The question is a simple one: If you’re a business owner, should you do your own bookkeeping? The answer might seem obvious in the digital age of apps, AI, advanced software, and automated everything. But the truth is, in most cases, first-time and experienced owners should probably leave the bookkeeping function to professionals.
There are situations when the DIY route makes sense. For example, managers with a lot of time, the right skills, a rock-solid grasp of the basics, and who operate very small entities can, for a while anyway, do their own books before the business grows and becomes more complex.
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There’s an in-between phase, too, where owners can get training and use software to make a first draft of the books before handing them over to a professional accountant who can check for errors. The points below offer a starting point and knowledge base that help to answer the question, “Should you do your own bookkeeping?”
- What’s Involved in a Thorough Bookkeeping Job
For starters, so-called “simple bookkeeping” involves much more than adding columns of numbers and balancing expenses against revenue. Modern accounting is about maintaining careful tax compliance with complex federal, state, and local regulations. Plus, those who do the job must possess an in-depth understanding of secure record-keeping, reconciliations, payroll protocols, proper data entry, and industry standards.
So, as an owner, should you do your own bookkeeping? Before answering, consider the following details about what’s involved in addition to the big-picture explanation above. One, a thorough job covers the entire accounting cycle. That means you’ll need to be meticulous if you do the work yourself about recording, classifying, and reconciling all financial events in order to get accurate and usable output. The whole thing begins with setting up what accountants call a clean set of books.
What’s that? The short answer is that it’s a chart of accounts alongside a reliable system for capturing every transaction, namely all sales, receipts, and payroll events. Daily chores include invoice management, data entry, bank reconciliations, and paying bills. Forget that last task, and your telephone will serve as a friendly reminder.
Recurring, non-daily duties of the company bookkeeper focus on filing taxes, processing payrolls, withholding taxes, and managing A/R and A/P (accounts receivable and accounts payable). Every few months, the bookkeeper must create balance sheets, income statements, and cash-flow documents to keep an eye on profitability and liquidity. Budgets, variance analyses, and cost-tracking chores round out the job responsibilities.
But you’re not done yet. Ongoing work includes record-keeping for tax purposes and setting up internal controls to protect the company from fraud. Secure data storage, approval workflows, and separation of duties are part of that mix. Yes, it’s a lot of work and not the kind of thing the average non-professional is prepared to do without extensive training, experience, and excellent software.
2. When Does Outsourcing Make Sense?
While there are rare cases where an owner can competently manage the books, a professional bookkeeper or CPA typically delivers the thoroughness, accuracy, and legality that protect the company and save a lot of time.
There are lots of scenarios in which outsourcing the entire ball of wax with regard to bookkeeping makes great sense. In most cases, hiring a pro is the wisest choice for anyone who cares about scalability, accuracy, and focus. If you don’t have the in-house talent or time to tackle daily financial chores, outsourcing is the natural solution for creating consistently up-to-date data and fully compliant reports.
When cash is scarce, which is a common problem for startups, professional bookkeeping firms or independent experts can put tighter controls in place, deliver on-time reports, and perform dollar-perfect reconciliations. But should you do your own bookkeeping if you own a small, seasonal business? When irregular workloads are the rule rather than the exception, there’s even more of a need for clean, audit-friendly books.
Accurate records prepared by a third party make it much easier to secure bank loans down the road and pass stringent audit requirements whenever bespectacled IRS agents come calling. And for companies with evolving tax requirements or that operate in more than one state, professional help is a must. In the end, outsourcing boosts efficiency, minimizes risk, and offers expert guidance without the cost of maintaining an in-house accounting team.
3. Getting Training & Using Software
Want to dip your toes into DIY bookkeeping? What about doing some work yourself and then handing the books over to an accountant for verification and error correction? If you do, it’s imperative to begin with the very best self-help resources, namely live training and/or software products specifically designed for the job. Try reputable online courses, community college classes, or small-business development centers for training.
Most courses focus on hands-on practice and real-world situations to give learners confidence before they attempt to handle their own books. At this point, “Should you do your own bookkeeping?” becomes a question with three possible responses: “Yes,” “No,” and “Partially.” Then, when choosing software to augment your newfound knowledge, be sure to get scalable, user-friendly products that suit the business’s industry and size.
4. The Downside of Doing the Job Yourself
The root of the problem is that non-accountants, even with decent training and expensive software, tend to fall victim to security vulnerabilities, data gaps, late filings, missed tax deductions, and dozens of other obvious and not-so-obvious pitfalls.
The root of the problem is that non-accountants, even with decent training and expensive software, tend to fall victim to security vulnerabilities, data gaps, late filings, missed tax deductions, and dozens of other obvious and not-so-obvious pitfalls. Those are just a sampling of the reasons for answering “No,” to the question, “Should you do your own bookkeeping?”
The DIY approach comes with dozens of backfire scenarios, can end up costing a ton of money, and has a way of producing high levels of stress. Even if you have good intentions, pitfalls for DIY enthusiasts include unwanted results like misclassified deductions, missing data, inaccurate tax filings that trigger audits, distorted cash-flow reports, and a lack of proper internal controls.
Finally, even the best software products on the market aren’t worth a dime if users misunderstand complex directions. That can lead to duplicate transactions, incomplete reconciliations, and audit trail gaps, to name just a few potential problems.
5. Clearing Up a Few Common Misconceptions
Beware of the common misconceptions about bookkeeping. First, don’t assume that “CPA” (certified public accountant) and “bookkeeper” are synonymous terms. CPAs are licensed accountants who handle highly complex chores like federal tax audits, estate planning, and corporate consulting. Bookkeeping represents a tiny piece of what a CPA does. Another myth is that bookkeepers must have college degrees; they don’t.
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Finally, the idea that pricey software products can thoroughly and perfectly manage a company’s books is a widespread falsehood. In the real world, software can assist, but there are too many judgment calls and qualitative decisions that require human input for compliance with industry standards, ethics, laws, and company policies. Should you do your own bookkeeping? The bottom-line answer is probably not. Outsourcing is almost always the smarter solution.
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