Key Takeaways
- Doing your own books costs time that is worth more elsewhere. Recording entries, paying bills, invoicing, and reviewing statements add up to real hours every week.
- Inaccurate records create tax exposure. They limit your ability to plan ahead and raise the risk of penalties from an incorrect filing.
- Decisions made on incomplete or outdated financial information can send a business in the wrong direction, and the mistake often is not visible until much later.
Having a strong accounting framework in place is an integral part of managing your organization. The COVID-19 pandemic has highlighted this need and demonstrated just how important it is to have a professional manage the firm’s finances. Accounting is a complicated task; the numerous entries, paperwork, and ever-changing regulations can be hard to organize if you don’t have the relevant skills and qualifications. Business owners often decide to do their own books to cut back on cost. Below are three specific reasons business owners could be hurting themselves by doing their own books.
You’re Sacrificing Valuable Time
Business owners wear many hats and have to manage various operations throughout the day. Recording all entries and managing the company’s finances are added work for them. Since accounting requires attention to detail, entrepreneurs may feel like they are drowning in work. If you decide to do your own books, you will be responsible for managing everything from recording entries, paying bills, sending invoices, and reviewing financial statements.
You’re Creating Potential Liabilities
Financial records are crucial for filing taxes and making future plans. Thus, the highest level of accuracy and precision is required. If the books are not accurately managed, it will limit your ability to tax plan and increase the chances of penalties due to inaccurate tax filing.
Your Inability to Plan
A lack of accurate information can cause major oversights in day-to-day operations and future financial decisions. The ability to quickly gain a feeling for the business from reviewing the financial statements and then putting together a plan based on those statements and company goals is an important part of every successful business. Those statements however are only helpful if the information in them is current and accurate. If they are not, decisions could be made that take the company in the wrong direction.
Fox and Partners provides worry-free accounting for business owners, freeing them up to focus on growth and success. Contact us today to learn more!
Frequently Asked Questions
Four show up repeatedly: running personal expenses through the business without recording them properly, treating loan payments as expenses, never reconciling the bank, and mixing multiple entities in one file. Each one distorts the financials in a way that is painful to unwind later.
They can. The responsibility for supporting income and deductions sits with the taxpayer, so deductions you cannot substantiate may be disallowed. Good records are less about avoiding an audit and more about getting through one without losing deductions you legitimately earned.
Three quick checks. Does every bank and credit card account reconcile to the statement each month? Does every balance sheet line tie back to a document you could produce on request? Are last month’s financials in your hands by mid-month? A no to any of these points to a gap worth fixing.
