Wed 01 Mar 2017 | By:

Bookkeeping 101: Everything You Need to Know

Small Business BookkeepingTD Bank recently surveyed over 500 small business owners to find out what they liked least about running their own businesses.

The hands down winner with nearly half the vote? Bookkeeping.

As someone who does bookkeeping for a living, I get it. I talk to small business owners every day and hear the same frustrations over this task and the problems they face in getting it done.

Luckily, it doesn’t have to be this hard.

 

Understanding Why Bookkeeping is So Disliked

The first step in understanding the solution is to figure out what the problem is and why doing the books gets such a bad rap. As it turns out, there are several reasons small business bookkeeping is at the bottom of the list.

The first reason is that most people don’t know how to do it properly. Despite the common claim of “it’s not rocket science” the truth is that doing your books correctly does require a solid foundation of accounting knowledge. Don’t mistake data entry for actually knowing how and where to enter things as that is a fast road to an utter mess.

The second reason is that when people don’t know how to do something well or aren’t comfortable with it, they tend to put it off. Unfortunately, this only makes it worse. Trying to sort out what got spent on what twelve months after the fact is not only frustrating and time consuming but seriously increases the chance of missing something or misallocating it, which can have expensive repercussions.

The third reason most small business owners I know don’t like doing the books is because it doesn’t add anything to the bottom line. Since doing the books doesn’t bring in any revenue, it doesn’t feel as important as other activities. It also isn’t as much fun as coming up with a new product idea or marketing campaign and it is a lot more stressful than just doing some filing or ordering office supplies.

I think a lot of the underlying reason entrepreneurs don’t like bookkeeping is also because they know they should be doing it and sooner or later are going to have to get it done. Unlike many other tasks which you would like to do but don’t get to, doing the books is eventually going to have to get done.

Knowing that causes stress and one of the most frequent things we hear from owners who hire us is that it takes a huge load off their mind knowing it is going to get done.

 

How to Solve the Problem

So what are the options for overcoming this all too common problem? There are several.

The first is to invest some time up front to get the books set up correctly and then get some training on how to do them correctly. Things are a lot less scary and intimidating when you know how to do them right. And the training doesn’t take that long and can be done a variety of ways so it fits your schedule and preferred learning style. There are tons of books, video courses, in person seminars and online tutorials. Some are free and some are paid.

Once you have spent a few hours learning how to use your bookkeeping software and understanding the tasks to accomplish it seems a lot less scary and overwhelming. Many business owners actually find they come to enjoy it and look forward to tracking their progress in business through hard data and actual dollars and cents.

Another option is to task one of your employees with some or all of the work if you have someone you trust and is reliable and detail oriented. That way you get the benefit of accurate and up to date books without having to do most of the more tedious part yourself.

The third option is to outsource the work. There is no shortage of options for having someone else do your books. Selecting a good bookkeeper is the subject of a whole other article, but if you find a good solution than this is often the best option. It ensures you get professional quality service while leaving you the time to spend on growing and managing your business.

The bottom line is bookkeeping is essential to your business. The best way to keep it from being your most hated task it to first learn enough about it so that it doesn’t scare you and then when you can consider outsourcing it to a qualified firm.

I guarantee that if you take those two simple steps you will not be naming it as your “most hated task” next time around. Then you can work on knocking off the next one on your list!

 

Accountant vs Accounting software

These two resources are undeniably helpful in maintaining the overall financial health of your business. Hiring a professional and using an accounting software are also efficient ways to handle your business’s accounting, not to mention they’re also cost-effective.

Many entrepreneurs have opposing views when it comes to which one is the most ideal to use, however, regardless of which one you want to utilize, the end result is the same – you’ll be able to take care of your business expenses better.

To help you make the right decision, this article will discuss the advantages and disadvantages of using the assistance of an accountant and a small business accounting software.

 

ACCOUNTANT pros & cons

Small Business AccountantIf you’re considering which one you want to hire/use, a accountant or an accounting software, there’s a simple way to choose, you just have to ask yourself – “do I want to deal with a real person, or do I prefer to use a tech solution?”

Most people would prefer to work with a professional accountant, but before you choose this option for yourself, continue reading first.

ADVANTAGES

There are many pros when hiring an accountant, one of them include the kind of working relationship that you’ll have. If you work with a professional, the relationship is more interactive, you’ll be able to talk and discuss things, pitch in your ideas and express your disagreements. In turn, they can also give us advises, helpful points and assist us in managing our business’s finances.

Professional accountants also understand your financial goals and situation and create ways to make your business better. They can adjust your taxes and help you prepare for the future. Unlike accounting softwares, humans can think rationally, they have the instinct to anticipate imminent danger such in the case financial troubles and issues and other tough situations.

Hiring an accountant will even prove to be a good choice during tax period. Having an accountant, your workload during tax time will be easier because there’s someone who will assist you with every procedure. Your accountant will explain to you tax regulations, tax filing, tax document preparation and a lot more.

Apart from all these, an accountant can both use his/her skills and use an accounting software all at the same time. He/she also has the ability to anticipate problems and create solutions in a timely manner – something that accounting softwares can never do.

DISADVANTAGES

Cost is the number one concern among entrepreneurs when we talk about hiring an accountant. Professional fees can cost you as much as $1000 per contract – the more experienced the accountant is, the higher the cost of services. Others prefer to be paid on an hourly, per project or per process, regardless, they can even be more costly. For the new entrepreneur, this is already a large sum of money.

As the saying goes, no one is perfect – that includes your accountant. We are all prone to human error and while doing your accounting tasks, they may have their fair share of errors. However, you can also help them in your own little way; be more participative and make sure to get involved – two eyes are better than one, it gives you the opportunity to see errors as well.

 

ACCOUNTING SOFTWARE pros & cons

Small Business Accountant vs Accounting SoftwareYou may have jumped for joy when accounting softwares were created, that is … if you’re a tech savvy kind of person, however, not every virtual service is for everybody.

In this section we’re going to talk about the pros and cons of using an accounting software.

ADVANTAGES

As you know, using any kind of tech solution makes everything easy and fast. I would say that the greatest advantage of using a software is automation. You basically don’t have to do manual entry, manual calculations and many other time-consuming tasks on your own because you can streamline anything.

Financial statements and reports are automatically generated without any effort and accounting softwares will provide you with almost every accounting tool you could imagine. You can even stay connected with your accountant or other team members because the majority of accounting softwares have share and collaboration features. Accounting softwares can also be used anytime, anywhere, they can be accessed in any web browser or operating system as long an internet connection is in place.

Accounting softwares are also very affordable. Most, if not all of them are paid monthly or annually and they have competitive pricing and practical features, so that’s an edge that a professional accountant will never have.

DISADVANTAGES

Working online is not the safest place; you continuously share information with your partners and team members, you’re putting your business at risk by doing so. Anyone can access your information anytime as long as they have the skills to do so, they may use your information for dangerous and fraudulent activities.

This can affect your business immensely, however, there are many ways to solve this problem. You can add layers of electronic protection to secure any data you enter or share online. You can also have an internal auditor, but this is an additional expense on your part.

For an accounting software to continue performing better, you may need to upgrade it from time to time for additional features. Of course, for any upgrade, you may have to shell out cash to pay for the additional services.

As with any kind of tech solution, you also have to learn how to use it, but not all people are adaptable and they may find it difficult to navigate their finances using an accounting software.

These are just some of the advantages and disadvantages of both services. Regardless which one you choose, the most important thing is, you feel comfortable doing your accounting tasks with the service. Always remember, that it it’s still very important to be hands-on, use these services responsibly.

Matt Remuzzi is the owner of CapForge Bookkeeping, a full service nationwide bookkeeping service that specializes in high quality, highly affordable service for small businesses and startup entrepreneurs. Matt has a popular QuickBooks book on Amazon and you can find him on Twitter daily. If you have questions, he’d love to hear from you!

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