When I tell a small business owner I believe they should do their own bookkeeping, I almost always get the same look. It’s a mix of terror and wide eyeballs that say “you’re f***in’ with me right?”

I’m serious though. Doing your own bookkeeping gets you elbow deep into the details of your financial information. You look at every little thing you spent money on, which forces you to think about your expenses in a head space that’s disconnected from the usual emotional high of buying something.

You have a chance to think about why you purchased it in the first place and, with objective hindsight, examine if you maybe should’ve left it on the store shelf. This assumes you’re bookkeeping in a calm and collected head-space. I understand this may not be the case right now. It may be closer to a fear and frustration tornado that’s raining overwhelm (I’ll come back to this).

As you review your expenditures you can catch errors before they become an issue. If you’re looking at your phone bills every month, and one month it goes up by $25, you’ll have a chance to call the phone company in that month to find out what happened. If it was all on auto-billing, it may have gone unnoticed and unquestioned.

Get ready to dig into your numbers! #elbowdeep

Let’s get ready to dig in to your business numbers. #elbowdeep

Doing your own bookkeeping also gives you an expectation for what your income statement should look like. If you know you’ve made the choice to put apps and other software in to Office Expenses, you can look at your income statement and know exactly what’s in the Office Expenses bucket (or line or account or category – whatever you want to call it).

If you outsource this job maybe the bookkeeper decides those items should go into Software Expenses, and only physical office expenses should go into Office Expenses. Now you’re looking at your income statement and you’re not really sure what makes up those amounts.

Your income statement is useless if you’re not sure what makes up the numbers.

How can you lower run-away utility bills if you’re not sure what’s classified as Utilities Expenses? Maybe you turn your heat off and shiver through the winter, trying to lower that expense, only to find out your phone bill was in there too, and the biggest cost was you kept going over your data limit – no amount of shivering will fix that.

Back to the Fear and Frustration Tornado

I understand the idea of doing your own bookkeeping is scary and not something you want to do, and I’m not suggesting you go it alone.

It’s important to have someone walk you through the basics of bookkeeping and receipt management, so you can setup a specific process that’s tailored to you and your business.

Think of it like hiring a bookkeeper as a coach instead of doing it for you. You’ll want to have a few lessons in the beginning to make sure you get started on the right foot (or left, if you’re left footed).

This person should be someone who creates a safe space for you to make mistakes and be honest about how the process is going. The more you can share with this person, the faster you’ll learn and grow.

As you gain confidence in your ability to sort, categorize and reconcile transactions, a lot of the negative emotions will start to ease.

Even the best dogs can get themselves into a mess. #gooddog

We tend to fear bookkeeping because we don’t know where to start, it’s difficult to understand whatever we can find on the internet (or know if we can trust it), and we worry that any mistake will have the Canada Revenue Agency (CRA) banging on our door.

The first two can be helped with a good bookkeeping coach.

The third? The CRA has a bad reputation for being mean and unyielding, and I don’t believe that’s totally accurate. I’m not here to advocate for them, but what I will say is this. You can always call and speak to an agent, who will explain the rules and how to correct whatever happened – you don’t need to be perfect.

No matter how big the mess feels, it can always be cleaned-up.

When’s the Right Time to Hire a Bookkeeper?

I don’t believe you should do your own bookkeeping forever. In fact you probably shouldn’t do it for very long. So how do you know when to hand it off?

1) Start by keeping track of the hours you’re spending on your bookkeeping. In the beginning it will be higher, but once you get the hang of it and it becomes part of your regular routine, you’ll have a pretty good idea of what it takes for you to do it consistently.

When the amount you would be making by doing something else exceeds the amount you would pay a bookkeeper, it might be time to hand it off.

2) If your bookkeeping starts to become more complicated, and you’re asking more and more questions, it’s probably time to hand it off.

3) When you have the available resources to comfortably pay a bookkeeper, it’s definitely time to hand it off.

If you’re still not sure, talk to your bookkeeping coach. They’ll have a good understanding of your specific situation and will be able to advise you based on your needs.

When you do hire a bookkeeper, you’ll get far more out of the relationship because you have experience doing your own books. You’ll have an expectation for your income statement and will be able to ask your bookkeeper why your numbers are changing.

When your numbers are changing, it gives you questions to ask about operations, and that’s where the real value lies. What are the business reasons for the change?

All your financial reporting, be it monthly statements or year-end analysis, can tell you everything you need to know about the health and status of your business, but they are written in a different language. The language spoken by accountants and bookkeepers.

Immersing yourself into the process of making those reports in the early stages will help you learn the language and understand the story behind the numbers.

Kaitlin

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