Do It Yourself Bookkeeping Can Be Costly
If you have a small business you might be tempted to do the bookkeeping yourself or getting someone you know to do it for you. Accounting mistakes can however hinder the growth of your business.These mistakes are very typical for businesses that are just starting out.
Difficulties in Monitoring Cash Flow
There is a need for the observation and monitoring of the cash flow for any business and particularly for a business under duress. Doing it yourself does not help the situation and this is why it is essential to have a professional bookkeeper to maintain records and make regular reports instead of updating books on a quarterly basis.
The Need to Keep Track of Accounts Payable
It is essential to maintain records and keep track of accounts payable or accounts will go unpaid. Loosing track of what has been paid or has not been paid is very easy when you do the accounting yourself. Bookkeepers have a system in place and this helps maintain your company’s reputation.
Inaccuracies Can Cause Problems
Business owners are not bookkeepers and hence they will not know what to record, when to make records or how to make those records. Without the right records it is possible to run into difficulties. It is also possible not to know when to make payments .
You might end up with misrepresented financial figures that do not tell you the state of the company’s financial health. This is dangerous because you will not know how to make projections and might end up not paying taxes rightly because you don’t know which deadlines to keep.
Effects of Time and Effort
Bookkeeping is not as easy as many business persons might think it is. It takes time and effort and this means that other areas of your business suffer. Time a very valuable asset if you have a small business. There are many other things that you can do instead of spending your time buried deep in bookkeeping. The time you lose doing it yourself might end up costing you more that it would cost you if you employed a professional bookkeeper.
Bookkeeping Errors and the IRS
When you keep your own books and make errors, you might find yourself in problems with the Internal Revenue Service (IRS). This is why self bookkeeping is not a very good idea for your business. It can be too risky to keep your own books especially if you are just learning bookkeeping.
It is hazardous to record transactions improperly. Decisions that are made on the performance of the enterprise will be incorrect. Taxes based on sales will be under reported and subject to collection activity. Payroll that is over stated can lead to labor issues.
Taxes that are under paid can devastate your business. The IRS and taxing authorities impose heavy fines and penalties for the slightest infractions.
Wages form the basis for Workers compensation and unemployment claims. Ignorance is not an accepted excuse.
Doing it yourself is not saving you any money when your CPA has to redo the work in order to prepare a tax return. It is also not advisable to use incorrect numbers for planning purposes.
Seek out professional help in all critical departments of your business – especially your accounting department!