As a small business owner, you know that keeping your finances in order is crucial to your success. But when it comes to bookkeeping, many business owners find themselves at a crossroads: should you handle it yourself or hire a professional? It’s a common dilemma, and there’s no one-size-fits-all answer. In this post, we’ll explore the pros and cons of DIY bookkeeping to help you decide what’s best for your business.
What is DIY Bookkeeping?
DIY bookkeeping is exactly what it sounds like—taking care of all your business’s financial records, transactions, and reporting on your own, without the help of a professional bookkeeper. It means managing everything from tracking expenses to reconciling bank statements, preparing financial reports, and ensuring your tax filings are accurate.
Fortunately, there are tools available that make DIY bookkeeping more accessible. Accounting software like QuickBooks or Xero can help you stay organized and on top of your finances, even if you don’t have a background in accounting. But just because you can do it yourself, doesn’t necessarily mean you should. Let’s dive into the pros and cons.
The Pros of DIY Bookkeeping
1. Cost Savings
One of the most appealing aspects of DIY bookkeeping is the immediate cost savings. Hiring a professional bookkeeper comes with fees that can add up quickly, especially if your business is still small or just starting out. By handling the books yourself, you eliminate that expense.
Plus, while accounting software isn’t free, it’s often much more affordable than paying for professional services. Many small businesses find that the cost of software is a small price to pay for the control and independence it provides.
2. Complete Control Over Finances
Another major benefit of DIY bookkeeping is the control it gives you over your business’s finances. When you’re the one handling the books, you know exactly what’s going on with every dollar that comes in and out of your business. This hands-on knowledge can be incredibly valuable, especially when you’re making financial decisions or planning for the future. Additionally, managing your own books gives you real-time insights into your business’s financial health. You don’t have to wait for a monthly report from your bookkeeper—you can check your numbers whenever you want.
3. Flexibility
DIY bookkeeping also offers a level of flexibility that you might not get when working with a professional. You can create a bookkeeping process that fits your specific needs and work on your finances whenever it suits you. Whether you prefer to update your books daily, weekly, or monthly, the choice is entirely yours.
The Cons of DIY Bookkeeping
1. Time-Consuming
While DIY bookkeeping can save you money, it can cost you time—often a lot of it. Bookkeeping is detailed work that requires accuracy and attention to detail. Every hour you spend entering transactions, reconciling accounts, or preparing reports is an hour you’re not spending on growing your business, serving your customers, or developing new products. There’s also a steep learning curve involved. If you’re not familiar with accounting principles or the software you’re using, it can take a significant amount of time to get up to speed.
2. Risk of Errors
When you’re managing your own books, the risk of making mistakes is much higher, especially if you’re not trained in accounting. Even small errors—like entering the wrong amount or forgetting to record a transaction—can lead to bigger problems down the road. Incorrect financial records can result in inaccurate tax filings, which in turn could lead to penalties or fines from the Canada Revenue Agency.
3. Lack of Expertise
Professional bookkeepers bring a wealth of knowledge and experience to the table. They can offer insights and advice that you might miss when handling things on your own. For example, they can help you identify potential tax deductions, optimize your financial processes, and ensure that your business is in compliance with all relevant regulations.
Additionally, the financial landscape is constantly changing, with new tax laws and regulations coming into play regularly. Keeping up with these changes can be challenging when you’re focused on running your business. A professional bookkeeper stays updated on these changes and ensures that your books are always in order.
When DIY Bookkeeping Might Be Right for You
DIY bookkeeping isn’t for everyone, but it might be a good fit if:
- You’re Just Starting Out: If your business is in its early stages and your financial transactions are still fairly simple, DIY bookkeeping might be manageable.
- You Have a Financial Background: If you’re already familiar with accounting principles, or if you have experience managing finances, DIY bookkeeping could be a straightforward task.
- You’re on a Tight Budget: If hiring a bookkeeper is out of your budget for now, starting with DIY bookkeeping can help you manage costs until your business grows.
When to Consider Hiring a Bookkeeper
As your business grows, so too does the complexity of your financial records. Here are a few signs that it might be time to bring in a professional:
- Your Business is Expanding: More clients, more transactions, and more employees mean more work on the bookkeeping front. A professional can help you keep up with the increased workload.
- You’re Running Out of Time: If you’re finding it hard to keep up with your bookkeeping tasks and it’s starting to take away from other important aspects of your business, it might be time to get some help.
- You Need Absolute Accuracy: If your business requires precise financial records—for example, if you’re applying for a loan or preparing for an audit—hiring a professional bookkeeper can give you peace of mind.
DIY bookkeeping comes with its own set of benefits and challenges. While it can save you money and give you more control over your finances, it also requires a significant investment of time and effort. It’s important to weigh these pros and cons carefully to determine whether DIY bookkeeping is the right choice for your business.
Remember, the decision isn’t set in stone. You can always start with DIY bookkeeping and switch to a professional later on as your business grows and your needs change.
If you’re still unsure whether DIY bookkeeping is right for your business, or if you’re considering making the switch to a professional bookkeeper, I’m here to help. Feel free to reach out for a consultation, and we can discuss the best bookkeeping solution for your unique situation. Let’s make sure your business is on the right financial track!