Busted! Don’t Believe These Myths About Bookkeeping!

By Birch Accounting & Tax Services Ltd. | | Categories: Accountants , Bookkeeping , Business Advisor , Business Plan Help , Corporate Accountant , Corporate Taxes , General Contractor Accounting , Payroll , Personal Income Tax Accountant , Personal Taxes

Busted! Don't Believe These Bookkeeping Myths - Blog by Birch Accounting

Many people underestimate the role of a bookkeeper as they have fallen for the misbeliefs and misconceptions associated with the accounting profession. As accounting and tax consultants in Leduc, Alberta, at Birch Accounting & Tax Services Ltd., we want to clear your doubts by debunking three of the most widely believed myths about bookkeeping.

Myth 1: It’s just data entry.
Yes, data entry is one component of the bookkeeping process, but in reality, it’s one of the smallest components. To best answer this question, I believe we need to first understand the purpose of bookkeeping, both historically and today.

Historically, the purpose of bookkeeping has been to facilitate the preparation of tax returns and to ensure compliance with CRA; however, this does little to add value to business owners.

The purpose of bookkeeping today is to create a foundation of financial information, which will lead to business intelligence and a competitive edge as you make timely decisions based on factual information. Improved decision making is accomplished when we [1] develop a strategic reporting structure (and chart of accounts), [2] create a system for gathering, accurately recording, storing, and reconciling financial transactions, [3] commit to a consistent timeline, [4] review the results and compare vs. budge, vs. the previous year, or against a monthly trend.

Advancements in accounting software have dramatically lowered the cost of implementing such as a system to the point where most small businesses today can easily afford to develop their own customized solutions. It’s important to note that as costs have come down, if you’re not seeking to gain business intelligence out of your bookkeeping system, you’re competitors are, and that puts you and your business at a disadvantage.

Myth 2: It’s only necessary at tax time.
Building on the first myth, when the purpose of bookkeeping was to facilitate the preparation of tax returns and ensure compliance with CRA, there was little need for the bookkeeping to be done throughout the year. So long as physical copies of transactions were kept and organized well they could be brought to a bookkeeper at the end of the year for processing and to generate a set of annual reports, however, as the purpose of bookkeeping today has transitioned to generating business intelligence for use in creating a competitive edge, we can no longer wait until the end of the year to complete the bookkeeping, because we now need that information each month in order generate our financial reporting and so that we can keep score of how our business is doing financially.

In order to create that competitive advantage, we must now develop a system that ensures a steady stream of financial information flowing into the accounting software each month. Advancements in accounting software have greatly assisted this process as we can electronically capture all this financial information eliminating the need to wait for a shoebox of invoices and receipts.

Myth 3: I can do it myself.
Since the beginning of time, bookkeepers have responded to this myth based on their view of the first myth, and it usually sounds something like this ‘Yes, you can do it yourself, but you’re better off spending your time doing revenue-generating activities, or actual billable work.’ I believe that in order to create a competitive edge, however, we need to change the way we discuss this topic. It now goes something like this: Since the purpose of bookkeeping is no longer about compliance and the filing of tax returns, but rather about building a reliable foundation of financial information useful for generating business intelligence, it is simply not possible for a business owner to Do It Yourself. There is just too much that has to happen, by people and software that requires specialized knowledge and strict adherence to your business’s timeline. It’s just not possible to maintain such a system while at the same time putting your focus on revenue-generating and billable activities.

There is a subset of this myth that says ‘Myth #3b - If I can’t do it myself, I’ll have my wife, sister, cousin, etc. do the bookkeeping.’ While this may be possible for some, it requires a significant investment to [1] research and identify what software would work best for your business in your industry, [2] learn all the details of that software so that you use it as intended to generate the accounting system that your business requires in order to create the accurate financial information, [3] demonstrate that the discipline of maintaining the accounting system is strictly adhered to (gathering, storing, recording, reconciling all financial transactions as well as reporting and analyzing the results). 

Very few have this necessary expertise, and fewer still have the available time to ensure the integrity of this system, and given the low cost of maintaining such a system with a great bookkeeping firm, it only makes sense to outsource this service.

To steer clear of myths like these and work with accountants in Leduc, Alberta, reach out to Birch Accounting & Tax Services Ltd. Aside from our professional bookkeeping services, we also offer personal taxes, corporate taxes, business planning, and payroll services to clients across Leduc, Calmar, Nisku, Devon, Millet, Beaumont, Wetaskiwin, Camrose, and Edmonton, Alberta.

For more information about the services we offer, please click here. To schedule a free thirty-minute consultation or to get in touch with us, please click here