The Costs of Not Doing Your Bookkeeping

If we know one thing about being a business owner, it’s that when your feet hit the ground as you spring out of bed every morning, you exclaim excitedly, ‘I can’t wait to work on my bookkeeping!’ We kid – unless numbers and accounting and charts of accounts are actually your jam. In that case, more power to you!

If it’s not, we get it. Because let’s face it: If finance isn’t your love language, it’s understandable that you’d want to put off doing it for a while. Or forever.

But when it comes to bookkeeping, hiring someone may not seem realistic – at least not yet. But bookkeeping is much like going to the dentist – few actually want to do it, but not doing it isn’t really an option, either. Bookkeeping provides the information you need to make decisions that can literally make-or-break your business.

Here, we’ll examine the real costs of not doing it.

It'll Cost You Money

This one should really go without saying but … we’re saying it. Not managing your finances accurately will cost you money. You could end up making a huge mess and, potentially, some seriously costly mistakes. The nitty-gritty costs …

You risk bills not being paid on time, resulting in late fees.

You risk missing outstanding payments that are owed to you if you don’t keep up with invoicing your customers.

You could end up having to pay a CPA more on an annual basis to organize a year’s worth of bookkeeping records to prepare your books for tax time.

You don’t have a clear picture of where all of your money is coming from, and can’t analyze your best growth opportunities.

You don’t have a handle on where all of your money is going and don’t know what your highest expense categories are.

You might not qualify for a loan if you can’t submit accurate and reconciled financial reports to lenders.

Whether you’re looking to grow your business or bring in investors, the fate of both depends on the answer to one question: ‘Are you making money?’ And you can’t answer that question with unreconciled books and inaccurate financials.

Bookkeeping can save you money.

When the books are up to date, an accurate financial report can be produced at any time, not just at month or year end, for potential investors, lenders or the IRS. This saves you money in the long run.

 

It’ll Cost You Time

As a business owner, you’re acutely aware how precious a commodity time is. But what you might not realize is that putting bookkeeping off can cost exponentially more time.

But we get it. You’re fearful that you don’t have the expertise to get it all done – and get it all done accurately – so you put it off so that you’re not revealed as incapable. You figure not getting it done is better than trying and failing. The nitty-gritty costs …

Bookkeeping – at a minimum – requires monthly upkeep, preferably weekly and some bookkeepers are in their client’s books daily.

Time you don’t spend on your books on the front end will require a significantly larger time investment on the back end.

You’ll waste time looking for documentation – such as receipts – months after the original transaction.

You’ll have to spend time reaching out to collect on outstanding balances when you miss payments due from your clients.

It takes time to train yourself, learn and customize your accounting software or decide which accounting system meets your businesses needs.

It takes time to understand even the basics of accounting.
Gut check: Do you understand the different accounting methods, cash basis and accrual basis?
Gut check: Do you understand what double-entry bookkeeping is?

It takes time to figure out which reports will provide the most insight to drive your financial decisions.
Gut check: Do you need a weekly cash flow? A monthly P&L and Balance Sheet?
Gut check: How do I understand what my reports are telling me?

Bookkeeping is all about tracking the details - which takes time.

As an entrepreneur, your gifting is more likely to be looking at the big picture. Don’t spend time in the weeds categorizing all of your transactions and reconciling your accounts when a bookkeeper can do it quicker and more efficiently by using the latest technology to sync your bank accounts, issue invoices and electronically retrieve your receipts.

It’ll Cost You Peace of Mind

Maybe you’re afraid of math. Maybe you’re afraid of the information in your financials. Maybe you’re afraid of failure. You know that when it comes to numbers, the results are binary. It’s right or it’s wrong. It’s black or, in this case, red.

First things first: These are very real, very legitimate fears. When the financial vitality of your business hangs precariously on your ability to not only manage your bookkeeping, but to manage it well, sleep and peace of mind can seem elusive at best, and impossible at worst. The nitty-gritty costs …

You know your inexperience can result in making mistakes – mistakes you may not be qualified to catch or fix.

You aren’t sure your business is protected from fraud and risk.

You don’t understand your financial statements and what the information in them means.

You don’t know what specialized reports you need, let alone know how to run them, in order to have the historical data necessary to make more informed decisions when creating your budget.

Your money is moving, but you aren’t confident that you’re properly managing all of your accounts receivable, accounts payable and payroll to protect your cash flow.

You can’t remember the last time you were fully present with your loved ones – whether at night, on weekends or on vacation.

Your bookkeeper can become a valuable/trusted partner in your business.

Handing over the bookkeeping to a professional does not mean handing over control of the finances. Your bookkeeper will still be looking to you to provide direction and feedback. But, handing over the nitty-gritty does mean that you’ll have peace of mind that someone is watching the details.

 

The Bottom Line

Ask yourself: Can I afford my own hourly rate if I were to take time away from other pressing matters to handle my own bookkeeping?

Because while you may think you can’t afford to hire a bookkeeper, you’re technically costing yourself whatever your hourly time is worth every time you sit down to handle a task that could be delegated to someone – often surprisingly – more affordable than you.

Ultimately, however, the most important question to ask yourself is this: Am I the best person to do this? Because without experience in bookkeeping or an understanding of balance sheets and income statements, that answer could be all you need to recognize that it’s time to treat yourself to a professional.

  • A bookkeeper can help you understand your financial statements and what the information in them means.
  • A bookkeeper can provide specialized reports with historical data so you can make more informed decisions when creating your budget.
  • A bookkeeper will manage all of your accounts receivable, accounts payable and payroll to protect your cash flow. They will know how all of your money is moving.

Behind every successful business is a dedicated bookkeeper. If you think you might be ready for help, just answer these four questions.