Often starting on a shoestring budget, startup founders and small business owners are tempted with the idea of doing everything themselves, especially in their early years, to save on costs. In some situations, it might make sense, but deciding whether to stick to the same DIY approach to a business’s bookkeeping as well can be a tough call.
It is not a once-a-year affair. Recording and reconciling your firm’s finances is a routine task, even if you are relying on bookkeeping software. And dealing with the minutiae of everyday business transactions can be sometimes mind-numbing. Moreover, tracking the financials demands precision, as any mistakes can lead to missed income or unnecessary tax penalties and losses.
Already feeling confused? To help you figure out if handling your business’s books on your own is the best choice, consider these three questions:
1. Do you have the aptitude?
It doesn’t happen every day that a startup founder or small business owner is a finance professional. If you don’t belong to the club but are nevertheless financially savvy, then you are good to go.
Otherwise, ascertain whether you are familiar with basic accounting processes. Do you know how to categorize transactions and properly document them, and how about filing taxes? Do you know how to prepare payroll and manage loans or debt repayments? Any idea about how to reconcile the financial accounts?
Though bookkeeping software can help you simplify these processes somewhat, you still need a basic understanding to enter the right input under each tab in the bookkeeping app. However, if these questions baffle you or you find taxes torturous, seek out a professional bookkeeping service.
2. Do you have the time?
For startups and small businesses in the early stage, including the pre-seed or seed stage, it is easier to manage time for bookkeeping. With customers low in numbers and transactions low in volume, updating financial records for maybe 30 minutes a week would be enough.
But for those who are processing employee payroll or dealing with a high volume of transactions daily, filing the data and meeting all the other bookkeeping deadlines may require more than a few hours a week. Such businesses need to decide if they can make time for managing the books regularly alongside other duties. This is the biggest tradeoff, so make an informed decision.
3. Does it sound economical?
Don’t take on the task of managing your books because you like to keep every financial transaction in the business under your control. Nor should you undertake bookkeeping if you love playing with numbers. Instead, put your mathematical skills to use and find out if your decision is financially viable.
Let’s do the math: Say you are billing your clients $50 per hour and spend 30 minutes a week doing your own bookkeeping. That means you are looking at roughly $100 per month. Add the cost of accounting software, which as an example is $340 per year for Sage 50cloud  tool. That’s a total of $1,540 per year on doing your own bookkeeping.
If hiring a professional bookkeeper costs you less than $1,540 or the value of your time, then simply let the pro do the job. To do your own calculation, track how much time you spend on bookkeeping. Then figure out the value of your time. Compare your time’s worth to the cost of bookkeeping, and you will have the data you need to make a choice.