The Hidden Costs of Doing Your Own Bookkeeping

You may view doing your company’s bookkeeping as a point of pride, or simply as a way to save money. But there are many costs associated with “do-it-yourself” bookkeeping that business owners often overlook. Join us to see how outsourcing your bookkeeping can help you and your business.

You may view doing your company’s bookkeeping as a point of pride, or simply as a way to save money. But there are many costs associated with “do-it-yourself” bookkeeping that business owners often overlook.

At the end of the day, very few business owners are really saving themselves money. As you consider whether it makes sense to do your own bookkeeping, consider these three often not-so-obvious costs:

1. Your time

When deciding whether to do your books, you need to account for the value of your time—and do a quick opportunity-cost analysis. Remember that any time you spend on bookkeeping possibly could be put toward much higher-value, revenue-generating tasks, such as generating leads and sales, fine-tuning your marketing plan or developing new products.

Figuring out the value of your time is simple: Consider how much income you earn each year and then break that down to calculate your hourly “wage.” For example, if you earn $400,000 and work about 2,000 hours per year (50 weeks x 40 hours), your hourly rate is about $200. 

Then, multiply that hourly rate by how many hours you spend on your bookkeeping. So, if you spend five hours each month on bookkeeping, it’s essentially costing you $1,000 a month.

And don’t forget: You might be spending more time than you think on accounting and bookkeeping due to all of the small organizational or administrative tasks that can be involved, whether that’s manually entering an expense into your accounting software, uploading receipts, or categorizing expenses. And sometimes just figuring out how to navigate and run reports using accounting software can be time-consuming.

It often ends up being a few additional minutes here and a few additional minutes there. When considering how that time adds up over the course of a year, it can quickly become too expensive.  From the example above, if all the additional minutes add up to two hours, your bookkeeping is costing essentially $1,400 per month (7 hours x $200 per hour).

2. Errors

Bookkeeping is only as valuable as it is accurate and businesses that do their own accounting can, unfortunately, end up with errors, especially if it’s rushed. Even if you use robust accounting software, you still have to know the basics of how to categorize expenses and what information you need to input, along with where to enter that information. Otherwise, expenses that could be logged with finer detail end up in a one-size-fits-all category. 

Keep in mind that your bookkeeping data may be used to prepare your taxes and determine deductions or credits for which you may be eligible. It is also used to help you make important business decisions (like purchasing equipment or inventory) as well as to apply for loans and other financing. Wrong information will create problems.

3. Your peace of mind

Most business owners don’t enjoy bookkeeping, and some even dread it. Why spend your valuable time doing something you probably don’t enjoy?

One survey by SCORE, a business owner mentoring organization that partners with the U.S. Small Business Administration, found that 40% of business owners say that bookkeeping and taxes are the worst part of owning a business.

Moreover, many business leaders make bookkeeping harder on themselves than it needs to be because they’re usually not accounting experts. For example, they might not be maximizing the features of their typical accounting software—thus potentially wasting time—or they may be needlessly keeping duplicative information.

Another important consideration: If you are doing your own bookkeeping, you may only be doing it when you have extra time—meaning your books aren’t up-to-date. That can be a problem, as updated books help ensure you’re making business decisions using the most accurate information.

Using a real-time solution such as Decimal means your books always stay up-to-date—and you don’t have to spend time doing them.