If you’re like many small business owners, doing your own bookkeeping may be a source of pride – especially if you’ve done it from the start. Or, perhaps you see it as a cost-saving activity to maintain your earnings.
But have you considered the true cost of DIY bookkeeping? From time and resources to expensive errors, the price might be higher than you think.
To help you explore whether to continue doing your own small business bookkeeping, we’ve compiled a list of five hidden costs to consider.
As a business owner, your time is valuable, and it’s important to do a quick opportunity-cost analysis to decide whether doing your own books is worthy of your time. Any hours you spend on bookkeeping can’t be spent on other tasks – for instance, ones that generate revenue.
To simply calculate the value of your time in dollars, follow these steps:
Is $1,200 in monthly lost time — $14,400 annually — worth continuing your DIY bookkeeping?
When it comes to accounting and taxes, getting things wrong can get expensive – fast. Your bookkeeping is only valuable when it’s accurate, according to Alex Detweiler, Vice President of Accounting Services at NEWITY. Business owners who manage their own accounting may be more likely to make mistakes, especially if they’re rushing or focused on other aspects of their business.
There are a variety of ways these errors can have an outsized impact on your business:
Unless you opened a bookkeeping business, the odds are you did not start your company with the intent of becoming a bookkeeping expert. Accounting professionals bring valuable experience and up-to-date knowledge, meaning they have insights to offer that you simply do not have the time to source for yourself.
“This oftentimes leads to small businesses leaving money on the table,” says Detweiler.
When you attempt to understand every bit of financial and accounting information, insights, tax deductions, new government regulations and incentive programs without the proper time to invest into fully understanding these topics, missed savings increase the hidden costs that can add up quickly.
Further, a survey from SCORE – a mentoring organization for business owners that partners with the U.S. Small Business Administration (SBA) – found that 40% of business owners say bookkeeping and taxes are the worst part of owning a business.
If most business owners do not enjoy bookkeeping – and a majority feel that they are not knowledgeable enough about these topics – why would they spend their valuable time doing it themselves? This can be especially frustrating for companies that do not have sufficient cash flow or work to justify hiring an in-house accounting team.
Finally, consider whether you can keep your financials up to date if you are managing your own bookkeeping. For many business owners, revisiting their books only occurs when they have extra time – meaning they are not updated frequently enough to portray an accurate representation of the company’s financial health.