I found some great advice on a blog written by a bookkeeper in Australia.? The same principles apply in the U.S. and elsewhere!
It?s easy to develop a false sense of security about doing your own books because you have control over them.? Lack of cash flow to actually pay someone else to do the books feeds into that.? However, the mistakes that can occur due to the lack of knowledge or maybe even trying to wear too many hats can be devastating to the business.
Here are some of the major downfalls to doing your own books if you own a business.
1.? Lack of software knowledge.? Quickbooks is pretty powerful software.? Most new clients who have already set up Quickbooks for their business are either not using it correctly, or not using it to its potential.? It?s not an easy software to figure out on your own.? On the other hand, trying to manage business books without Quickbooks or similar software can also be a disaster.? The more that is done manually, the more room there is for error.
2.? Missing tax deadlines.? This might include quarterly income tax reporting as well as?year-end reporting.? Unless it?s your full time job to keep up with IRS requirements, the rules can be confusing.? Not to mention how fast time flies when you?re having fun running a business!
3.? Failure to handle payroll properly.? If you are trying to do your own payroll along with other bookkeeping, it might mean double trouble.? Deductions need to be handled properly, and are complicated by requirements for health insurance benefits and certain deductions that can be handled with pre-tax income.? Penalties for not handling all these things properly can be very stiff.
4.? Making invoicing errors or not doing invoicing.? In a service oriented business, when you?re busy helping clients or customers, it?s easy to let the billing fall through the cracks.? Worse yet, if your financial records are not organized and accurate, you might be missing information and not billing customers properly.?? A loss of income isn?t something that most new and small businesses can afford.
5.? Recording?expenses incorrectly.? Whether or not some expenses are deductible can be questionable.? Failure to record items correctly can cause huge problems at tax time or in an audit.? It?s better to leave it to the experts.
6.? Backing up financial records.? Our computer techies constantly remind us of the importance of backing up our business information.? Whether the financial records are on the computer or done manually, backup systems are necessary.? Having a bookkeeper?should ensure that there are at least two sets of financial information?in two separate locations.? Computer information should be backed up either on ?the cloud? or on a hard drive that?s kept in a separate location from the main computer.? Physical records should be stored offsite in a secure location.? It?s good to know for sure which records need to be kept and for how long so that you don?t end up keeping multiple file cabinets and boxes of information needlessly.
Every owner of a new business should hire a bookkeeper as soon as possible to avoid the headaches that can be caused by having the books mis-managed due to lack of knowledge or experience.? Give us a call and let us help you run your business the way it should be.
Source: http://www.sparkbusinessconsulting.com/why-no-business-owner-should-do-their-own-books/
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