Small business owners have a lot on their plate when it comes to running their business smoothly. Sole proprietors often manage multiple aspects of their company’s operations, such as staffing, scheduling, and bookkeeping. While a DIY approach to operating a small business may be necessary for the early stages of a business venture, it’s often not a fiscally responsible decision for the long run.
To better understand the impact a non-professional can have on small businesses’ health, let’s look at another common DIY situation, the do-it-yourself home renovation.
Tackling a home renovation project on your own can be very appealing. The promise to save money, learn a new skill, and take pride in a well-finished challenge is hard to resist. However, DIY renovation projects are notorious for going over-budget, being a source of frustration, and frequently result in regrets and poor looking results. In worse-case scenarios, do-it-yourself renovations can seriously damage a home and its subsequent property value.
In bookkeeping, DIY bookkeeping tactics often yield similar results for small businesses as a poorly completed home renovation does for homeowners. Today, we’re going to share why a non-professional approach to bookkeeping can cost small business owners money.
Professional Bookkeeping Effects Profitability
Monitoring business success isn’t just about recent sales numbers and incoming cash flow. How a company allocates incoming funds can determine an organization’s profitability. And deciding how and when to use available business cash is directly connected to how accurately funds are being tracked.
When small businesses accurately record, monitor, and routinely review incoming coins and outgoing expenditures, the information needed to make wise decisions is readily available. Often, the best way to ensure a small business’s books reflect an accurate picture of the company is to outsource that crucial task to a certified bookkeeper.
Typical Small Business Owner Bookkeeping Oversights
- Not tracking income and expenses regularly.
- Overlooking small transactions and costs.
- Not understanding how to manage cash flow.
- No clear budgets or financial goals.
- Not reviewing financial reports frequently.
Small Businesses May Pay More Taxes without Professional Bookkeeping Services
An advantage to hiring a professional bookkeeper is the access to their knowledge of tax breaks and benefits available to small businesses. Each year in Canada, small business owners miss out on thousands of dollars in business tax claims because they aren’t aware they exist or are unclear if they qualify for them.
Examples of five expenses commonly under-claimed by small businesses in Canada include:
- Vehicle expenses
- Home office expenses
- Charitable donations
- Business advertising expenses, including online efforts
- Company meals and entertainment
Business Owners Spend Valuable Time on Bookkeeping Tasks
When time is money, it’s essential to use your available minutes wisely. For many proprietors, this means focusing more time on the areas that bring in revenue, such as sales, lead generations, or product sourcing.
When small business owners start spending more time away from what they do best, company efficiency and productivity can decrease. Lower productivity can negatively impact all aspects of the business, from client relationships to sales and even the workplace atmosphere.
Outsourcing essential services to trained professionals frees up valuable time for business owners who can then use it in more productive ways.
Bookkeeping Errors Are Costly
Just as shoddy plumbing work can create long-term problems for a house, so too can poor bookkeeping. Several bookkeeping errors can cause issues that have the potential to impact a business for years to come.
Lack of knowledge and experience is often a contributing factor that leads to poorly managed books by small business owners. While an abundance of bookkeeping education and tutorials are available and tailored to small business owners, it’s easy for mistakes to occur without adequate direction and experience.
Accounting Software Isn’t All-Knowing
A common misconception small business owners assume is that their accounting software will take care of their bookkeeping and accounting needs. This simply is not true. While accounting software programs, such as QuickBooks Online®, are essential to streamline bookkeeping processes, they cannot interpret data the way a certified professional can.
Accounting software should be viewed as a tool used to maintain and operate your business’s bookkeeping efforts. A reliable bookkeeping professional is a trustworthy source for overseeing and reviewing business books.
Professional Bookkeeping Services Save Small Businesses Money
The wise use of a business’s financial resources helps operators grow, scale, and increase profit margins. Having a clear view of your business’s financial health is imperative when creating and executing business strategies. Professional bookkeeping services can help small business owners maintain healthy financial practices that cost much less than falling victim to common DIY accounting traps.
If you’re ready to outsource your bookkeeping to a professional firm, give us a call or use the contact form. While we’re based in Victoria, BC, we work with small businesses throughout Canada.