As a person who enjoys crafts, there is a particular pleasure in being able to make something yourself. If you are a small business owner, your business is like a craft project: an idea that was brought to life through hard work and creativity. So it’s common that when business owners contact us, they have been doing their own books for some time.
If you currently are managing your own books or are contemplating taking on this role for your business, here are some items to consider going in:
You need to understand basic accounting principles
Recording activity into your accounting software is more than just “Money In, Money Out”. You will need a firm grasp on how double-entry accounting works. Otherwise, you can really mess things up. For example: If you recently purchased an expensive piece of equipment, how do you record the purchase in your books? You may think it’s just an expense, but it could actually be considered a fixed asset (a fixed asset is the purchase of a tangible item that is purchased for long-term use and generally used to generate revenue). In the case of a fixed asset, the principles of accounting require us to record not just the purchase of the item but also the depreciation to track the decline of its value over time.
It takes time
Most business owners are juggling various responsibilities at their company. As a result, they struggle to set aside time to keep up with their financial records. In the beginning, this may not be a problem. However, as the business starts to grow, the books may become weeks or even months behind. Which means it will take more time to catch things up. More time spent on accounting means there is less time to focus on other parts of the business.
You need to aware of tax laws, and they change…constantly
In 2018 we saw several tax law changes go into effect. Deductions once allowed by the IRS no longer were available. While the number of tax law changes in 2018 was significant, the fact is that the US tax code changes every year. If you are going to manage your own books, you have to keep yourself up to date on these changes, especially those that may require you to adjust how you record certain types of transactions. Of course, this is on top of all the tax filing deadlines you need to know for business income taxes, federal and state payroll taxes, and local sales tax.
The longer you do it yourself, the harder it will be to pass it to someone else
Many of the business owners that come to us have been managing their accounts for years. Often, they are stressed, emotionally drained, and tired. When we ask them why they have reached this point, the common response is: “When I started doing it, it seemed easier to take care of it myself rather than train someone else.” That viewpoint is understandable. The problem is that if you don’t have a clear roadmap of when and how to delegate, having to manage your own books can leave you feeling frustrated and resentful. Remember: You didn’t become a business owner so you could spend hours each month balancing bank accounts! (But we did!)
So if you have been managing your books yourself and you think that you are ready for a change, why should you consider hiring a bookkeeper? Our next article in this series will discuss this topic.