What are the Downsides of DIY Bookkeeping?

While doing your own bookkeeping may seem like a good idea initially, you could face these indirect costs:

• Mistakes: Bookkeepers have the knowledge and skills to know what to look for to avoid making costly mistakes. By doing DIY bookkeeping, you could be making mistakes and not catching them.

• Money: Doing your own bookkeeping seems “free” at first, but if you break down your time hourly versus the cost of a bookkeeper, you may be spending more over time.

• Time: Bookkeeping is also time-consuming (if you’re doing it right), and you could use that extra time to further grow your business or take a much-needed break from the stresses of entrepreneurship.

There are two main types of bookkeeping to be aware of when deciding what type of bookkeeper to hire. These include basic and full-service bookkeeping, where the decision largely depends on your business goals and needs.

Basic bookkeeping

Basic bookkeeping is exactly what you would expect it to be: the basics. This includes things like payroll, employment taxes, and tracking expenses.

• Time and service: While the length of time basic bookkeeping requires can vary based on the size and complexity of your business, it generally requires less time than full-service bookkeeping. Bookkeepers are often only required to maintain records and manage financial transactions.

• Average bookkeeper cost differences: Due to the additional education and experience required to be a full-service accountant, the average cost of a bookkeeper is lower than a full-service accountant.

Full-service Bookkeeping (and Accounting)

Full-service bookkeeping is everything you’d find in basic bookkeeping with additional accounting services and financial statement analysis.

• Time and service: Accounting requires a much higher level of time and service simply because accountants are responsible for managing the books as well as interpreting and analyzing the financial statements to report a holistic view of the company’s financial health.

• Average cost differences: Due to extensive education and certification requirements, the average salary for an accountant will exceed that of a bookkeeper.

Whether you opt for basic bookkeeping or full-service bookkeeping and accounting, either option can help you be better prepared come tax season.