Bookkeeping is one of the most important aspects of any small business. It is also important that you know the process, whether you work with a bookkeeper or do it yourself.
There are pros and cons to each, and there are also things that you should know too. Here is what you should know about the pros and cons of both bookkeepers and DIY.
Bookkeepers vs. DIY
There are two options available for you for bookkeeping: hiring a bookkeeper or the DIY method.
At first glance, you may think the options are easy to characterize. Bookkeepers offer benefits, such as providing a more wholesome look at your bookkeeping. The DIY method, while more cumbersome, could save you money. However, there’s more to both bookkeeping methods that can make your choice harder to decide.
The pros and cons of bookkeepers and the DIY method follow below.
Pros of a Bookkeeper
Whether you hire a bookkeeper for external bookkeeping or work with one in your business, having a bookkeeper offers small business owners several pros.
First, an external bookkeeper remains separate from your business. This means you’ll have a more neutral view of your bookkeeping and your business’s financial health. You’ll also receive useful accounting work, helping you focus on other business matters.
Second, an external bookkeeper will help you avoid potential problems. Some of the worst bookkeeping problems can make you panic, such as an IRS audit, an overpayment, or an underpayment of taxes. Hiring a bookkeeper will decrease the chances of any problems happening.
Third, an internal bookkeeper will be accessible whenever you must retrieve your bookkeeping records. This can save you both money and time. An internal bookkeeper will also be more familiar with your business and the potential transactions that can create issues.
Pros of DIY Bookkeeping
If you decide to go the DIY route for your bookkeeping, there are a couple of pros.
The first advantage of DIY bookkeeping is that you won’t have to pay someone to do the work. This is useful if you’re already used to filing your taxes, sorting your documents, and using the required bookkeeping software.
Another pro of the DIY bookkeeping method is that your business records will remain private. This is a concern for many businesses that value the privacy of their customers and their employees.
Cons of a Bookkeeper
While a bookkeeper, whether hired or within your company, is convenient, there are cons associated with them.
If you hire an external bookkeeper for your business needs, he or she may not use the bookkeeping software your business uses. They may want to use their own software.
A second con of working with a bookkeeper is the process. If an internal bookkeeper is responsible for business bookkeeping, they may make mistakes with the bookkeeping process. An internal bookkeeper may not know the full requirements of your industry. This can create problems with financial transactions, and the time you’ll invest in assisting them.
Finally, even with an external bookkeeper or internal bookkeeper, time is still a problem. A bookkeeper may not have all of your financial records to submit, or you may mistakenly overlook an important transaction. You might even need to find documents if your business experiences an audit. All of this can create time constraints that can quickly add up.
Cons of DIY
There are cons associated with doing bookkeeping on your own. If you’re managing your bookkeeping needs yourself, there are several cons for you to consider.
If you decide to DIY your bookkeeping, you’ll need to remember to keep track of all of your receipts and records. In addition to running your business, you’ll also be responsible for the administrative side of your finances. This is a huge drain on time that could be better spent expanding your business or working on your marketing.
It may take hours for you to collect, find, and sort through your financial transactions. It may take hours more to upload your information to bookkeeping software. Even worse, it can take even longer for you to correct mistakes if you hear back from the IRS.
Second, unless you have professional bookkeeping experience, it’s highly likely that you could make a mistake with your books. These mistakes could lead to incorrect information on your taxes, which could result in fines or even an audit.
While doing your own bookkeeping might save a little money in the short term, it could end up costing you big if you make mistakes along the way.
Instead of wasting time figuring out your own bookkeeping or making costly mistakes with your financial statements, consider hiring a professional bookkeeper.
They’ll be able to answer any questions you have, organize your financial records, and ensure you’re tax paperwork is in good standing and ready to go come tax season.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.