text above the header Stay informed of industry trends, exclusive content, thought leadership, and exciting announcements. button

The Perils of “DIY” Accounting

Insights

While self-managing your accounting might appear to be cost-effective, it may not be as economical or simple as it seems. DIY accounting often has hidden costs that can negatively impact the sustainability and growth of your business.

Below are some of the perils business owners experience when they try to do their accounting themselves:

  • Inaccuracy – Many business owners do not have accounting expertise and struggle with recording transactions accurately. Simple mistakes can lead to skewed financial reports, incorrect inventory levels or customer receivable balances, and double or missed payments. Erroneous books give an incomplete picture of the business and results in business decisions based on inaccurate information.
  • Compliance – Entrepreneurs wear many hats and often have a “just get it done” mindset when it comes to bookkeeping. They rush through entering transactions without really understanding proper reconciliations, expense tracking, receipt retention, and other compliance matters. The combination of lack and time and knowledge lead to issues with accuracy and tax compliance.
  • Missed Deadlines – Businesses are responsible for many filing deadlines including corporate tax, payroll tax, sales tax, state registration renewals, government censuses and others. Business owners that do their own accounting must spend time monitoring these requirements. This can lead to missed deadlines and penalties for late or inaccurate filings.
  • Mixing Business and Personal Expenses – Comingling business and personal expenses complicates tax filings and compromises financial data accuracy. This practice can also make it difficult to secure loans or investments.
  • Payroll and Expense Errors –Payroll is time consuming and can be complicated. Even for companies that use a payroll processing service, reviewing payroll and employee expenses is still time consuming; and payroll errors can be costly and problematic.
  • Missing the Efficiencies of Technology – Even when using an accounting platform such as QuickBooks, there are opportunities to integrate this software with other tools, as well as set up rules and shortcuts to make reporting more efficient, accurate and timely. Business owners acting as their own accountant may not be aware of available technologies and set-up strategies. In addition, because of time-limitations, they often fall behind on expense tracking and uploading receipts into the software. This can lead to audit exposure.
  • Issues With Obtaining Capital – Clean, complete, and accurate books are a must for Entrepreneurs seeking to raise capital. Without appropriate books and records, securing a bank or SBA loan may not be possible, and higher priced lending may be the only option.
  • Overlooking Cash Balances – Many business owners quickly take a look at their bank balances when they are getting ready to pay an invoice but fail to account for outstanding checks or upcoming auto-payments. This leads to overdrafts and bank fees and can result in embarrassing returned payments. Experienced Accounting Professionals manage cash flow and keep track of receivables, while actively managing prompt payments of invoices.

The complexity of financial regulations and the need for accurate record-keeping and reporting demands specialized knowledge that goes beyond basic bookkeeping. Fractional accounting professionals provide this much needed expertise on an affordable as-needed basis, freeing you up to grow your business. Contact us to learn more about our fractional accounting services and how they can help your business.

Share this page:

Previous Post Next Post