Is Do-It-Yourself (DIY) Bookkeeping Costing Your Small Business Time and Money?

According to the National Federation of Independent Business’ survey data, “financial management, compliance burden, and time constraints” are among the most significant challenges facing small business owners, serving as the primary contributors to the struggle that many small business owners have with inefficiency and reduced growth capacity.[1] Additionally, many small business owners are forced to wear many hats, sometimes serving as the primary bookkeeper or accountant for their business. However, as outlined in an article in the Journal of Accountancy (AICPA), due to the owner’s limited accounting experience and inability to create and maintain proper, efficient accounting systems, many of these small businesses eventually encounter issues due to errors that build up and accumulate over time. The article also points out that business owners are better able to serve their customers by focusing on running the business and delegating the bookkeeping and accounting functions of the business to an experienced bookkeeper/accountant.[2]

In layman’s terms, small business owners’ attempts to save money by doing their own bookkeeping may end up inadvertently costing themselves, and their businesses, more in the long-term. Sometimes, you don’t know what you don’t know and hiring an experienced bookkeeper can help to bridge that gap.

One of the questions I like to ask is small business owners is this, “In your view, what is the purpose of keeping up with your business’ books?” Some common answers include, “compliance with tax-related rules, regulations, and laws; to check-in on my business’ performance; and others may just shrug and say because it’s just important, without being able to narrow down a single reason.” The good news is that all these answers, and many more, are correct. The financial information recorded by a competent bookkeeper serves numerous purposes for your small business.

First, accurate records ensure IRS and state tax compliance, helping the business owner avoid unnecessary costs such as penalties and interest that can be levied against the business for failure to report their business’ income and expenses properly. Many business owners assume that their tax professional ensures this information is accurate. Unfortunately, without ongoing review and financial record maintenance, the tax professional may not have the full picture needed at tax time to ensure compliance and maximize deductions, possibly costing the business owner thousands of dollars in unclaimed expenses.

Second, while data nerds— like me— like to throw around terms like “data integrity,” “decision infrastructure,” and “advisory-based positioning,” the business owners’ ability to evaluate the performance of their business using a Profit and Loss statement or other financial report is only as good as the quality of the data. Like the old saying goes, “put good in, get good out,” proper expense and income categorization, including capitalized asset depreciation and having a professional review the business’ periodic close process is essential to making sure the information available to the business owner is accurate and usable. As those of use with a formal accounting education have had drilled into our heads, accounting, definitionally, consists of four activities: recording, or capturing the transaction; classifying, or correctly categorizing the transaction; summarizing, which refers to the periodic (monthly/quarterly/yearly) close-out of and preparation of financial statements; and interpreting the results using the data provided in the financial statements. It’s paramount to a small business’s success that the business owner either possesses the accounting background and experience necessary to maintain the business’ financial records or work closely with a bookkeeper/accountant to delegate these tasks.

In summary, working with an experienced bookkeeper or accountant can pay dividends that far exceed the upfront costs of their services. If you are interested in hiring Hollis Bookkeeping and Financial Services LLC to help maintain your business’ books and provide insight into the business’ performance and financial health, give us a call or send me an email at Timothy.Hollis@hollis-bookkeeping.com. We offer affordable pricing and solutions tailored to your business’ needs, such as one-on-one consulting, bookkeeping reviews and clean-ups, and ongoing bookkeeping packages— including a full-service solution that is similar to having your own internal bookkeeper at a much lower cost.

Why Should You Trust me with Your Business’ Books?

Possessing over seven, almost 8, combined years of experience serving in roles such as Staff Accountant, Grant Accountant, Assistant Controller, and Senior Financial Analyst, as well as having been awarded a Bachelor of Business Administration and a Master of Business Administration- accounting minor, I possess the experience and educational background to help your small business thrive. My educational background consists of coursework specifically focused on data-driven decision making for businesses and advanced accounting courses— giving you peace of mind that you’re in good hands.

[1] National Federation of Independent Business. (n.d.). Small business problems & priorities.
https://www.nfib.com/surveys/small-business-problems-priorities/

[2] Collins, J. C. (2013, August 1). Small business growing pains. Journal of Accountancy. https://www.journalofaccountancy.com/issues/2013/aug/small-business/