The Dangers of DIY Accounting
In business, it’s smart to keep costs low where you can. But if you’re wondering whether to outsource work to an accountant or DIY, it’s good to make sure you understand the risks of opting to do it in-house. DIY accounting may sound easier and more efficient, but if you or your team aren’t experts in the topic there are a few ways it can jeopardize your business and slow down its growth.
1. Inaccurate Record Keeping
If accounting isn’t your team’s expertise, you run the risk of having clerical errors in your record keeping. DIY accounting errors like forgetting a transaction, classifying data incorrectly, or transposing digits can quickly add up to cost you time and money to resolve.
These poor accounting practices could possibly also look like fraud when the time comes to go through an IRS audit. During an IRS audit, you may be required to send receipts, bills, loan agreements, logs, and canceled checks.
Although you aren’t attempting fraud, without organized and accurate records, you may not be able to provide the true story. Additionally, if you don’t have documents that are required for an IRS Audit, you risk additional penalties and even potential jail time.
2. Missed Deadlines & Penalties
In accounting, there are quarterly and annual financial reports due, as well as general accounting deadlines created through your organization. If accounting isn’t your number one priority in your day-to-day, these deadlines can be forgotten and missed.
Even if you do remember these deadlines, knowing what and how things need to be done is a whole other challenge. If you haven’t previously studied the topic, you will be susceptible to a learning curve in accounting when you first take on these responsibilities.
Initially, you’ll need to take some time for learning accounting software and how to maintain accurate bookkeeping. Ultimately, doing the work yourself may take you longer than an experienced accountant who has extensive knowledge on the subject.
If you’re trying to do DIY accounting, you can’t get by with just the basics. You’ll also need to understand the nuances of accounting for different industries and in different geographical locations.
The realm of accounting requires a whole new level of knowledge and expertise. When you venture into DIY business accounting, you may find your team spending more time fixing mistakes rather than focusing on goals to accelerate your business growth.
3. Trouble Learning Accounting Software
As stated above, first-time accounting teams will need to learn the ins and outs of accounting software like Sage or Quickbooks. This will inevitably take valuable time and energy away from your day-to-day responsibilities.
Before you start learning accounting software, your team has to decide what software works best within your organization. Just from the list above, you’ll find they are all unique and suited for different business structures.
You may not realize which software isn’t right for you though until you are able to fully understand everything it can offer. Discovering and mastering each software takes a lot of effort, and you may get so far only to realize you’ve invested time and money into software that doesn’t fit your business.
The advantage to outsourcing accounting services is that you can have a team of experienced professionals cable of matching your business to the correct accounting software. And you can get that human support when you need it as you implement the technology.
4. Difficulty Detecting Fraud
In most parts of life, an outside perspective helps bring clarity and an unbiased opinion to the table. The same is true with your accounting services.
There are a lot of moving pieces to your small business which unfortunately make small businesses more prone to fraud. And when your accounting is done in-house, it makes those cases more difficult to detect.
If your business is dependent on one person to handle your DIY accounting, there may be less internal oversight since they are the only ones with that level of expertise. Ultimately, this can give that person more room to commit fraud under the radar, since you or others on the team don’t know what to look for to combat fraud.
5. Lack of Time & Pressure
Running a small business can be rewarding and exciting. It’s important to prioritize your time to goals that help advance your business. But if your team is stuck managing accounting on top of these responsibilities, they may quickly become overwhelmed and unmotivated.
The deadlines, education, and software needed for a successful accounting team may not allow you adequate time for other required projects and business development. Accounting is necessary for your business and it should not be a limiting factor.
DIY accounting sounds like a good, efficient idea at first, but at the end of the day, it may mean you’re sacrificing innovation and growth.
Looking At The Big Picture: The Effects of Poor Accounting Methods On A Business
Incorrect reporting leads to more expenses. If your data on cash flow, income, or balance sheet statements is incorrect, you could end up not having enough money to pay bills or end up overpaying/underpaying on taxes.
Inefficient use of tools and processes. Once you invest in your accounting software, you’re only at the start of your journey. You’ll need time to learn how to effectively use the software so you’re able to maximize its benefits for your team.
Employee strain. When accounting is added to the multitude of responsibilities for your employees, you can put additional stress on yourself and your team.
Higher labor costs. Employees may have to spend additional time going back to fix any mistakes which can cause overtime and increased labor costs.
Risk of turnover. If DIY accounting is only a fraction of someone’s position, the rigorous nature of the tasks could begin to overwhelm them and open the door to job dissatisfaction. If that employee were to leave, it can cause an even bigger burden when you need to find someone to cover the responsibilities.
Stunted business growth. Your small business has limited resources, so having an in-house accounting team means pulling resources from other projects. You’ll need to allocate time and money into accounting where it could be spent on business growth and innovation.
A Better Alternative to DIY Accounting?
After looking at the structure of your business and its needs, outsourcing your accounting makes sense both from a practical and financial standpoint. Below are some key advantages of outsourcing accounting services.
Fewer Costs. In the long run, outsourcing will cost less, since you don’t have to factor in costs for a salary or benefits. You’re simply paying for the service you need.
Flexibility. You’ll have the ability to gain more support in busier seasons and cut back in times you don’t need as much assistance.
Save Time. Your partner will help streamline processes and tools so your accounting runs more efficiently and is easier to manage.
Expert Support. You’ll gain a team of professionals that can help guide you to the best accounting strategies and technologies for your organization.
Less Risk. When an experienced team of accountants partners with you, there is less risk of fraud and suspicious errors being undetected.
Focus on Your Goals. With a team of experts focused on accounting, your team can pour more time and resources into other key areas of the business.
Power Your Business with Centri
Our team of experts is here to help you set up the best accounting solutions to make it run seamlessly for your business. We help alleviate the stress that can come with managing accounting by providing:
- Easy and quick onboarding.
- 24/7 support and advice from strategies to tools.
- Real-time access to all your information so you can make informed choices.
Unlike other outsourcing options, we will provide you with personalized expertise that goes above and beyond just the numbers. We’re here to provide guidance and alleviate the pressure of having to struggle through all your accounting on your own.