Bookkeeping is essential for any business. Whether you’re a start-up, small business, in the construction, restaurant or retail industry, bookkeeping is a must not only to remain compliant with the law but to also keep on top of your finances.
If you’re an entrepreneur and you’re still at the stage of getting your business off the ground, you might feel that your transactions are pretty much straightforward and you can take care of bookkeeping on your own. And probably, you’re thinking that hiring a professional will only add to your costs.
On the contrary, DIY bookkeeping can put you at risk of expensive mistakes, which we will elaborate more on later. In this case, you can consider to outsource bookkeeping. Outsourcing makes a lot more sense, especially for enterprises that don’t have the resources yet for a full-time employee.
In this article, we will take a look at the risks of doing your own bookkeeping and the reasons why it’s a good idea to hire a third-party bookkeeper to take care of your accounts.
What is bookkeeping and what do bookkeepers do?
Bookkeeping is the systematic recording of day-to-day business transactions, this includes expenses such as payroll, services, materials, and income like payments received for goods and services.
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Typically, bookkeepers are the ones who help companies keep track of all financial activities and record every transaction into ledgers.
They are also responsible for providing accurate financial information about the company and are in charge of preparing the four major financial statements, which are: income statement, balance sheet, cash flow statement and statement of changes in equity.
These financial reports help owners to create budgets, identify trends and forecast for the company’s future.
Should you do your own bookkeeping?
Whatever businesses you’re in, it’s impossible for you to keep it moving forward without you having a good sense of your numbers.
Without having a clear picture of your finances, it’s like you’re driving a car with a blurry windshield. You’re not sure if you’re running through a red light and you’re at risk of crashing your vehicle at any moment. That’s why it’s important for owners, like you, to keep a close eye on the status of their finances — and one way is by making sure your books are accurate and updated.
Unfortunately, as much as entrepreneurs want to do their own bookkeeping, they probably won’t have the time to get their records done properly.
It’s so easy to get caught up in the day-to-day operations of running a small business and sitting down to do bookkeeping is such a time-consuming task.
Yes, cloud-based accounting tools can make DIY bookkeeping more manageable, but without proper knowledge, you might be at risk of costly errors that will put you on the wrong side of the IRS.
What are the risks of DIY bookkeeping?
- Lack of tax and accounting knowledge
- Unless you keep yourself abreast of tax laws and accounting principles, you are at risk of committing inaccuracies when bookkeeping or processing payroll. And while your purpose of doing your own books is to save money, errors in paying taxes and processing wages can lead to expensive penalties.
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- Errors in records
- It’s good if a business owner can keep their records updated; however, it’s a different story if their books are inaccurate. With errors in your records, it would be difficult to track your expenses and your bank accounts. In addition, if your books are inaccurate, you might pay the wrong taxes, face penalties and miss out on tax benefits that you’re qualified on.
- Missed deadlines
- Failure to keep accurate records, or worst, failure to keep your books updated can snowball and lead to missed tax deadlines. Unfortunately missing out on important tax returns and other deadlines can mean trouble for you and your business.
- (Are you falling behind your books? Check out miplly’s catch up bookkeeping service here.)
- Underutilized accounting software
- Using accounting software can make bookkeeping a breeze — that is if you know how to efficiently use it. However, if you’re unfamiliar with the tool, bookkeeping could be a dread.
- Also, without the help of a professional bookkeeper, business owners might be using software that does not meet their needs and therefore defeating the purpose of utilizing an accounting tool convenience.
What are the advantages of outsourcing bookkeeping?
Knowing the importance of keeping accurate records and the “dangers” of doing your own books might make you decide to outsource bookkeeping. And here, we listed some of the main reasons why hiring a third-party bookkeeper gives you an advantage.
- Gain more time to spend on core business activities
- As mentioned earlier, bookkeeping is essential in any type of business. However, it is easy especially for small business owners to neglect their records because they get caught on other essential activities such as marketing, sales and product development.
- When you outsource bookkeeping, you give yourself more time to focus on core areas of the business. At the same time, you have the assurance that you have an expert taking care of your books.
- Make considerable savings
- Compared to hiring a full-time or a part-time employee, a third-party bookkeeper is much more cost-efficient because you’re not paying for their wages and benefits. With outsourced bookkeeping, you only pay for the specific service that you need.
- Have an expert on your side
- When you outsource bookkeeping services, it means you’re hiring a professional to manage your records. When you work with an outsourced bookkeeping firm like miplly, not only are you assigned your personal bookkeeper, but it also means you’re working with a team of numbers experts whose purpose is to help you with your books.
- Reduce errors and improve accuracy
- Having an expert in your team also means narrowing down the margin of error and improving the accuracy of your books. Outsourced bookkeepers are trained to handle everything and have experience working with various clients.
- No-stress tax time
- Has tax time always been like a nightmare for you? That’s going to change when you outsource bookkeeping. Using expert bookkeeping services assures you that your books are kept updated and accurate so you don’t have to worry about being questioned by the authorities.
- In addition, having precise financial data on hand also makes your stakeholders happy and would-be investors satisfied because you can show them a clear picture of how your business is doing.
- Access to excellent bookkeeping system
- Most outsourced bookkeepers work virtually, this means that they’re not only good with numbers but they are tech-savvy too. You can trust your bookkeeper to know the latest in accounting systems and they can even help set up a bookkeeping tool that is fit for your needs.
- Easier scalability
- Small businesses often start with the most basic needs, but as they grow financial activities become more complex. Another advantage of outsourcing bookkeeping services is the ability to easily upscale (or downscale) without having to train or hire additional team members.
Are you ready to outsource bookkeeping?
miplly offers bookkeeping services that are straightforward, simple, and efficient. Our team of highly trained, experienced bookkeepers will undertake the job of managing your books so you can focus on running and growing your business. Start your FREE 7-day trial with us today!
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