad idea.
1. Excess stress.
The biggest challenge about DIY bookkeeping is stress, the kind that keeps you up at night worrying about money. Bookkeeping is likely to stress you out when you fall behind on your transaction records. Without current financial details, you have no knowledge of who you owe money to, who owes you money, or how profitable you are. This may not seem like a big problem if you have ample resources in the bank. But, if worrying about making next weeks’ payroll has ever kept you up at night, you’ll understand what this stress feels like.
2. Financial implications.
There are several financial implications to consider with DIY bookkeeping, and the magnitude of these financial implications can vary dramatically:
a. Failure to report and remit taxes by the appropriate deadlines can result in interest and penalties that can vary in size based on your circumstances.
b. Not keeping real-time financial records can result in inadvertently making over-payments or duplicate payments to vendors. It could also lead to loss of control on how you disperse your cash (for example, you’re likely to pay the loudest vendors first, but maybe not the most strategic vendors).
c. Not keeping real-time financial records will make it difficult for you to learn from past experiences because you will lack the timely reports required to learn from your past decision making or to analyze trends.
d. Not keeping real-time financial records will also make it difficult to make strategic decisions related to significant investments in facilities and equipment or staffing.
3. Poor decision making.
The greatest challenge with bookkeeping is not realizing the importance of the information being created. We live in an age driven by data, and those who have sufficient financial information to make great decisions are most successful with their business.
Understanding the importance of the information collected through bookkeeping will help you define what you need that information for and how often it must be updated for the best results. The two most common uses that we witness are:
a. Cash-flow Management
b. Gross Profit Analysis
To make the best use of your transactional information, your bookkeeping must be current, clean, and accurate. When the data used in the bookkeeping process is not current or accurate, it complicates the decision-making process or leads to a poor outcome. This is by far, the biggest problem with DIY bookkeeping. The second major issue is that the cost of cleanup work is usually higher than the cost of doing the work.
4. Slow bookkeeping and report creation.
Modern technology has not only improved the bookkeeping industry, but it has also changed it dramatically. Bookkeeping is no longer about simple data entry, but about cultivating valuable information and generating timely reports. This requires expertise in cloud-based accounting software and the network of custom applications to streamline business processes and collect valuable information. Without expertise in the latest accounting technology, your bookkeeping process is likely to take longer than it should. The same goes for your report generation.
Do things right - Hire a professional
Professional bookkeepers are trained in the use of modern bookkeeping technology. They know how to operate cloud-based accounting systems and can easily access reports required for your business. Moreover, they build customized processes to streamline data entry using the right suite of accounting software and applications. They guide the implementation of those processes, develop a reporting system that ensures operations are running as intended, and the financial results of the business are carefully monitored regularly. They even help ensure that the reporting structure is being used to make timely, strategic business decisions in the best interest of the company.
How to choose the right professional
When choosing a bookkeeping firm, select one that supports forward-thinking and experts in the use of robust cloud accounting software. They must emphasize the importance of creating valuable information and timely reporting compared to simple data entry. If you choose a professional to do your bookkeeping for compliance purposes (completed only at the end of each year or each quarter), note that you fail to utilize the valuable information that you can generate today with existing technology.
Similarly, understand that an excellent bookkeeping firm that focuses on providing timely and valuable reporting as described would not price a job at an hourly rate. This provides no pricing certainty to their clients and makes it difficult to develop trust. Additionally, they would never provide pricing without first seeking to understand the needs of their prospective client thoroughly. Failure to understand your clients’ needs leads to higher-priced services, poor performance, and unmet expectations.
As a result, a customized quote for your business should be requested to ensure your needs are accounted for at a fixed price that you are comfortable with.
For the very best bookkeepers and accountants in Leduc, Alberta, reach out to Birch Accounting & Tax Services Ltd. We are well-adapted to modern accounting and are efficient with report creation and timely delivery. At the same time, we have over a decade of experience in bookkeeping, personal taxes, corporate taxes, business planning, and payroll services. So, you can trust us to provide you with the right clarification, education, solution, and service!