By Amanda Karen | CrunchSum
Many solo-entrepreneurs and small business owners make the decision to handle their own bookkeeping. It is often the case that you can when you are just starting out, however, it may not be the best use of your time. Whether you are just starting out or are solely owned and operated, you are required to wear many hats. Generally, bookkeeping is the one that many business owners want to wear the least.
What is bookkeeping?
There is a prevailing idea among many business owners that bookkeeping is largely just data entry. Reducing bookkeeping to just data entry leads many business owners to believe that they can handle their own bookkeeping without the help of an expert. However, it is much more than just entering your transactions into QuickBooks from your bank statements. It involves the use and knowledge of the chart of accounts, debits and credits, account reconciliations, sales and accounts receivable, bill processing and accounts payable, and sometimes even payroll processing. The goal of bookkeeping is to maintain accurate and current financial records. This cannot be accomplished through data entry alone.
Why is bookkeeping important?
Bookkeeping is important for a number of reasons. We will focus on just two. The most important, being for tax reporting purposes. You want to have accurate financial data so that you are reporting accurately for tax purposes. Having accurate bookkeeping is also going to enable you, as a business owner, to make better informed investment decisions. With current financial data, you will be able to do things like pull reports and know where your business stands financially at all times.
Your bookkeeping needs to be current.
Avoid scrambling right before taxes are due to get your financial records up to date. Your bookkeeping should be completed monthly, even if you don’t have high transaction volumes. If you find yourself in a panic to get your finances organized for tax purposes, errors will likely occur and you will report incorrect financial information. Incorrectly reported financial information could eventually lead to you having to file an amended tax return. No one wants to have to deal with that. If your finances are this disorganized, this might be your first clue that you should hire an external bookkeeper to complete your bookkeeping for you.
At CrunchSum, we know that starting, owning, and running your own business is exciting. We also know that when starting out, you want to cut costs wherever possible. We would just encourage you to think about whether it will be worth it in the long run to complete your own bookkeeping. You will need to consider the potential time that will be lost, as well as the potential errors that may go unnoticed due to a lack of bookkeeping expertise. Bookkeepers exist to make the lives of business owners easier. In the long run, the benefits you’ll receive from a bookkeeper and the potential cost savings you will gain in terms of both time and money, will be invaluable.
Do you do your own bookkeeping or do you use an external bookkeeper? How is it working out for your business?
CrunchSum provides web-based bookkeeping and QuickBooks support services to web and technology companies.
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