It’s only a good idea to do your business’ bookkeeping if you don’t have many transactions each month. Otherwise, you should invest in hiring a bookkeeper.
Many small business owners have a do-it-yourself mindset. Unfortunately, DIY bookkeeping isn’t always as simple as DIY crafting.
Small business owners are typically fine doing their own books when they’re first starting out. They learn how basic bookkeeping works and save money. But when your business starts growing and bookkeeping tasks start taking up too much time, you should consider hiring a bookkeeper.
There’s no magic number of transactions that signifies when you should or shouldn’t do your own bookkeeping. It depends on your bandwidth, budget and preferences. Generally, you should do your own bookkeeping if you have the time and you’re willing to learn how to do it right.
If you’re just doing your own bookkeeping for the sake of saving money and not learning the best practices, your tax returns will be a lot harder to file and you could miss out on deductions.
So, yes, anyone can do their own bookkeeping — but it may be smarter for some business owners to hire a bookkeeper.
Pros of doing your own bookkeeping
Doing your own bookkeeping may take some time to learn, but there are several advantages to it. For small businesses with just a few transactions per month, DIY bookkeeping may be the best way to go.
1. You’ll understand bookkeeping better
You need to understand how your business’ finances work regardless of who’s doing your bookkeeping. There’s no better way to learn than doing it yourself.
By doing it on your own, you can see exactly where your dollars are coming from and going to. That helps you better manage your money and make high-level financial decisions.
You’ll learn how to organize, read and manage your business’ finances in a hands-on way. So when it comes time to hire a bookkeeper, you’ll already know what they need from you to keep your books clean and have a stress-free tax season.
2. You can save money
If your volume of transactions is low enough, you probably don’t need a bookkeeper to take over for you.
A bookkeeper can cost around $200 to $2,000 per month, depending on what type of bookkeeper you want to hire. Doing your own bookkeeping while your business is starting out shouldn’t take up a lot of time — and an accounting software can make it even easier.
The most time-consuming thing you’ll likely have to do is comb through your books and reconcile your expenses — which is simply making sure your expenses appear the same way in your books as they do in your bank account. Most small business owners are fine reconciling their expenses once or twice a month.
You’ll only save money if you’re bookkeeping the right way. If your books are outdated or inaccurate, you might have to spend more time and money to have it fixed come tax season. The solution to this is to learn the best practices if you choose to do your bookkeeping yourself.
3. You can do things your way
Being your own bookkeeper means you get to decide how things are done. This is a huge plus for business owners that have experience bookkeeping and know what they’re doing. You also get to choose what software you feel most comfortable using — since some bookkeepers will only work with certain software.
As long as your methods are organized and don’t result in mistakes on your tax return, you should be OK.
Cons of doing your own bookkeeping
Doing your own bookkeeping might be the best choice in some cases — but there are some roadblocks that come with it. The main ones are the learning curve and time-consuming tasks.
1. You may have to learn everything yourself
You can’t start your own bookkeeping without any knowledge going into it. You’ll have to do some form of research or training beforehand. If you don’t, that could lead to you spending more time cleaning your books later on.
There’s nothing inherently wrong with learning everything yourself — it just may take longer to get the hang of than it would if you received training. If you’re not tech-savvy, it could take even longer.
2. It can take up a lot of time
The bigger your business is, the more time it takes to manage your books. It can take hours from you even when you use accounting software like Xero.
Some business owners can get away with cleaning up their books once a month, or even once a quarter. But that’s not the case for everyone — even if you are a small business. The amount of transactions, employees and owners your business has could require you to be cleaning your books weekly or daily.
When you get to that point, hiring a bookkeeper could save you both time — and in turn, money. An experienced bookkeeper has likely seen financials similar to your business’ before, so they can organize them quicker.
3. You may make mistakes
There are many common mistakes small business owners make when doing their books. They might categorize transactions wrong, set up sales tax incorrectly or not use accounting software.
Without the proper training or experience, you might not even know you’re making a mistake before it’s too late.
The bottom line
Bookkeeping might not be the most exciting part of running your small business — but it’s one of the most important.
You can either do your bookkeeping yourself or hire a bookkeeper. Whichever option you go with, there are pros and cons.
Doing your own bookkeeping means you’ll need to reserve enough time each month to clean up your books, but you’ll gain a better understanding of your business. Hiring a bookkeeper means you’ll spend more money up front, but run your business knowing an expert is handling your books and preventing mistakes.
Not sure whether a bookkeeper is for you? Schedule a free call with a DiMercurio Advisors team member today to explore your options — and start focusing more time on the parts of your business that you love.