Why DIY Bookkeeping Is a Bad Idea for Small Businesses
As a small business owner, you have more than enough on your plate. Managing the company website, developing marketing strategies, managing employees, the list goes on and on. With so many tasks that take up your time, paperwork and bookkeeping are often last on the to-do list. But, if you decide to go the DIY route, be aware that poor bookkeeping practices can stifle your business growth and put you in hot water with the CRA. Read on to learn why outsourcing your bookkeeping is one of the smartest business decisions you can make.
Incorrectly Allocating Expenses
When doing your own bookkeeping, the most common error is misallocating expenses between the profit and loss account and the balance sheet. An incorrect allocation of expenses can result in an inaccurate final account that will distort your net profits. In addition to you not having an accurate picture of how your business is doing, this will also result in incorrect tax calculations.
Inaccurate Business Analysis
A lack of accurate bookkeeping will prevent you from analyzing your strengths and weaknesses effectively, resulting in the inefficient use of resources. By understanding where your focus and finances need to be directed, you will be in a position to optimize your efforts. By having access to this type of information, you can make critical decisions about the future direction of your business.
Inefficient Bookkeeping and Reporting
With the help of modern technology, the bookkeeping industry has been improved as well as radically altered. More than just simple data entry, today’s bookkeeping profession has evolved into cultivating valuable information and creating timely reports. Streamlining your business processes requires an expert with deep knowledge of cloud-based accounting software. Your bookkeeping process and report generation will take longer if you don't have experience with the latest accounting technology.
Falling Behind on Regulatory Changes
Keeping up with all the latest regulations is part of your bookkeeping services provider's job. Why double your workload if you don’t have to? Outsourcing your bookkeeping can ensure you are fully compliant with all current laws.
Failing to Control Your Cash Flow
An important aspect of running a business is controlling your cash flow, particularly in the beginning. To do so, it is necessary for you to know what your Accounts Payable and Accounts Receivable are for each of your vendors and clients. In order to increase your cash on hand throughout the month, you need to make sure your bookkeeping is adequate, such as reducing how long your customers have to make payments and determining when to make your own payments to vendors.
Waste Precious Time and Money
By outsourcing your bookkeeping, you will be able to free up more time and resources. The bookkeeping will be handled for you, so you won't have to spend time looking through your receipts and records. Your time will be freed up to focus on what you do best – growing your business. Having an outsourced bookkeeper will save you money as well. You will spend a fraction of what you would pay for a full-time employee if you outsource your bookkeeping.
One of the primary reasons for startup businesses failure is poor bookkeeping. Keeping accurate records of your finances can provide valuable insight into your current financial situation. It will also help you to capitalize on any financial benefits and keep up with your organization's needs. Proper bookkeeping is vital for understanding the future needs of your business and for recognizing growth potential.
For reliable and professional bookkeeping services, contact C.CAMPBELL AGENCY today.