Many startups try to handle all the administrative tasks internally with their core team instead of hiring experts or working with vendors or consultants. They often try their hand at DIY QuickBooks to manage all their accounting needs, particularly when the business is just starting out.
The instinct to save money by keeping things in house isn’t necessarily a bad thing. If you can do it yourself that’s one less person or B2B partner you need to hire.
However, there are two main drawbacks of the DIY approach.
Investing a lot of time into managing your own books internally draws focus away from other areas of growth within the business (lead generation, marketing, searching for outside investors, finding the perfect office space, etc.).
Your expertise and energy would be better spent on core competencies and executing on your business plan.
The second drawback is quality and expertise.
Most larger corporations and companies have full-time accounting departments and staff to cover all of their bookkeeping needs and manage the company’s financial health. Unless you and your core team have relevant MBAs and extensive experience on bookkeeping software, there’s a high probability mistakes can be made, which could have repercussions down the line.
Reaching out to a local CPA, business consultant or accounting service provider could be a good medium-ground option for small to mid-size companies. It’s more affordable than hiring an accountant internally and you’ll have peace of mind knowing things are being done right while you focus on what really matters – building your business.
It may seem like more money upfront to outsource to a local CPA, but the costs saved in the long run outweigh the cost paid in the short-term.
The likelihood of being audited is pretty low (about one percent) for the average individual. However, that number increases to 2.5 percent for small business owners. Hiring a qualified CPA or bookkeeping service can help ensure your personal or business tax filings don’t raise red flags and help the process go quickly and smoothly should an IRS audit occur.
CPAs are more familiar with the auditing process, the different types of audits and what commonly triggers them:
Furthermore, if a company or business has employed the help of an accounting professional early enough, there will be few to no discrepancies in areas such as taxes, inventory, payroll, accounts receivable or accounts payable.
Assuming it’s cheaper to handle your own accounting also overlooks a key service accounting firms provide – efficiency maximization. Accountants and business consultants seek out inefficiencies in your operating procedures and expenses. They can identify opportunities to optimize cash flow and may even pay for themselves in the long run.
It’s all too easy to lose track of receipts for smaller purchases, incorrectly write off purchases, improperly round figures that are reported to the IRS, fail to keep books up to date or fail to make quarterly estimated tax payments on time.
Reconciling bank accounts, generating income statements and balance sheets and cleaning up the ledger are all essential bookkeeping practices that should be done on a monthly basis. Maintaining these regular accounting touch points helps prevent discrepancies that will make your life difficult down the line.
A fresh set of experienced and impartial eyes will be able to spot any issues with your books fairly quickly, and they will know how to correct problems should they appear.
Depending on your business you may also be subject to a litany of compliance laws, regulations and federally or locally mandated business policies. Failing to maintain compliance can be a potentially business-ending mistake in some industries. CPAs that offer internal control and compliance services are the experts to trust when you need to develop internal controls to insulate your business from compliance headaches.
Learning which tasks to own and which to delegate is a big part of the entrepreneurial process.
At H&H Accounting services, we are well-versed in the needs of businesses of all sizes and in all stages of development. We would be happy to sit down with you and discuss your business and explain how our accounting, bookkeeping and business consulting services could help.
Contact us today for a free consultation.
