Growing Your Business

Is DIY the Right Approach For Business Bookkeeping and Accounting?

by
Lee Reams II
on
10/29/2015
Is DIY the Right Approach For Business Bookkeeping and Accounting?

The Home Depot and Lowes have built their businesses around do-it-yourself homeowners who want to tackle home improvement and repair projects themselves. They have been successful in large part due to the fact that many homeowners today would rather invest their time and energy into doing these kinds of projects themselves than pay a professional to do it for them.

In recent years, the do-it-yourself trend has also caught on in small business — especially in the areas of bookkeeping and accounting. Technology advances and new software programs have enabled owners and entrepreneurs to handle many accounting functions themselves instead of hiring a bookkeeper or accountant to do them.

But is DIY bookkeeping and accounting a wise move? Sometimes it is … but sometimes small business owners can end up like the DIY homeowner who thought he could replace the broken garbage disposal himself. Instead, he ended up with a flooded kitchen and a $5,000 repair bill for what would have cost $300 for a professional plumber take care of in the first place.

Too Many Hats?

Just because small business owners should be aware of what’s going on in all areas of their companies doesn’t mean they’re experts at everything. “Small business owners are known for wearing lots of different hats,” says Rhinelander Accountant Marge Cook. “But one hat many aren’t comfortable wearing is the accounting hat.”

In fact, many entrepreneurs and small business owners come from a sales or operational background and lack in-depth bookkeeping and accounting knowledge. But software programs like Quickbooks have been designed to allow even financial novices to handle basic small business accounting tasks.

The question becomes what differentiates basic accounting tasks that many owners can probably handle themselves with the right software from more complex tasks where owners could quickly end up in trouble? The answer will be different for each owner, depending on such factors as the owner’s financial sophistication and comfort level in using accounting software and the complexity of the company’s finances.

If you have a decent level of financial and accounting knowledge, are comfortable using accounting software and your business’ finances are relatively simple, then you might be able to handle most of your company’s bookkeeping and accounting yourself using a program like Quickbooks.

But if you’re lacking in these areas and/or your company’s finances are more complex, DIY accounting could lead to more problems than it’s worth, such as:

  • IRS and payroll penalties for late tax payments and missed filing deadlines (not to mention unwanted attention from the IRS).
  • Failure to obtain helpful reports that can be generated from financial and accounting data.
  • Inaccurate financial records due to errors and mistakes.
  • Inability to obtain bank financing due to these inaccurate financial records.
  • A lack of internal controls, resulting in employee theft and embezzlement.
  • A damaged reputation in your industry and among your customers.
  • Disruptions with vendors and suppliers.
  • Failure to identify and take advantage of strategic financial opportunities for the business.

Any one of these problems could end up costing your business significantly more than what you would spend to hire a professional to handle your bookkeeping and accounting. If your DIY accounting leads to several (or more) of these problems, you could end up feeling like the DIY plumber with a flooded kitchen.

One solution for owners who don’t want to go the DIY accounting route but can’t afford to hire a full-time bookkeeper or accountant is to retain an outsourced or virtual CFO. This way, you can access the professional accounting services that will help you avoid these and other DIY accounting problems without paying the salary and benefits required to hire a full-time bookkeeper or accountant.

Stick With What You Know

“If you’re like most entrepreneurs and small business owners, you probably started your business because you had a great idea or a great product, not because you’re a great accountant,” says Certified Bookkeeper Delia Mena. “So stay focused on what you know the most about and leave the bookkeeping and accounting to professionals who are experts at this.”

This is especially true as your business starts to grow. “The larger and more complex your company becomes, the more dangerous DIY accounting can be,” Miami CPA Evelyn Hsu adds. “Eventually, most growing small businesses reach a point where DIY accounting is no longer feasible and they need to use a professional, whether this is a full-time accountant or a virtual CFO.”

share this post
Search for matches...
Lee Reams II

Lee Reams II

CEO

I am a tax and business news junkie who has spent the last 20 years developing and executing "best in class" word-of-mouth marketing campaigns for tax and accounting professionals. With TaxBuzz and CountingWorks we have taken that same commitment to quality content directly to the consumer. Keeping you up-to-date with the latest tax law changes, business growth tips and planning strategies to help you reach your best financial outcome.

Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

Need help selecting a firm?

Use our specialized search engine and get matched to the best accounting and tax firm for your needs.

Related Posts

Latest Posts