The Hidden Costs of DIY Bookkeeping for SMBs

Nearly half of business owners do their own finances and bookkeeping. For many, it’s not a passion for finances that drives them to take the DIY path; it’s the desire to save on costs.

But are you really saving money when you manage your own books?

The answer may surprise you. In fact, DIY bookkeeping can have hidden costs that may be holding you back from growth.

The Hidden Costs of DIY Bookkeeping

Managing your own finances can feel empowering at first as a business owner. But as you get more established and start growing, the true costs of taking a DIY approach start to surface.

Those costs can come in the form of:

Missed Deductions

Missing out on deductions can cost you thousands of dollars. Many business owners miss out on these common deductions:

Home office expenses. Depending on your setup, you may be able to write off a portion of your mortgage/rent, utilities, internet and even insurance if part of your home is used exclusively for business.
Business meals and travel. Travel expenses and meals with prospects or clients are often deductible.
Professional fees. Lawyer fees, bookkeeping software, tax prep and SaaS tools are often deductible as well.
Depreciation. Many DIY bookkeepers expense major purchases like computers, equipment and furniture incorrectly and miss out on tax benefits.
Start up and organizational costs. Expenses you incur before launching your business (like research, marketing, filing fees or training) may be deductible.

It’s easy to overlook these deductions (and others) if tax prep isn’t your area of expertise.

Compliance Errors

Compliance can be complicated, and errors can cost you big time. If you’re managing your own books, you may make mistakes with:

Payroll and employment taxes. You may misclassify employees or independent contractors, or you may miss deadlines for payroll tax deposits.
Sales tax. You might miscalculate or apply the wrong rate. You may fail to remit sales tax from online sales or register in all states where sales tax is required.
Late filings. You may miss the deadlines for quarterly payments or reporting requirements.
Industry regulations. You might not follow specific financial reporting standards required for your industry, which can spell trouble for you in the future.

Compliance issues can trigger interest charges, penalties, audits and other legal headaches that may impact your daily operations.

Cash Flow Blind Spots

Cash flow is what keeps your business running. But if you’re taking a DIY approach to bookkeeping, you may:

Confuse profit with cash flow. A positive bottom line doesn’t mean your cash flow is healthy. Late or unpaid invoices may leave you strapped for cash to cover basic expenses.
Not track accounts receivable and accounts payable properly. You may not follow up on overdue invoices or pay bills too early, draining your cash reserves in the process.
Fail to forecast seasonality. Many SMBs have seasonal highs and lows. It’s easy to overlook this and fail to account for it when forecasting.

Without a clear handle on cash flow, you risk being blindsided and unable to cover operating costs.

Time Drain

Bookkeeping is more than just data entry. It involves:

Categorizing expenses
Handling Q4 bookkeeping tasks
Reconciliations
Tracking receipts
Staying ahead of tax deadlines

Managing your business’s finances is time-consuming. Every hour you spend on it is one less hour you’re spending on growing your business.

The Advantages of Outsourced Bookkeeping

It’s clear that DIY bookkeeping can cost your business more than you think, but these costs aren’t the only reason to consider outsourcing this crucial task.

Outsourced bookkeeping can also give you:

Access to Expertise and Accuracy

Professional bookkeeping services stay on top of tax law changes, accounting best practices and compliance requirements.

Bookkeeping is what they do day in and day out. It’s their area of expertise, so you enjoy the benefits of:

Fewer errors
Organized, audit-ready books
Industry-specific insights for deductions, benchmarks and reporting requirements

With outsourced bookkeeping, you get peace of mind that your financials are accurate and compliant.

Time Savings

Why spend hours on bookkeeping when an expert can do it for you? All of that time you save can be put towards core tasks that help your business grow.

Better Financial Clarity

When you have an experienced professional handle your bookkeeping, you get better financial clarity through:

Accurate reporting and up-to-date financial reports
Clear financial data that helps you make smarter business decisions
Cash flow visibility, so you can plan ahead for lean months

An outsourced bookkeeper can also spot trends and risks ahead of time, so you can correct course before small issues become major problems.

Ultimately, a professional bookkeeper will give you peace of mind that our books are clean and your financial data is reliable.

How to Know It’s Time to Outsource

How do you know when it’s time to get help with your bookkeeping?

It may be time to outsource if:

You’re spending 5-10 hours a month on bookkeeping
You’re not confident in the accuracy of your books
You dread tax season
You want to focus on growing, not reconciliations

Want to learn more about our bookkeeping services? Schedule a consultation now to learn how our outsourced offering works and how we’ve helped other companies grow.