When you run a small business, you will do everything you can to reduce overhead expenses. Normally, the first thing you think of is to minimise your hires. The fewer people you hire to help you, the less money you’ll spend.
Fundamentally, there are countless things you can do all by yourself when starting a business. It’s not overly difficult to run your own marketing strategy – there are loads of free resources out there to help you do this. However, there’s one thing that often divides opinions: managing your business accounts.
Should you do your own business accounting? It can have some advantages, but it can also have a handful of disadvantages…
Pro: Saves money
The obvious place to start is with this advantage. Yes, doing your own accounting can help your business save money. It stops you from hiring someone in-house to do it – which can be super expensive as accountants command big wages. You’re literally saving tens of thousands a year – or even just a few thousand if you outsourced this role.
Provided you have the knowledge and expertise to actually manage your accounts correctly, it can be a very smart way of cutting your overheads.
Pro: Helps you understand your financial situation
Another underrated advantage of doing your business accounting is that you learn more about your finances. It teaches you to be aware of all the transactions that take place in your business. As a result, you should constantly remain on top of things and be aware of when issues arise.
When you get someone else to do the accounting, you can sometimes be detached from the financial side of your business. You’re only aware of the final profit figures for each month or quarter. So, when things aren’t great, you’re shocked. Why is this the case? How could this happen? If you’re managing your accounts, you’ll learn why as it happens. Thus, you can make changes immediately to try and correct the glaring financial issues.
Con: You’re not an accountant
Again, it’s an obvious downside to managing your own business accounts. You are not an expert in accounting & finance, meaning you don’t know all the tricks of the trade. Anyone can file a tax return for their business, but a proper business tax accountant can file one that makes you pay less tax. They can give you advice on how to reduce your spending or how to claim some tax relief, etc.
Simply put, an experienced accountant knows how things work a lot better than you. Yes, you can save money by not hiring someone to handle things. However, working with a professional that’s got decades of experience could help your company save more money in the future. You can reduce your spending, pay less tax (legally) and see wider profit margins.
Doing your own business accounting can be a complete mess if you don’t know what you’re doing. In truth, it only makes sense to do it if you have some sort of financial experience behind you. If not, you can get better outcomes by outsourcing or hiring an expert.
Con: You limit your productive hours
Accounting can take up a lot of your time – which is why people are literally employed to do it. Now, factor in that you probably aren’t an expert in this domain, right? You’ll need to spend time doing research and figuring out how to manage your accounts properly. Then, you have to act on this and actually manage them.
All in all, it eats into your productive hours as a business owner. Sure, you can argue that you’re still being productive. But, all the time spent managing your accounts could’ve been spent focusing on other things – like marketing your business, developing new product ideas, finding clients, and so on.
The unfortunate reality is that accounting takes up a lot of your time. If you hire someone else to do it, you can free up many hours every week. Turn these hours into more money for your business by being more productive. Hunt down new leads, contact old customers to get more business from them – there are so many more things you can do with this time that’s valuable to your company.
With all things considered, accounting is probably one of the few things you shouldn’t do. Unless you come from an accounting & finance background, it’s more beneficial for your business to outsource this role. This still helps you save money when compared to hiring a full-time accountant. But, it also ensures your finances are managed by an expert, helping you yield more benefits.