The True Cost of DIY Bookkeeping for Small Businesses
We say it often, but it bears repeating: For many small business owners, every dollar counts. Yet in their efforts to scrimp and save to invest toward growth, some entrepreneurs occasionally take a few shortcuts they probably shouldn’t … and one of those shortcuts is relying on DIY bookkeeping rather than hiring a professional.
“How hard can it be to track income and expenses?” Harder than you think. Not to mention, bookkeeping is more complex than just tracking income and expenses.
While DIY bookkeeping might seem like a smart cost-saving move at first, it often dredges up unforeseen costs that can far outweigh the price of either hiring a dedicated accountant or outsourcing your bookkeeping needs.
So before you decide to handle your small business finances on your own, here are a few hidden costs to consider.
5 Hidden Costs of DIY Bookkeeping
Hidden Cost #1: Costly Errors
Bookkeeping isn’t just about entering numbers into a spreadsheet or accounting software. It requires an understanding of financial principles, tax rules and industry-specific regulations. Without a professional background in accounting, it’s easy to make mistakes — and those mistakes can be expensive.
Common DIY errors include:
- Misclassifying expenses, which can lead to inaccurate financial reports.
- Failing to reconcile bank statements, resulting in undetected fraud or discrepancies.
- Forgetting to record transactions or entering them incorrectly, which throws off your books.
- Improper handling of payroll taxes, which can trigger IRS audits and even tax penalties.
These errors can affect everything from your tax filings to your ability to secure financing or attract investors. In serious cases, inaccurate bookkeeping can even lead to legal trouble.
Hidden Cost #2: Missed Deductions and Tax Advantages
Your average new business owner is probably aware of a few basic business tax deductions and credits, such as home office expenses, mileage and business meals.
However, professional bookkeepers and accountants know the tax code up and down, meaning they have a much wider awareness of all the various tax breaks a business can get — and they have a better understanding of which ones apply to certain types of businesses (like yours). They also stay up to date on the latest tax laws, so they’re more likely to be aware of when new deductions come up and when certain tax credits expire.
If you’re doing your own books, you’re probably only scratching the surface of what’s deductible — which means you’re probably paying more in taxes than you need to. And those missed savings can add up.
Hidden Cost #3: Incomplete Financial Insights
Accurate bookkeeping gives you visibility into your company’s financial health. If your books are inaccurate or incomplete, you can’t rely on your financial reports to guide key decisions. Professional bookkeepers deliver:
- Clear, timely financial statements
- Accurate cash flow analysis
- Budgeting and forecasting support
- Strategic insights based on your industry and goals
This level of insight can help you spot emerging trends, control costs and/or plan for growth. That’s tougher to do if you’re not confident that you correctly crunched the numbers.
Hidden Cost #4: Lost Time and Productivity
A tired old cliché about small business owners is that they “wear many hats,” but it’s true. Many entrepreneurs are CEOs, marketers, salespeople and customer service reps, all rolled into one.
Adding “bookkeeper” to that pile can spread you too thin, especially during periods of peak business activity.
Bookkeeping done right takes time. Even if you’re using accounting automation software, there’s a learning curve. You could spend hours entering data, troubleshooting errors and trying to understand reports. Those are hours you’re not spending growing your business, serving customers or building strategic partnerships.
If your hourly rate (or the potential value of your work) is higher than what you’d pay a bookkeeper, you’re not actually saving money.
Hidden Cost #5: Stress and Burnout
DIY bookkeeping isn’t just a financial burden — it’s an emotional one. Many small business owners report feeling overwhelmed and stressed about their finances, especially when tax season rolls around or cash flow gets tight.
When your books are disorganized, deadlines loom larger and the risk of audits or late fees grows. That constant worry takes a toll on your mental energy, which can spill over into other parts of your business … and your life.
Handing your bookkeeping off to a trusted professional means peace of mind. You’ll be more confident in the accuracy of your numbers and the state of your records, which in turn will make your business feel like it’s on more solid financial ground.
Need Help Transitioning Away From DIY Bookkeeping?
Ultimately, bookkeeping is too important to treat as a DIY project. It’s the financial backbone of your business, so getting it right is essential for success.
McManamon & Co. is an accounting, tax, fraud, forensic and consulting firm that serves small and midsize businesses. We offer outsourced CFO, accounting and bill pay services that are tailored to your company’s needs, helping you stay organized, compliant and financially sound — without the headaches of DIY bookkeeping.
Call us at 440.892.8900 or contact us online today to learn how we can take the burden of bookkeeping off your plate — so you can focus on what you do best.
Tags: accounting, financial literacy, outsourced CFO, outsourcing your accounting, small business, small business accounting, small business finances, small business taxes | Posted in accounting, McManamon & Co., small business, small business taxes