What’s the Real Cost of DIY Bookkeeping for a Small Business?

By Sherley Perest, Founder & Certified Professional Bookkeeper, SherOps Bookkeeping, Edmonton, AB

I learned the value of clean books long before I became a bookkeeper. I grew up around my family’s mechanic shop, watching how quickly things can get away from you when the books aren’t given real attention. That early lesson is a big part of why I started SherOps Bookkeeping here in Edmonton, and it’s the same pattern I still see today when small business owners try to handle their own bookkeeping longer than they should.

When you’re starting or growing a small business, doing your own bookkeeping can seem like an easy way to save money. And for some business owners, it can work, especially when the business is small, the transactions are simple, and you understand the bookkeeping requirements. But as your business grows, the real cost of DIY bookkeeping may become more than the cost of hiring a bookkeeper.

Your Time Has a Cost

Bookkeeping takes time. Think about the hours you spend categorizing transactions, reconciling accounts, tracking receipts, preparing invoices, reviewing payments, dealing with payroll, or figuring out GST/HST. Research from SCORE, cited in this breakdown from Beancount on affording a bookkeeper, puts the average small business owner at over 20 hours a month on financial tasks like these, roughly half a work week, every month, on something that isn’t billable and isn’t growing the business.

Now ask yourself: What is an hour of your time worth to your business?

If you spend five hours doing bookkeeping that a professional could complete more efficiently, those are five hours you aren’t spending serving clients, generating revenue or growing your business. Saving on bookkeeping fees doesn’t always mean you’re actually saving money.

Small Errors Can Become Expensive Problems

Accounting software makes bookkeeping easier, but it doesn’t guarantee that the books are correct. A transaction can be entered twice, recorded in the wrong account, posted to the wrong period, or incorrectly treated for GST/HST. A bank feed can bring transactions into your software, but it doesn’t know everything about your business.

These errors can accumulate quietly over several months or even years. By the time they are discovered, you may need a bookkeeping cleanup to correct the historical records.

You May Be Making Decisions Based on the Wrong Numbers

One of the biggest costs of inaccurate bookkeeping isn’t always a penalty or an accounting bill. It can be making business decisions using financial reports that don’t communicate the true situation of your business.

If your income, expenses, Accounts Receivable, Accounts Payable or liabilities aren’t properly recorded, how confident can you be when deciding whether to hire someone, make a large purchase, increase your prices, or take money out of the business? Your bookkeeping should give you information you can rely on.

Tax and GST/HST Problems Can Cost You

Incorrect bookkeeping can also affect your tax and GST/HST reporting. You may miss eligible business expenses or Input Tax Credits because transactions weren’t properly recorded or supporting documents weren’t maintained.

On the other hand, you may claim something incorrectly or report the wrong amount of GST/HST. Fixing these issues later can require additional bookkeeping and accounting work and, depending on the situation, may result in interest or penalties.

Your Accountant May Have to Spend More Time Cleaning Up

At year-end, your bookkeeper should be able to prepare organized and reconciled books and provide the necessary reports and supporting information to your accountant. If you have been doing the bookkeeping yourself and the accounts aren’t properly reconciled or transactions need to be corrected, additional work may be required before the accountant can complete the year-end. The money saved throughout the year can quickly disappear when you have to pay someone to reconstruct or clean up the books.

When Is It Time to Stop Doing It Yourself?

DIY bookkeeping isn’t necessarily a problem. The question is whether it still makes sense for your business. If bookkeeping is taking too much of your time, you’re constantly behind, you aren’t confident that transactions are being recorded correctly, your GST/HST is becoming difficult to manage, or you don’t trust your financial reports, it may be time to get professional help. If any of that sounds familiar, take a look at the signs your bookkeeping needs a cleanup for a more detailed checklist.

Hiring a bookkeeper isn’t only about paying someone to enter transactions. It’s about having accurate financial information, staying organized, and giving yourself more time to focus on running your business, which is exactly what I set out to build with SherOps.

Curious what handing off your books would actually look like? See how SherOps’ bookkeeping services work, or book a free consultation and let’s talk about your business.