Handling your company’s bookkeeping to save money is not uncommon. I have seen many business owners use their secretaries or unqualified employees to do the books. However, the endeavor of “do-it-yourself” bookkeeping often entails various expenses that business owners tend to overlook. In most cases, attempting to save money by personally managing bookkeeping tasks doesn’t yield the anticipated benefits, and here’s why. Here are the three biggest hidden costs of doing your own bookkeeping.
Every hour spent on bookkeeping could be dedicated to revenue-generating tasks or strategic business activities. For example, generating leads and sales, fine-tuning your marketing plan, or developing new products or services. Time is money, so this is one of the biggest costs of doing your own bookkeeping.
When deciding whether to handle your own bookkeeping, it is crucial to consider the worth of your time and conduct a brief analysis of opportunity costs. Here’s how you do that:
Hourly rate x hours spent on bookkeeping = The cost of doing your own bookkeeping
For example, if you make $500,000 per year and you work 2,000 hours per year, your hourly rate is about $250. So, if you spend five hours each month on bookkeeping, it’s essentially costing you $1,250 a month ($250 x 5).
Do you see how doing your own bookkeeping may be costing you more than you think? You can quantify the actual cost it incurs, and that’s not including the small administrative tasks involved in bookkeeping that can add up over time.
For example, if you´re manually entering expenses into your accounting software, uploading receipts, categorizing expenses, or figuring out how to run a report – and this takes 2 hours of time every month – your bookkeeping is now costing you $1,750 per month (7 hours x $250 per hour).
The burden of bookkeeping can drain your energy and distract you from more valuable aspects of your business – so why waste time on something you dislike?
As a financial specialist, clients often seek my help to simplify their bookkeeping – which is not surprising as 40% of business owners consider bookkeeping and taxes the worst part of owning a business – and I find they have been making it much harder on themselves than it needs to be.
For example, they don´t maximize the features of their accounting software—thus wasting time and duplicating information – or they only do their bookkeeping “when they have the time,” leading to out-of-date information and a now overwhelming task.
** If you´re worried about whether you´re doing your bookkeeping correctly, consider using software or partnering with an accounting expert.
Handling your own bookkeeping may lead to errors, even with software usage. Why? Because many business owners don´t have the necessary expertise. There is a higher risk of misclassifying expenses or entering incorrect information, and this can have significant consequences.
Accurate financial data is crucial for tax preparation, making important business decisions, and applying for loans or finance, so any errors in this data could lead to financial problems – such as cash flow issues or the mis-purchasing of equipment and inventory. Not to mention, missed opportunities, such as not maximizing tax deductions or credits.
Put simply, using secretaries or unqualified employees to do your books is a recipe for disaster. Why? Because wrong information creates problems and can require a costly clean-up by a professional bookkeeper. Trust me, that happens a lot.
Read: Get Your Business Back on Track: 4 Steps to Clean Up Your Bookkeeping
You might be spending more time than you think on accounting and bookkeeping due to all of the small organizational and administrative tasks, so be aware of this. While it may seem like a cost-saving measure, doing your own bookkeeping can have hidden costs that are often overlooked.
Consider your time, peace of mind, and the potential for errors, before deciding whether to continue doing your own bookkeeping. Look to minimize or eliminate these costs by using bookkeeping software or outsourcing your bookkeeping to professionals, This will allow you to focus on what you do best – running and growing your business.
Want more time, peace of mind, and accurate books?
If you find yourself struggling with messy bookkeeping records, reach out to us at Lazar Accounting. Our Brooklyn bookkeepers specialize in helping you clean up your bookkeeping and can provide the expertise and support you need to keep your records in order for the long term.
If you’re ready to get your bookkeeping records in order so that they drive your growth rather than hinder it, contact us today. We’re here to help you succeed.
