Bookkeeping isn’t the same as accounting, as it may seem to an amateur. It is a very essential part of a business, big or small. Whether you decide to do it yourself or hire professional bookkeeping services, you must make sure that you are keeping records of every penny spent.
Can You Do It Yourself?
Bookkeeping is not especially hard when you’re dealing with your own business and have the time. Even if you’re someone who is not good with financial accounting, you can easily seek aid from technology or other people to make your way through it.
How Can You Make Bookkeeping to Your Advantage?
You know what you do, when and how. If you are self-employed or have a small business, your records may not be as complex hence there’s no need for you to pay someone else to do the job for you.
- Save yourself a few bucks: While outsourcing may seem like the easier option out, it might not be the most effective. Hired accounting and bookkeeping services in Canada are costly and no one wants extra expenses when they already have their back to the wall, especially when you have a small business and limited income.
- Improve your skills: Performing your bookkeeping can help you develop relevant business skills as an entrepreneur and allow you to be more related to your finances.
- A clear insight: Doing your own books will provide you with a clear picture of your finances on demand. You will be very aware of all the problems in your finances, be it the euphoria that hits on seeing an increase in income or the shock after seeing how high the expenses have gotten. You’ll know when to take steps to control your expenditure in the coming future.
What Should You Consider?
Now that you’re well aware of all the advantages of doing this routine task your way, you might as well make a note of all the things that you must consider before getting at it.
- Your capabilities:
The most essential factor to consider is whether or not you are proficient enough of properly keeping your books. Do you have experience with bookkeeping? Can you properly comprehend accounting information? If you aren’t certain or confident about the answers to these questions, perhaps you should consider investing in some bookkeeping course.
- Availability of information:
Before you get to it, make sure you have all the required matter within your reach. You will need records, invoices, bills of sales, receipts, market value estimates and concrete statements for everything financial value in your (or your business’s) possession. Another major factor to be taken into consideration is the depreciation on any purchased item (your house being an exception) and this is also something that most people fail to acknowledge. Therefore, go digging for all documents! Even if you hire professional bookkeeping services, you’ll be needing these documents.
Time is money and bookkeeping is a task that demands a great amount of concentration and time. It might take away your time to be creative and focus on the part of your business about which you are solely passionate about. So unless you have that amount of time to devote to the job, you must contemplate taking the help of some outsourced accounting and bookkeeping services in Canada or United States.
While keeping your books may sound easier on your pocket than it is, you should make sure that it doesn’t cost you more to do it yourself than it would if you hired some else. An easy example is if you charge $50 or $100 an hour, it does not make sense to get it done from someone whose hourly rate is lower than this.
How Do You Do Your Bookkeeping?
Now that you’ve decided to go down this road, let’s take a look at all the ways in which you can be your own bookkeeper.
- Use business accounting software:
These are going to be your best friends while bookkeeping in this age and economy. We’re well aware that there is no reason to keep your books on paper, it only leads to more errors and this medium is considerably easier to lose. No one wants any of that when dealing with such a crucial business task.
Accounting software helps you record transactions, ensure data accuracy, get insights into overall business performance and provide you with solid financial information. There are numerous low-cost and even free software products available like Waveapp or paid ones like Xero, Quickbooks Online, Freshbooks, Sage and more.
- Learn from others:
You can take some help from the internet. There’s ample amount of information available for free, you can read blogs from entrepreneurs or credible companies and watch YouTube videos. You can even consider taking a short-term online course on bookkeeping if you aren’t the best with balance sheets and financial statements.
- Don’t put it off:
Bookkeeping is as imperative as any other “money-making” parts of your business. Don’t do the blunder of putting it off until tax time which will bring more stress your way. Treat it as a routine task, it’s simpler that way. Bear in mind last minute bookkeeping cost you far more than the regular bookkeeping. For example, during tax season since bookkeepers are in very much demand they tend to charge higher. Your business tax accountant might even refuse to take you on board this year since he doesn’t have enough manpower available to deal with your numerous transactions.
DIY Bookkeeping: The Disadvantages
Everything has its pros and cons, just like doing your own books. While there may be plenty of good reasons to start doing your bookkeeping yourself, you might want to consider its drawbacks too.
- Correction of books:
If in case there are any errors in the books, the correction will cost you more than you saved by deciding not to hire a professional. Remember that the cost of fixing things is than getting it done correctly in the first place. A simple example of this would be that you kept on choosing wrong account while posting your bills or used wrong tax rates. So now, someone has to identify these errors and correct them. Identification and then rectification usually takes more time than your professional accounting and bookkeeping service provider posting it correctly from the day one.
Make sure that all the information that you take into consideration while bookkeeping is accurate and precise. Wrong financial statements and income tax filings may result in amiss bookkeeping which may lead to unanticipated chaos- either you’ll require to hire an expert to fix it or end up paying additional taxes. In either case of additional tax payment or underpaying tax cost you money. Keep in mind audits and reviews from IRS and CRA cost you money in terms of time spent and hiring a professional tax accountant.
- Bad Bookkeeping Skills:
If you lack accounting and bookkeeping knowledge, you might end up making mistakes which may prove to be catastrophic later.
Should You Do Your Own Bookkeeping?
The amount of time that you are willing to devote to the task will determine if you should take it on yourself or not. Remember that you don’t have to take too much on your plate but at the same time you don’t have to spend on bookkeeping if you can do it yourself.
Be cleverly strategic about how you spend your time and money. If you are confident about your ways of doing it, go for it. If you feel like it isn’t your cup of tea, you can always delegate it.