We know, it seems a bit counter-intuitive to pay someone to help you save money. We also understand why doing your own small business accounting brings peace of mind and, of course, can save you money. Many of our clients started out doing their own accounting, and it definitely worked for some of them while they were small enough. We also have many clients come to us with outdated books and shoeboxed documents.
Whether you plan on doing your own accounting temporarily or for the entire lifespan of your company, here's some things that many clients wish they had known while they were DIY-ing their accounting:
01: If You're Going to DIY Your Accounting, You Have to Actually Do It
It's common for small business owners to choose to manage their own accounting needs. Unfortunately, it's also common for small business owners to get distracted by all the other things they have to manage. It's easy to put off recording receipts, invoices, etc. while assuming you'll get to it "at the end of the month."
Suddenly, the end of the month is upon you, and you still don't have time to calculate payroll, prepare financial reports, or reconcile your bank account.
So you don't actually end up doing your own accounting.
If you're going to DIY the accounting...do it. From the very beginning make it a non-negotiable part of your work day. It's set in stone. If your books and reports are up-to-date, doing your own accounting can actually be quite painless.
02. Commit to a Process & Platform
There's a good chance you spent months crafting a bomber business plan. But how's your accounting and finance plan? How are you going to actually track all that money you projected to earn? How are you going to quickly show investors what's going on with the health and growth of your company?
Do your homework first, and decide from the beginning what software and applications you're going to use to help you track and analyze cash flow, reports, expenses, payroll, etc. Are you going to use QuickBooks only, or are you going to subscribe to mobile apps that sync with your accounting software? Do you need mobile capabilities to help you keep track of expenses on the go?
Define your needs and financial goals, and then find the systems that will make your life easier as you manage the money yourself.
Keep in mind that this system you use now might need to be something you can one day transfer to an outsourced accountant or firm. The better your records, the more accurate and faster the transition when you get too big to handle the finances yourself.
03. Learn the Basics
Make sure you don't just "wing it." Yes, we all know how to balance our personal checking accounts, but small business accounting is a different beast--with a lot more paperwork, analysis, reporting and strategy.
Take the time to read a few books, watch some online videos, and try it out. Here's some of the things you'll want to know about:
- How to analyze your cash flow.
- How to handle your accounts receivable (customers that owe you money) and accounts payable (people/vendors you owe money).
- How to calculate payroll.
- How to prepare a budget.
- How to read and prepare financial statements.
04. Ask Questions. Ask For Help.
When you hit a wall and don't understand something, remind yourself that this doesn't mean the end of your accounting efforts. Get online or make a phone call. Even if you feel like you're doing everything right, it's always a good idea to get another set of eyes looking at your numbers and reporting.
05. Invest Your Time & Some Money
This is worth repeating: set aside daily time to tend to your accounting tasks. Keep the books updated, bills paid, and invoices going out to customers.
Even if you're not paying someone else to do your accounting, invest a little money into good software and mobile apps. You need every bit of help you can get, and a little investment can go a long way.