4 Reasons DIY Bookkeeping Can End Up Costing You More

While many people only think of accountants at tax time, a big part of my job, more than preparing taxes, is bookkeeping for local businesses.  While finances are my number one priority, small business owners are very busy and tend to put it off for more urgent matters.  But unfortunately, around this time of year, finances are what becomes urgent and you have a year’s worth of book reconciliation to do.

Here is why the DIY route to bookkeeping will end up costing you money instead of saving it:

1.  Faulty bookkeeping will give you a faulty picture of your cash flow, which from all of my previous advice, you already know that cash-flow is the lifeblood of your small business!  Don’t obscure your financial viability.  Without accurate records, you won’t be able to tell how to fix a financial problem or even if there is one in the first place.  Dangerous!

2.  Overestimation or Underestimation of profits means that you’ll either pay more in taxes on income you didn’t actually receive, or you’ll raise the eyebrow of the IRS on cash you didn’t know you needed to report.  That includes reporting assets and expenses that can lead to a higher tax liability as well (i.e. depreciating assets).  Overlooking costs or misplacing receipts means you can’t write those expenses off, either.

3.  Payroll problems can arise if you have inaccurate records.  How do you know if you’re over or under compensating employees or their benefits with inaccurate bookkeeping?  Answer: you can’t.  An error that carries over to an employee’s W-2 from your own records causes tax problems for them as well.

4.  Who owes you what, what do you owe? When?  Unorganized invoicing means the longer it takes to get you paid.  It also means the longer it takes for you to send money you owe which leads to late fees and penalties.  Being backed up on your bills and incoming payments is a serious cash flow issue.

Ultimately, bookkeeping mistakes are extremely expensive and very time-consuming.    Hiring an expert like me to fix them will cost you a pretty penny I don’t mind saying.  However, hiring an accountant for regular bookkeeping can be a great decision.  It gives you the power to maximize your business decisions, like knowing when to make investments in equipment,  inventory or even more staff.  Accurate bookkeeping is what gives you, the small business owner, information on how best to run your business.