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As an essential business function, bookkeeping is a critical 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 a newly started business, it can be tempting for business owners to DIY (Do It Yourself) bookkeeping, resulting in significant consequences down the road. Moreover, these common outsourcing accounting and bookkeeping myths can also be the reasons behind entrepreneurs staying away from outsourcing to experts. As a matter of fact, businesses managing 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. Inaccuracies 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. Still, the potential financial benefits of investing in your business can’t be presented well without an expert 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 Cashflows
- Manage Payables
- Arrange financing and load applications
- Tax preparation
Yet, some businesses take the risk of DIY bookkeeping and face the following challenges.
Risks of DIY Bookkeeping
1. 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 pro-advisor. Therefore, there are high chances that you will probably make costly mistakes while trying DIY bookkeeping. Accounting software might prove a good tool, but it also requires going through a steep learning curve to use it effectively.
2. Missing Taxation Deadlines
Bookkeeping is considered more as a chore than a business-critical 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.
3. Inability to Keep Accurate Records
One of the key bookkeeping challenges, especially for small and medium business owners, is the 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.
4. Lack of Time
The enthusiasm of starting up a new business drives a lot of entrepreneurs to take up additional 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 core business growth and leave the accounting and bookkeeping to the experts.
5. Unsolvable Cash Flow and Accounts Payable Damages
Every business needs observation and monitoring of the cash flow, especially companies under pressure. DIY bookkeeping challenges 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.
6. Complicated Accounting Software
Theoretically, bookkeeping software should make life easier for business owners. While some business owners are adept at using bookkeeping software, others have trouble picking it up. Many business owners lack the time to learn or are unfamiliar with bookkeeping software. You would be better off outsourcing bookkeeping activities to manage your books online if you are not tech-savvy. Additionally, keep in mind that using software does not equate to understanding accounting!
Benefits of Outsourcing Bookkeeping Services
As is evident from the aforementioned points, when it comes to your business’ finance, it is wise to hire experts with have sufficient expertise to handle the growing volume of accounting tasks.
Here are a few of the many benefits of outsourcing bookkeeping services:
1. Cost & Resource Savings
In general, businesses view outsourcing as an unnecessary expense for their operations. Whereas it is quite the opposite.
Given that most businesses can offer their services at lower costs, one of the key benefits of outsourcing bookkeeping is significant cost savings (mainly due to lower costs at their location).
In addition, outsourcing bookkeeping allows you to avoid paying for full-time or part-time employees’ salaries, taxes, office supplies, and benefits. You only invest what you require. Hiring full-time employees does not result in a loss in productivity costs.
2. Time Savings
As your company expands, you’ll spend less time scaling the company and more time managing your finances. You can focus your time, effort, and resources on developing business strategies by outsourcing administrative tasks like bookkeeping and accounting. Along with networking and customer relationship building, it will increase revenue.
3. Minimized Errors
The majority of businesses use accounting automation software to save time. In addition to saving time, it also lowers risks while reducing human errors. Moreover, real-time reports are provided to accountants by automation software. They aid in identifying potential issues and solving them quickly. Additionally, it will lessen the likelihood of internal fraud.
DIY is a creative concept that opens the doors to new learning, interests, and apprehensions. However, when it comes to your business’ 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 struggling through the DIY bookkeeping challenges, and plan to kick-start your outsourcing journey, feel free to write to us at: firstname.lastname@example.org, and we will have one of our F&A experts reach out to you to get you started.
Frequently Asked Questions
DIY bookkeeping today can be broken down into three simple steps that you can complete at the end of each month: Verify transactions, match up bank accounts, and generate financial reports.
The concept of outsourcing accounting is straightforward. Instead of having an accounting team, you hire a third party to handle your company’s affairs. Businesses that want to benefit from tasks like payroll, accounts receivable, and financial reporting can outsource accounting services.
Outsourced accounting is a service that provides small businesses with a full accounting department experience. Day-to-day transaction coding, payroll, management financial reporting, accounts payable, and accounts receivable are just a few of the many services provided by an accounting department.
The two most common techniques are single-entry and double-entry bookkeeping systems. While each has advantages and disadvantages of its own, the business must select the one that is best for their particular industry.
Consider outsourcing accounting for your company if you’re looking for a scalable, affordable, and trustworthy way to manage your accounting department’s requirements. Many small business owners might not even be aware of the specific services they require, but good accounting services can point them in the right direction nonetheless.