Do It Yourself Accounting…Should you?
Many small business owners constrained by their budgets may question why they would need an accountant. The most common reasoning we hear is “It’s a simple record keeping job” which can be done by themselves in order to save on professional fee costs. Depending on the type of business setup the provisions for keeping track of your books becomes stricter. However, you can potentially do the record keeping yourself for your Sole Prop or Partnership with some basic knowledge of accounting (See link below for the Wave Accounting app to use), where you accurately reflect your business's income and expenses and the Canada Revenue Agency (CRA) may find them acceptable. Accounting is more than a simple data entry job. When you don’t have proper system and processes in place, unpleasant tax surprises can pop-up, goals can be missed and important paperwork misplaced. Generally, Entrepreneurs are not familiar with the constant changes to accounting and tax laws. This may result in punitive penalties or interests from the CRA. Chartered Professional Accountants are trained to analyze every transaction and record it in the manner that it provides most accuracy in reporting which generates great value to the small business owner. Do it yourself solutions do work for the short term but is never a great long term solution. When businesses scale up it becomes important to outsource the bookkeeping services to a professional CPA firm.
DIY or Hire a Professional?
Trying to save money by doing accounting on your own can often end up actually costing you more in the long run. Let’s think about the time you had a friend trying to cut their own hair, the end product never ends up being as expected. If you are not an accountant/bookkeeper, it is quite common to not understand the complexities associated with tax filing, preparing your balance sheet, managing cash flow on your own. A simple clerical error can be seen as tax evasion by the CRA. Missing CRA deadlines can create hidden tax liabilities for your business. Selecting and mastering the right accounting software is another problem that business owners have to decide on. In Canada, according to Innovation, Science & Economic Development statistics (March 2018), about 96% of new small businesses (with 1–99 employees) survive for one full year, 85% survive for three years and 70% survive for five years. Approximately 7000 businesses go bankrupt every year in Canada. Typically, from two main reasons for this are poor financial management and bad business ideas. As you can imagine a CPA professional can help you steer towards the right direction.
Many people and business owners benefit by using outsourced professional accounting services. CPAѕ have a requirement for соntinuоuѕ education that requires them to keep up to date with the еvеr сhаnging world of tax laws. CPA’s study for years to hone their craft so they can add immense value to small business owners. Accounting and finance management is not just about recording transactions and categorizing expenses. It is about maintaining financial records in a way that allows your business to strategize better and move towards growth and profit. Hiring a reputable accounting firm can be high value for a growth businesses. The key is to delegate the right tasks and to the right people. Think back to why you started your business…was it to do your accounting or to grow your business with higher sales?
Why Cloud Accounting is Good for Business
If you want your business to work smarter and faster, a solid cloud accounting software could be a great investment. More and more businesses are switching to the cloud to generate the most value from the benefits of online accounting and to help streamline their core processes. The cloud is a platform to make data and software accessible online anytime, anywhere, from any device –including laptops, smartphones, and tablets. Your hard drive is no longer the central hub for all your data. You may actually be using the cloud without knowing you are, think back to when you first started using online banking. Every time you access your bank data, you’re using the cloud. Using any cloud accounting software, you will be able to access real time data and files from anywhere with an internet connection. Some studies have shown that small businesses are gradually moving for cloud adoption. The main benefits of Cloud Accounting can be summarized as follows:
Safe cloud backup
Multi user access
Tiny monthly fee
One ledger shared with your Accountant.
So the question you have to ask yourself is why are you not on the Cloud? You can do the accounting yourself but cloud adoption is critical to future proof your business.
Link to Wave Accounting for DIY Accounting:
Click on the link below to book a meeting.
- Written by: Jag Bath