The Hidden Cost of Doing Your Own Bookkeeping

We hear so many business owners saying, “I don’t have money to hire an accountant right now, I’ll just do my own bookkeeping.” They watch a few QuickBooks tutorials on YouTube and think they’ve got the hang of it. What could go wrong? 

When it comes to business taxes, what you don’t know can cost you: here are the five biggest disadvantages of doing your own bookkeeping that end up costing you way more money than you are “saving” by not hiring a professional.

1. Paying more taxes than you need to because you are mis-categorizing income.

Without knowing what kind of income is taxable or not, you’re going to end up paying out of pocket for bookkeeping errors. For example, many business owners will mistakenly include money received from loans as income in their profit and loss statement. 

Depending on how large the sum is, that’s going to significantly increase your tax bill at the end of the year - all because you entered one transaction into the wrong category.

2. Leaving bookkeeping until the last minute.

Let’s be honest: if you’re trying to enter every transaction into a bookkeeping software by yourself, you’re gonna fall behind. After all, you have way more pressing business matters that demand your attention. By the time you finally get around to catching up on your bookkeeping 5, 8, or even 10 months later, you’ll spend days trying to import card transactions and categorize long-forgotten expenses. 

As a business owner, you just don’t have that kind of time: you have clients to serve, offers to market, and operations to run.

3. Not evaluating the return of your investments.

When you're not consistent with your bookkeeping, it’s impossible for you to do a month-by-month review of your investments to see whether they’re actually paying off.If you spend $5K on advertising this month, you’re going to need to closely monitor your revenue over the next 30-90 days to see if that investment is actually netting you a return.

Without someone there to provide you an accurate monthly report of your profit and losses, you won’t be able to tell which investments are money down the drain, and which ones are actually increasing your revenue.

4. Missing out on valuable tax write-offs.

Many business owners forget to account for out-of-pocket business expenses that they paid from their own personal funds. As a result, those expenses won’t get deducted from your income, and you’ll miss out on valuable tax write-offs that can save you hundreds - if not thousands - of dollars at the end of the year. 

There are dozens of other deductions and write-offs that only a trained accountant will know about, so if you’re not sure what you’re doing when it comes to your bookkeeping, you’ll be giving the IRS more money than you owe.

5. Not having a second set of eyes to look at your books, help you set money goals, and make projections.

A good accountant does more than just prepare your taxes and keep up with your bookkeeping. We’re also there to help you evaluate the business investments you’re making, show you where and how to save money, and create attainable revenue goals for you over the next several quarters and years.

Having this financial accountability can be crucial, especially if you’re a solopreneur. Sometimes, you just can’t read the label from inside the bottle: adding a professional perspective helps you make sounder decisions when it comes to your money. 

At the end of the day, you wouldn’t DIY the foundation of your own house, so why do that for your business?

Finances are the backbone that keeps your business standing, so you want to make sure they’re in the hands of trusted professionals.

At Prominence Business & Wealth Management, we have a team of just such professionals ready to take over the hard work for you. By outsourcing your bookkeeping, tax prep, and IRS communication to us, you’re buying back your time, energy, and head space so you can invest them all back into your business - and yourself.

If you’re ready to delegate all things finance in your business to top professionals in the industry, we are here to help: just click the link down below to schedule your free discovery call with us today.

We look forward to meeting you! See you in the next blog post.

Warmly,

The Prominence Team

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