Many tradies start their businesses based on an idea of financial freedom, being that they’ll have more money and time to enjoy life. For most, this is a destination, not where the business starts; most start on the smell of an oily rag.
This often means that tradies have time but little money. As a result, many of their decisions are based on saving money. One of those decisions is regards bookkeeping. ‘Honey, can you do the bookkeeping? It’ll be easy.’ If you’re thinking about asking your significant other or if you’ve been asked to do the bookkeeping, here are 5 reasons why you should think about saying no:
1. It’s Not Easy
One of the first things to consider when using an accounting program is a chart of accounts. If you simply chose the default without then reviewing and customising, you’re likely to be making errors from day one. If you get the foundation wrong, nothing afterwards will be right.
It’s a given that you’ll need training and very likely someone to help you get started.
Like with most things in life, experts make bookkeeping look easy. However, bookkeeping is a profession, and quality bookkeeping is the result of training and experience. The best bookkeepers I know have accounting certifications or degrees.
2. It Takes Time
Early on, there may not be too many things to do, but bookkeeping is still going to take time, especially if you are learning as you go. The question to ask from day one is, ‘Where is the time for bookkeeping going to come from?’
Here’s a small list of some of the things you may need to do if you take on the bookkeeping yourself: invoicing, setting up supplier accounts, banking, payroll, paying bills, chasing money owed (a big time commitment!), coding, filing and dealing with the accountants to make sure they have the right figures.
If you already have a full-time job as an employee or a stay-at-home parent, you probably don’t have too much spare time. And if you do, it’s often in the midst of 100 other tasks. This means that something must change: give up a day or two at your job, spend less time with your kids, let home tasks go by the wayside, get less sleep (!!), put your kids in day care or have less time for yourself.
If you try to do it all, it’s going to become stressful and it’s very likely that the quality of everything you do will suffer.
3. It’s Not Saving Money
If doing the bookkeeping means that you must reorganise your life, there is going to be a financial and possibly an emotional cost. This means the costs versus the benefits need to be weighed. As an example, let’s say it cost $180 per day to send one child to day care, which is around the cost of 3 hours of professional bookkeeping.
Calculating the dollar costs versus benefits is easy, but what about time? If day care gives you back 7 hours, can you complete everything you need to do in that time? Could a professional bookkeeper get everything done in 3 hours?
4. It’s Costing You Money
Over the years, I have seen bookkeeping both prepared by people doing it themselves and by many professional bookkeepers. If it’s done poorly, there are three common outcomes: the financial reporting doesn’t allow for good business decisions, the business has poor cash flow and accounting fees go up.
Timely and accurate financial reporting is essential if you want the business to not just survive but to thrive.
5. It’s Impacting Your Family
When making the decision to do the books yourself, really think through the decision. If you don’t want to do the bookkeeping and you do it anyway, at some point the stress will have a negative impact on your relationships.
Running a small business can be very rewarding, but it can also be very costly. There is one trait I constantly see in successful businesses: they have a great team of professional advisers to assist in making better decisions.
The best advice I can give you is to really weigh up the true cost of doing bookkeeping yourself:
- Do you have the skills to take over the books?
- Do you have the time to do the books?
- What are you ready to let go of in order to do the bookkeeping?
- What stop-gaps will you put in place to reduce stress on your relationship?
- What do you want your business life to look like?
- Who can help you build your business the best way possible?
Until next time… Troy
Troy Wink is the driver behind Newcastle Bookkeeping Plus. He is committed to helping small to medium business clients increase their revenue and profits by getting their bookkeeping right. Connect with him on LinkedIn