Why Small Businesses Should Refrain From DIY-ing Accounting and Bookkeeping?
Just because you can doesn’t mean you should.” The quote finely applies to business owners who tend to do DIY tasks that are better when done by field professionals.?
Heard of accounting and bookkeeping? Both these tasks are crucial aspects of a business's growth, considering which big companies smartly determine who should do what instead of delegating all things to one shoulder.?
In that context, eliminate accounting and bookkeeping from your DIY list even if you can, especially when you are a small business where things can easily hodge podge.?
In this post, we'll explain why you, as a small business, should refrain from handling accounting and bookkeeping yourself and what potential harm it can pose to your business if you do so.
Accounting and Bookkeeping- A Brief?
Bookkeeping refers to recording and maintaining a business organisation's financial transactions on a daily basis.?
Bookkeeping is the primary stage of accounting. Examples include noting/recording sales transactions, purchases, expenses, receipts, payroll, cash flow management, bank feeds, and preparing financial statements. Simply put, bookkeeping accounts for all the small details of day-to-day finances.
On the other hand, Accounting comes after bookkeeping, i.e., it is a secondary practice that includes summarising, analysing, and communicating the financial data recorded in bookkeeping. Accounting helps to make final, informed decisions in a business and, therefore, is a crucial aspect of any business growth.?
Do small businesses even need Bookkeeping and Accounting?
Yes, small businesses must incorporate these practices regardless of the profit stability. Accounting is not solely done to streamline business finances but also to remain compliant with legalities. Here are a few reasons you need accounting, even as a small business and startup.
5 Reasons Why Small Businesses Should Refrain from DIY-ing Bookkeeping and Accounting
1. Complexity of Subject- Risks Accuracy
Accounting is undoubtedly complex, but it is also a meticulous subject that requires fine attention to detail. Given its complexity, it requires deep subject knowledge to operate standardised procedures.
Attempting to handle this subject alone may be possible, but it may also risk accuracy. Business financial documents can’t be compromised on accuracy as all the events are often interconnected. An error in either event may lead to disfiguring a whole bunch of data.?
To avoid clerical errors and maintain utmost accuracy, it is recommended that the responsibility be delegated to specialised professionals focused only on these two tasks.
2. Compromised Consistency?
As learned, bookkeeping is done daily and is a consistent practice. The final data ought to have every day’s record.
A small business already runs on a team of limited people with other on-field responsibilities such as managing supply, building market presence, etc. Amid all this, bookkeeping needs strict scheduling. While other tasks can be postponed or rescheduled, bookkeeping can’t be done any other way as it may create documentation gaps.?
Taking over bookkeeping and accounting might result in inconsistency, irregular recording and delayed reports.??
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Irregularities in recording result in delayed decision-making and more time consumption. It is better to avoid mistakes, as they only increase time consumption by filling gaps and correcting errors.??
3. Unfamiliarity with Accounting Software
XERO, Quickbooks, Freshbooks—Have you heard these names before? A non-accountant person probably hasn’t. These are some accounting software used by professionals.?
As cloud-based accounting has emerged, ?Accounting and bookkeeping alone can be arduous because, as an outsider, one can’t learn all the software and technicalities.
Being unfamiliar with such software doesn’t welcome efficiency and, thus, productivity. If you are a business owner, would you find time to learn this software separately? No, you wouldn’t because there’s much more to deal with.?
Therefore, small businesses should consider hiring an accountant who is well-versed in modern software and troubleshooting errors.
4. Compliance Issues
Accounting records and documentation prove financial transactions that have occurred in a business over time. Tax regulatory bodies like the IRS analyse business documentation to ensure an organisation complies with laws.?
You will likely only demonstrate compliance if you are aware of handling business accounts. Specific rules must be understood and kept up to date.?
This is the sole reason small businesses need to delegate accounting and bookkeeping to an expert who can maintain compliance with laws and regulations.?
Legal requirements are a big reason that not even big companies take lightly to avoid compliance issues later. It doesn’t matter how much you know; you can’t approve of yourself without the relevant experience.?
5. Financial Losses due to uninformed decisions?
Small financial losses can be significant for startups and small businesses. As mentioned, bookkeeping and accounting are attributes of final decision-making. Whether a business is positioned to accept investments, expand services, or be profitable, all these decisions are made considering the company's records.?
If your accounts and books are not appropriately managed, you will end up making a miserable decision for the firm. To avoid potential financial loss, drop the idea of doing your accounting and bookkeeping and hire veteran people for your business. Professionals also track any issues in the record and provide accurate data on time.?
Outsourcing Accounting and Bookkeeping for Small Businesses
Before you outsource people to handle accounting and bookkeeping for you, make sure you tick this list below-
Conclusion
Small businesses tend to overtake maximum tasks on their own for cost cutting, only to realise later that this has led to a loss. Although savings is important for small businesses, they must realise that every penny spent on a business is an investment.
The more correctly it is done, the better results it yields. Therefore, DIY-ing things that require special attention (accounting and bookkeeping) is dangerous to save a few bucks. You may be putting your business's future in danger if you carry out these operations yourself without being a specialist.