This article was originally posted by Startup Savant
Most entrepreneurs hate the idea of bookkeeping. In fact, TD Bank surveyed over 500 small-biz owners to find out what they liked least about running their own businesses, and bookkeeping won, hands-down.
However, with the help of modern software and a knowledgeable professional it doesn’t have to be all that bad. In this article we’ll cover some bookkeeping-basics and give you the information you need to keep your brand in tip-top shape. Enjoy!
WHY BOOKKEEPING IS SO DISLIKED
Before we explore solutions, let’s first figure out the problem. Why is it that bookkeeping gets such a bad rap?
Reason #1: Lack of Know-How
Most people don’t know how to do it properly. Sure, it’s not rocket science, but doing your books correctly does require a fair amount of accounting knowledge.
Reason #2: Procrastination
When folks aren’t totally comfortable with a given task, they tend to put it off. Unfortunately, that only makes things worse. Trying to sort out expenses months after the fact isn’t only frustrating and time consuming– it seriously increases the chance of missing or misallocating data points, which can have expensive repercussions.
Reason #3: No ROI
Bookkeeping, in general, doesn’t add anything to the bottom line, so it doesn’t feel as important as other activities. It also just isn’t as much fun as coming up with a new product idea or marketing campaign, and it’s more stressful than doing some filing or ordering office supplies.
Many entrepreneurs’ beef with bookkeeping comes from their awareness that they should be more adept with it, and that sooner or later they’re going to have to face the frustration head-on. This looming stress can understandably sour people on bookkeeping altogether, but once it’s finally all sorted it’ll feel like a massive load off.
HOW TO SOLVE THE PROBLEM
So, what are your options for overcoming these issues?
The first is to invest some time in getting the books set up correctly, and then getting some training on how to actually do them correctly. The training doesn’t take long and can be done a variety of ways (books, seminars, video courses, online tutorials) to fit your schedule and preferred learning style.
It’s funny—tasks like these tend to feel a whole lot less intimidating once you learn how to do them properly. After a few hours spent exploring your accounting software, you might find you actually enjoy it. Many business owners actually look forward to tracking their progress through hard data!
Another option is to task a reliable, detail-oriented employee with some or all of the bookkeeping work. This route allows you to benefit from having accurate and up-to-date books without having to do the tedious tasks yourself!
The third option is to outsource your bookkeeping work—and there’s no shortage of options here. Choosing a good accountant is the subject of a whole other article, so we won’t dive in too deep now. But generally, this is a great option for those with a little extra money to spend. Assuming you choose a good accountant, outsourcing this work will ensure that you get professional quality, and will leave you the time to spend growing and managing your business.
7 BOOKKEEPING MISTAKES TO AVOID
Here’s a short list of the most common small-business accounting mistakes. Hopefully seeing these now will help you avoid them altogether!
#1) Disorganized Workflow
Think of your small business like it’s a bedroom: you can either keep it tidy and organized, or get lazy and leave clothes all over the floor, the bed a mess, and food crumbs in the carpet. It’s important to keep the mess from accumulating in your financials. Find ways to keep yourself accountable for establishing and maintaining financial organization in your workflow!
#2) Lack of Accounting Savvy
Most accounting software these days are pretty amazing, and they’re only a couple hundred bucks a year. The only thing is, you have to actually learn how to use them. Thankfully there are options like FreshBooks and Xero, both of which are super-intuitive and include-plenty of free training materials to help minimize the cost and learning curve. (See the FreshBooks Review and Xero Review for more information.)
#3) Should’ve Outsourced
Maybe learning how to leverage contemporary, cloud-based accounting software isn’t right for you. Maybe it’s something you should delegate to a qualified professional. In the end, outsourcing your bookkeeping is probably cheaper than the cost of stunting your productivity!
#4) Working with No Budget
Listen, if you don’t have a budget, how in the world do you expect to compete? Obviously, there’s a limit to what you’ll spend, you just haven’t planned, forecasted, and structured it yet. If this applies to you, map out your budget already! Accounting software can make this a walk in the park.
#5) Solely Relying on Accounting Software
Is Xero an astounding tool? Absolutely—but don’t make it a crutch. Don’t start thinking that some algorithms are responsible for your resources, marketing budget, etc. Remember, good software is designed to allow you to curate and customize your financials with as much functionality as you need!
#6) Mixed Personal/Business Accounts
Oh boy…it’s typically solopreneurs who walk into this quagmire. It tends to happen unintentionally, until they learn the hard lesson come tax time or a business emergency. At this point, they’ll realize they need to set up dedicated business accounts and sync them with their accounting software.
#7) Data Entry Blunders
Otherwise known as human error. Accounting software can perform astounding magic with your numbers, but in order to do that the numbers need to be accurate. Once you sync your business bank account and credit/debit cards with your software this becomes 100× easier.
ACCOUNTANT VS. ACCOUNTING SOFTWARE
When it comes to maintaining the financial health of your business, hiring accountants and using accounting software are both undeniably helpful, efficient, and cost-effective options. Many entrepreneurs disagree about which one’s ideal, but the end result is the same—you’ll be able to take care of your business expenses more proficiently.
That said, let’s discuss the advantages and disadvantages of accountants and accounting software to help you make the right decision!
ACCOUNTANT PROS & CONS
There’s a simple question you need to ask yourself: “Do I want one-on-one assistance, or prefer a tech solution?”
Most people would prefer to work with a professional accountant. That said, keep reading before you decide!
- The working relationship you’ll have: If you hire a professional you’ll be able to discuss your financial matters with them in depth, pitch in your ideas, and express your disagreements.
- They’ll understand your financial goals: Accountants can create ways to better your business based on their understanding of your financial goals. And, unlike accounting software, accountants have human critical-thinking skills, so they’re able to anticipate future financial danger.
- Assistance when tax time rolls around: If you already have an accountant when the tax period ends, workloads will be made much lighter. Accountants can help you during this time by explaining regulations, assisting with filing, prepping documents and more.
- Cost: This is the number one concern among entrepreneurs when talk of hiring an accountant comes up. Professional fees can be as high as $1,000 per contract (the more experienced the accountant, the higher the cost). Others charge by the hour or per process, but regardless, they can be expensive and may just not be in the stars for some new entrepreneurs.
- Human error: As the saying goes, nobody’s perfect, and that includes accountants. However, you can help minimize errors by being involved in the bookkeeping yourself—two eyes are better than one, right?
ACCOUNTING SOFTWARE PROS & CONS
If you’re the tech-savvy type, you probably jumped for joy when accounting software started coming out. However, they’re not for everybody.
Some people are freaked out by the word “software” or skeptical of technology altogether—and really, who can blame them? Let’s take a look at some advantages and disadvantages of using accounting software.
- Automation: Once you have your software set up, you don’t have to do any manual entry, calculations, or other time-consuming tasks. Financial statements and reports are also automatically generated!
- Collaboration: Since the majority of accounting software has collaboration features, you can stay virtually connected with your accountant or team members.
- Mobility: As long as you’re connected to the internet, accounting software can be used anytime, anywhere, and be accessed via any web browser or operating system.
- Affordability: Using accounting software is much cheaper than hiring an accountant. Their competitive pricing and abundance of practical features give them an edge that a professional accountant will never have.
- Security: Working online isn’t totally safe, and by continuously sharing information with your partners and team members you’re putting your business at risk. Anyone can access your information anytime, as long as they have the skills to do so. You can help prevent hacking by adding layers of electronic protection to secure any data you enter online, but this creates an additional expense on your part.
- Upgrades: For an accounting software to continue performing its best, you may need to upgrade it from time to time. Of course, for any upgrade, you may have to shell out extra cash to pay for additional services.
- It’s not for everyone: As with any tech solution, you have to learn how to use it, and not all people are tech-savvy. Some business owners may just find it too difficult to navigate their finances using accounting software!
Regardless of which route you choose, the most important thing is that you feel comfortable contributing to the accounting process. Always remember that it’s important to stay hands-on, and not to rely 100% on any service!
About the Author
Matt Remuzzi is the owner of CapForge Bookkeeping, a full-service nationwide bookkeeping service for small businesses and startup entrepreneurs. Matt’s QuickBooks is available at Amazon. Follow Matt on Twitter @capforge.
About Startup Savant
Startup Savant is “built by savvy entrepreneurs, for savvy entrepreneurs.” The company reviews services and software to help entrepreneurs start businesses and donates a portion of its revenue to support entrepreneurship in classrooms across the United States. Learn more at startupsavant.com or Follow on Facebook or Twitter @StartupSavant.