Entrepreneurs are classic “do-it-yourselfers,” because if our business depended on someone else to begin with, we wouldn’t have ever started it. We want to handle every aspect of our business to both save money and have control of our business’ destiny.
With bookkeeping, DIY (Do-it-yourself) is where we begin out of necessity. We’re not bookkeepers, but it needs to get done, and we’re usually our only employee on day one. Bookkeeping is a unique task to handle. You can try to learn from trial and error like you would sales or marketing, but in bookkeeping, it’s hard to know if you’ve done everything the right or wrong way until it’s too late. Doing it yourself takes an investment.
In this article we’ll look at what it takes to DIY, the benefits, and what you should consider before deciding to do it yourself.
What it Takes to DIY
To do your own bookkeeping for your business, you need the following:
- The interest and the ability to complete entries and paperwork
- At the end of a long and tough day, you need to have an interest, even if minimal, in bookkeeping and paperwork AND the ability and time to do it. If you hate paperwork and spending a couple of hours doing data entry sounds worse than getting a root canal, you’ll avoid your bookkeeping like the plague. You’ll have little chance of spending the time it will take to complete and give it the required effort it needs.
- A way to capture bookkeeping-related activity
- Did I go to the bank on Thursday or Friday? Was that check for $400 or $750? Business receipts in your head are quickly lost and forgotten. You need a way to capture activity related to your business immediately. Whether it’s taking a picture on your smartphone or using that same phone to put information into your cloud accounting software, a process is needed in order to avoid falling behind.
- Bookkeeping system
- Imagine if your car didn’t have a front end to protect the engine, radiator, and other components. Having a system in place, whatever that system looks like (cloud accounting software, paper system, desktop software, etc.), is vital, as without it, you’re bound to have a mess. A system keeps your small business’ accounting structured and in-check.
- Disciplined approach to recording/entering items into the system
- There’s no entrepreneur on the planet who hasn’t felt the feeling of having more work on their plate than they can do in a given day. The only way to stay on top of transactions as a solopreneur or small business owner is by having a method to enter items into your system when needed. Whether this is scheduling time in your calendar each Thursday or entering in every receipt the moment it’s received, you need an approach that works for you and one that you can stick to.
- Education on standard bookkeeping standards (GAAP)
- Do you think you could compete in the Daytona 500 or the PGA Tour tomorrow? Bookkeepers and accountants may not be professional athletes, but they are trained and knowledgeable of their field. If you plan to do your own bookkeeping, you need knowledge and training on generally accepted accounting principles (GAAP) and the ins and outs of accounting for a business in your industry.
- Knowledge of/training in the software you’re using
- In addition to knowing what’s required of your business’ books, you need to know how to work the software you’re using. Each is different, and although they are created to be easy to use and understand, the more you learn about the software, the more ways you can use it to benefit your business. Financially proficient small businesses can find potential risks and use their bookkeeping information to maximize profits. If you’re going to do your own bookkeeping, you need to make the additional investment to know how to use the software that’s driving your system.
- If done properly while taking time to fully understand your financials, doing your own books will give you a full picture of your business’ finances.
- Save money.
- Your books are in trusted hands – your own.
- In the case that you hire a bookkeeper or outsource your financials in the future, you will know how to train, manage, and/or inform who is now handling your books on the specifics.
6 Things to Consider:
- You are not a professional bookkeeper. Even if you are able to learn fast, your short time as a bookkeeper will not match the years an accountant or bookkeeper spends learning and practicing their trade.
- Your time is extremely valuable. For example, we work with lawyers who charge upwards of $200 per billable hour. Every hour they spend on bookkeeping takes away their opportunity to focus on their clients. If your time is less expensive than a bookkeeper, you may want to do your own bookkeeping instead of outsourcing or hiring.
- You will need to buy and manage the accounting software you decide to use.
- You will be responsible for keeping up with daily transactions.
- You should be tracking key performance indicators and know the importance of these metrics to your business.
- If you are doing your own books, you need to have someone or software that can hold you accountable. A simple clerical mistake can put your business, and possibly your personal finances, in jeopardy.
This article is part of the Bookkeeping Options for Small Business Owners and Entrepreneurs series by Kahuna Accounting. For a summary of the six most popular options that entrepreneurs choose when handling their small business’ books, read the initial piece in the series here: Bookkeeping for Small Business: Six Options for Entrepreneurs.