Financial professionals are under significant pressure to work faster and deal with more complex data while ensuring they keep costs at a minimal. They don’t just spend all their time gathering and reconciling data, there is a lot more that accountants can do to improve the financial performance of a business.

Accounting is a process that records transactions and maintains a chart of accounts. However, it can help with strategy and management. Business owners of both small and large enterprises need to focus on improving their accounting processes to ensure their current ratios and cash flow are favorable.

It is vital that business owners utilize quality accounting standards to ensure they’re making the most of their resources. Every successful business owner knows that accounting professionals play a huge role when it comes to improving business performance. So, if you’re looking for bookkeeping strategies that managing accountants and auditors suggest, you have come to the right place. Here’s everything you need to know.

1. Centralize and Streamline General Accounting Processes

One of the bookkeeping strategies that you and your employees need to consider implementing is centralizing and streamlining the general accounting processes. The fact is that the way an organization is structured to deliver accounting processes and accounting functions, is integral to successful financial management. It is the only way that a business can support all of its needs and those of its clients. By combining repetitive or common processes into a single location and across all departments, you will create a shared services center.

Since less than 20% of businesses leverage shared services, it will allow you to gain a competitive edge over other players. Besides, you will get to enjoy several benefits, such as fewer errors and a much faster cycle time. In fact, opting for a shared services center will allow you to meet all your goals and enable your business to get more things done. Moreover, you’ll complete more work in less time. Hence, you don’t want to overlook this bookkeeping strategy.

2. Encourage Strong Data Governance

Another excellent bookkeeping strategy worth looking at is the implementation of strong data governance policies. It is incredibly important to ensure clean and consistent data when it comes to general accounting. It is the only way that you can generate the right financial statements and financial reports, and get an accurate representation of the organization itself. It includes financial data and a chart of accounts.

By ensuring proper data governance, there is no limit to what you can achieve. Implementing a standard policy will ensure that you are able to get more done. Organizations that implement finance data definitions have an easier time reporting and meet all their KPIs compared to organizations that fail to do so. Moreover, you will get to perform much better as the possibility of making errors would be significantly reduced. You will also encourage better customer satisfaction and trust, strong compliance, and overall financial health.

3. Standardize Accounting Processes and Assign Process Ownership

If you want to improve the accuracy of your accounting records, including accounts receivables and the cash register, you have to standardize accounting processes and assign process ownership to specific employees or to certain members of your accounting team. Process standardization is critical to performance. It is actually considered a prerequisite for successful automation. Furthermore, end-to-end process management relies on shared services implementation.

When you standardize the accounting processes, you will be able to achieve common finance processes which are integral for adherence to process ownership. This has an overall positive affect on performance management, a better grasp of sales revenue, and streamlines the managerial accounting process. This means that you will have an easier time managing finances and identifying areas where you need to improve.

Leveraging process owners and process standardization pays off in the long run. You’ll improve communication between team members, make the most of varied capabilities, and smooth out any rough or incongruent aspects within your accounting process.

4. Striving Towards a Continuous Close

A notable bookkeeping strategy that you should consider is performing a continuous close and striving towards pre-close activities. Since the month-end close can be a frenzy of activity, you would have no option but to ask the accounting team to work overtime for which you would have to spend a great deal more money which may carry a negative impact on your financial condition. This is why you need to focus on ensuring a continuous close. It will allow the department to collect and analyze information on time. Besides, it can be quite stressful for your and your employees to take on the work at the last minute.

If you look closely at a leading organization, you will come to understand that working toward a continuous close is likely to even out all the work so that everything is completed by the month-end without delay. It is the only way that you can prevent your accountants or bookkeepers from working overtime. You should consider using cloud technology and automation to implement continuous accounting. It would allow financial data to be accessed in real-time.

Even when you perform some pre-close activities, it will become a lot easier to get everything done on time. This would prevent the likelihood of mistakes. You can rely on these activities to lower the cost of general accounting processes as well. Therefore, you don’t have any excuse to avoid this bookkeeping strategy.

5. Automate and Integrate Accounting Systems

In addition to the above, you should consider automating and integrating your accounting systems and processes. Even though automation is necessary for improving the performance of your finances, you first need to focus on understanding and streamlining the processes as it would allow you to maximize your return on automation efforts.

A commercial ERP software should help streamline general accounting and provide the results that you are looking for. It will operate as a primary system for general accounting. However, the emergence of cloud-based tools has changed the game. It has become a lot more affordable for organizations to improve their financial activities because of the availability of these products. As long as you take advantage of such tools, you will improve general accounting and reporting, which would have a positive snowball effect on business performance.

As you might already know, manual data entry is likely to cause errors no matter how experienced or careful your accounting team might be. For quality data, you need to switch to an integrated system. It will facilitate effectiveness and efficiency so that you don’t encounter problems later down the road. When you consider top organizations, you will come to realize that their internal or external system is linked and automated. Only through automation can you expect better KPI results.

For instance, you will benefit from correct journal entries when you opt for an automated solution. You should keep in mind that consolidated financial statements require the use of software to avoid the possibility of any mistakes. Otherwise, you could make costly errors that jeopardize your business. Don’t hesitate to put automation to work for you, your bookkeepers, and your management accountants.

6. Leverage Emerging Technologies

Lastly, you need to keep an eye on the latest technologies to ensure that you implement them early on. The emerging tools are there for a reason. You can use them to improve general accounting. Some examples include blockchain, cognitive computing, and robotic process automation (RPA). For those of you that don’t know, RPA is actually server-based, and it combines different processes with business rules or decision models without requiring much human oversight.

As more and more businesses realize that RPA has a lot to offer, it is in your best interest to jump on board. The last thing you want is to miss out on some amazing opportunities that may even improve your profitability ratio. You will be truly impressed by what the latest technologies can do for you. They can help your business unleash its full potential. The most successful bookkeepers, business owners and management accountants are those that leverage the latest offerings.

Conclusion

It is important that you adopt different strategies to ensure that your business succeeds. Consistently high business performance requires a high level of bookkeeping strategy and financial management. At the end of the day, it all comes down to having an open mind, getting the help you need, staying organized, using the tools at hand, and keeping up with the latest trends.

Sound Accounts helps business owners like you succeed with superior bookkeeping strategies that improve business performance and solidify long-term success. To learn more about the many ways we can strengthen your business, connect with us today. 

For more information about implementing better bookkeeping strategies, check out our frequently asked questions below.

FAQ

How can accounting and better bookkeeping strategies Improve performance?

Accounting is considered the language of business. It allows you to create and refine your workflow, as well as minimizing mistakes. By ensuring that proper accounting practices are followed, you can expect your organization to succeed.

How Does Bookkeeping Improve Your Business Operations?

Bookkeeping improves business operations by ensuring that you gain access to accurate records which you can use for making decisions.

Great bookkeeping adds tremendous benefits, including improved services, a better handle on cash-flow statements, a streamlined accounting process, better performance management, and a closer watch on resources and items. It readies you for E-Commerce Capability and prepares you for better operational strategies, diversification strategies, and overall corporate strategies. 

It also helps you make the most of your financial reports, financial statements, and other departmental reports, smooths over processes for employees so you can make the most of their capabilities instead of watching them spin their wheels on other things. It empowers your accounting research, improves professional services for your clients, improves client trust and loyalty along with customer experience, helps you navigate changing financial conditions, and with the right people in place, allows you to overcome the challenges of accounting.

How important is learning when it comes to finances, bookkeeping, and accounting?

It is important to stay current when it comes to ongoing education within principals and practices of accounting and economics. For a business owner, your grasp of financial and investment concepts will greatly affect your outcome and your position in the market. You can take online classes, join professional groups, get mentored by a professor of accounting, read the journal of accounting studies and the journal of accounting research, and shadow excellent bookkeepers both within your organization and others finding consistent success. 

What are 4 of the most important activities In bookkeeping?

Bookkeeping involves many practices, some simple, many that are more complex. These are simply 4 of the most common practices:

• Analyzing financial transactions and ensuring that they are assigned the right account.
• Writing journal entries that are debited and credited to the appropriate accounts.
• Posting entries to relevant ledger accounts.
• Adjusting entries once the accounting period ends.

When starting a company or managing a business, it’s easy to overlook certain things. Our hands are full of so many concerns. One thing you should never forget is your finances. Not only do major corporations need to keep an eye on their numbers, but the success of small business owners depends heavily on managing resources well and gaining a deep understanding of reports and analytics. 

The numbers tell us about the financial health of our company in multiple areas. Only when you have the right information, can you expect to make the right business decisions. This affects decisions like when to hire someone, the purchase of inventory, market pricing, departmental resource allocation, new investments, product development, and expansion. Although bank statements might provide some level of insight into your financials, they are just never going to be enough to manage a business effectively.

You need in-depth metrics to make sense of many factors, like determining how long your company can survive without cash and how long it takes for sales to bring cash, referred to as the cash conversion cycle. 

If you want a comprehensive understanding of your business’s financial health, there are a few reports that every small business owner needs to understand. These include a balance sheet, income statement, and a statement of cash flow. Each of these provides valuable data for assisting with key decision-making.

These three financial reports are interrelated and you need to understand each of them to unlock the true potential of your business. Let’s take a brief look at each one. 

1. Balance Sheet

One of the most important financial reports that you need to understand is your balance sheet. It reveals what you own in comparison to what you owe. A quick glance at a balance sheet will show you the value of your company’s assets at a specific date (i.e. today), the money that debtors owe you, and how much you owe creditors. In addition to this, it would also mention initial investments and equity over time.

In order for a balance sheet to be considered accurate, it must balance. This means that both sides of the report have to balance. Keep in mind that the money you borrow would be considered both a liability and an asset, as it would appear on both sides of the balance sheet. For instance, if you take a 3-year loan of $5,000 from your bank, it would appear in the financial report as $5,000 in cash and $5,000 in liabilities. Thus, the equation would balance the statement.

The following equation is used for preparing an entire balance sheet.

Assets = Equity + Liabilities

To better understand a balance sheet, you should view it in personal terms. We all have a balance sheet in our lives. Our personal balance sheets include how much money we owe on a mortgage, credit card bills, interest on student loans, and the cash in our bank accounts. The same goes for your business. Cash refers to the money that you have on hand, whereas, accounts receivable is how much money you are entitled to receive for providing a product or service. It is vital that you keep an eye on this number.

For instance, when you provide products on credit terms, your accounts receivable would be much higher than your cash at hand. Perhaps your clients might default on payments. In such a situation, you should consider charging a retainer, especially when dealing with first-timers.

Inventory is an asset that you can sell to receive cash. Similarly, prepaid expenses such as marketing and rent are also an asset. On the other hand, liabilities are on the opposite side of the equation and account for what you owe. The two most common liabilities that small businesses have are accounts payable and credit. The amount is owed to suppliers and vendors. Then, there is equity, which serves as your net worth. It is defined as the difference between what you own and what you owe. Hence, you can learn a lot about a company by viewing its balance sheet. You need to find out if the debt owed is higher than the assets owned. Moreover, you also have to know how long it would take for sales to convert into cash.

Some additional important information that you can obtain from the balance sheet is mentioned below.

Cash Conversion Cycle: This ratio determines how long it takes for sales to provide cash. It is important as it allows you to find out whether to trade in cash only or provide credit terms.

Working Capital: It is calculated by deducting current liabilities from current assets. The formula is used for finding out how much money you have for daily operations.

Debt Ratio: This is used to find the ratio of debt to assets.

Sales and Inventory Ratios: If you hold inventory, you can use these ratios to find out how quickly the inventory converts into cash after-sales.

2. Income Statement

The next financial report that you need to know is your income statement. It is used for determining profit or loss over time, usually a year. An income statement is necessary for finding out if a business is profitable or not. It includes sales, cost of goods sold, and operating expenses. Every entrepreneur has to know how to read an income statement to better understand the finer points of their finances. There are two sets of transactions that are mentioned in this financial report. They include operating revenue and expenses which relate to the cost incurred for directly generating the revenue and non-operating expenses such as tax.

A great thing about an income statement is that you can easily adjust it to suit your requirements. Whether you require an income statement for a month or a year, you should be able to generate it for the desired period using accounting software. For instance, if you have two revenue streams, which include cosmetics and hair products, you can create an income statement to find out how much profit each product is generating for you. The following are some crucial indicators that you need to evaluate using your income statement.

Burn Rate: This is the amount of money a business loses each month. Specifically, it measures how long it takes you to spend money on the business.

Net Profit Growth Rate: It measures the increase or decrease in revenue by comparing two income statements.

Net Profit Margin: It is the ratio of net profit to sales revenue.

3. Statement of Cash Flow

Lastly, you’ll need to know what a statement of cash flow has to offer. Small business owners tend to neglect this integral financial report and simply focus on the income statement and balance sheet. However, it can make or break a business. The statement of cash flow maps out how cash and cash equivalents enter your business and leave. It merges both the balance and income statement to provide valuable insights.

A valuable metric that you need to calculate using the statement of cash flow includes sources of cash. It allows you to find out how much money you are receiving within a given period and where the money originates. You might accumulate money by getting a loan, fundraising, selling stock, or through sales. Negative cash flow would indicate that your business is having trouble meeting expenses. This is why it’s important that you learn to better manage your cash flow, as it would serve as a cushion for your continued efforts.  

The statement of cash flow provides an overview into where cash is coming from and where it is going, which you cannot expect to determine with an income statement alone. For instance, when your bank account has a large deposit, it doesn’t mean your sales have increased. Instead, you might have taken out a loan. There is plenty of information you can gather with a statement of cash flow. Never underestimate its importance. 

Conclusion

Each of the above financial statements is necessary for evaluating the performance of your small business. You can use the information for making both short-term and long-term decisions. In addition to this, the bank will ask you to submit these statements to determine if you qualify for a loan or not. When you immerse yourself in accounting, you get to gather valuable insights. With professional bookkeeping services, you get to hire an expert to prepare these three financial reports for your business so that you can make the best decisions.

Sound Accounts is your ideal small business bookkeeping partner. We help business owners from every market sector organize, analyze, and capitalize on their financial info. Contact us today and discover the difference excellent bookkeeping and financial knowledge can have on your growth. 

Check out our frequently asked questions below for quick information about taking advantage of your financial reports. 

FAQ

Why is it important to monitor and understand my financial reports?

Using your accounting software and partnering with your bookkeeper to print and analyze your reports gives you the vital information you need to see your current performance clearly, uncover problems, reallocate funds, spot trends, and make decisions for growth with much more accuracy. 

Financial reports include an incredible amount of data related to your spending, debts, assets, investments, departmental performance, revenue and so much more. There is simply no way of accurately or confidently managing a business without a clear understanding of every aspect of your company’s finances. 

Besides the three important reports mentioned above, what are some other financial reports I should always be aware of?

Some other good reports include Accounts Receivable, Net Profit Margin Over Time, Budget vs. Actual Report, AR Days vs. AP Days and more. 

How do I make sure I’m making the most of my financial reports?

You should be tracking your info and studying it consistently, preferably on a daily basis. Set aside time each day to focus on your financial health and toward making projections and decisions based upon the information gathered. 

Most of all, it’s a good idea to partner with an experienced bookkeeper to help you make sense of your data, spot details you may overlook, explain financial info in easily understood ways, and help you decide on a plan of action for the next season. 

Whether it’s about getting more organized, keeping better records, tracking cash flow and tracking expenses, making better use of your financial statements, or finally contracting a professional bookkeeping service, developing a strong bookkeeping strategy will always change your business for the better and often enable you to grow in ways you didn’t previously have access to. 

It’s important that, as business owners, we take full advantage of technologies that might give us a leg up in our efforts. One area that often needs an upgrade is in our bookkeeping and money management. One affordable way to get a better handle on things, especially when you’re just starting out or fairly new, is picking up a good accounting software. 

While free options will not be as robust as paid choices like QuickBooks or Xero, several no-cost options exist that offer a range of possibilities for business owners hoping to better manage their books, simply handle invoicing with ease or take advantage of the sleek workflow and automated data organization that comes with accounting software. Let’s look at 4 choices for free invoicing or free accounting software in 2022. 

1. Wave

A top choice, Wave is a web-based software, which means you can access your account from anywhere with an internet connection. It may lack some advanced features, but it’s no slouch. Wave gives you the ability to connect unlimited credit card and bank accounts, and track income and expenses. You’ll also have the capability of invoicing clients and partners and scan receipts as well. 

Some additional Wave features include:

Journal transactions

Bill and invoice reminders

Payments made in foreign currency

Customizable sales tax

Customizable income and expense categories

Double-entry software

The ability to run multiple businesses through one account

Exportable Accounting Reports

Another great perk of Wave software is its security. It packs 256-bit SSL encryption and data backup. You’ll also get support via email, along with helpful hints from their blog, forum, and help center. Lastly, Wave expands your options by offering free add-ons like Wave Invoicing or pay-as-you-go add-ons like Payroll by Wave, that enhance your experience and give you more control over your accounting. 

As with any product, Wave does have a few drawbacks. It carries few tax capabilities and isn’t ideal for larger companies. Still, Wave, with its strong security, thorough collection of benefits and add-ons and ease of access, makes it one of the best choices for free accounting software. 

2. ZipBooks

ZipBooks contains most of the features you need for basic business bookkeeping, like expense management, bank syncing, billing, invoicing, and even reports. Additional features include bank reconciliation, auto-categorization, tagging and more, plus a wide range of detailed reports. ZipBooks helps you accomplish even more with data-driven insights to enable you to make the most of your financial reports. With greater financial intelligence comes better business decisions. 

ZipBooks offers an automated payroll option via a link with Gusto. You’ll need to subscribe with Gusto, which starts at $39 a month plus $6 per person per month. While this means an extra expense for you, Gusto is a great service that many business owners swear by. And paired with ZipBooks, can really streamline your payroll management. If you’re hoping to make online payments to your invoiced customers, you’ll need to use Square or PayPal and pay the associated fees. 

ZipBooks is an above average choice for free accounting software. With several built-in features and some of the best intelligence and reporting insights of any free software, it’s an excellent program for many businesses. Learn more about ZipBooks here.

3. CloudBooks

This one is sort of a cross between no-cost and low-cost. You can use CloudBooks to invoice, track expenses, create estimates, track time, easily communicate with your entire team, assign tasks, run projects, and more. However, you’ll need to upgrade and pay a very reasonable fee of $10 per month if you’d like to send more than 5 invoices, offer payments online for your invoices or brand your materials. 

For help, you can contact CloudBooks by email or even phone. They also keep a regular blog going with some great articles, featuring not only helpful hints about using CloudBooks, but timely posts about business, accounting, media, and marketing. Check out and sign up for CloudBooks here. 

4. Zoho Invoice

This self-admitted “forever-free” tool is an excellent choice for small business owners looking to create and manage invoices and collect payments, all with ease. Customize your templates with brand-specific choices, track expenses, communicate with customers using your client portal, create estimates, and run time-tracking on project billing.

Zoho is trusted by a wide range of businesses and entrepreneurs for its ease and automation. Everyone from freelancers, musicians and artists, to designers, lawyers, consultants, non-profit organizations, taxi and transportation, medical, travel and tourism, and everyone in-between, are using Zoho to manage their invoicing and payments. 

At its heart, Zoho isn’t just one, but a suite of apps, designed to help you manage your business better in just about every way. Their offerings include programs like Zoho Books, which goes beyond invoicing to include everything you need for complete bookkeeping. From there you get to choose programs or subscribe to the entire suite and gain a serious selection of features that allow you to email, invoice, manage bookkeeping, create and track marketing campaigns, manage projects, design, handle customer service and sales pipeline oversight, and book appointments. 

Zoho is customizable, features great mobile apps, and its interface is attractive and mostly intuitive. They’ve also made considerable upgrades over the past few years, allowing for a greater level of control and customization. 

Free for the basic service of Zoho Invoice, which includes one user, if you’d like to step up, which will be necessary for many if not most users, there are a range of paid Zoho Invoice plans, with a graduated system of features and pricing. From there, you can move into Zoho’s wider range of business products, requiring anywhere from $30 to $250 per month for a comprehensive suite of management tools to help you take care of just about anything. 

Conclusion

This is by no means an exhaustive list. And we’ll look at another set of free software options in the near future. But this should at least inspire you to take a look at bookkeeping or invoicing software if you’re not already taking advantage of the features and benefits of today’s available technologies. 

Remember, though, no program is a full substitute for an experienced bookkeeper. It’s important to create bookkeeping habits and strategies that are sustainable, comprehensive, easy-to-follow, and cover everything. A bookkeeper can make this happen for you and take the burden off your shoulders. 

Sound Accounts helps companies from all sectors achieve greater productivity with a range of superb bookkeeping services. Don’t leave your finances to chance. Reach out today to see the difference great bookkeeping makes in your business. 

For quick answers to questions about free accounting software, see our frequently asked questions below. 

FAQ

Is accounting software right for me?

The answer to this depends on a few things. It’s really never a bad idea to pick up a quality bookkeeping management tool. These programs, whether you’re handling your own books or outsourcing, can give you quick access to basic accounting tools and a range of reports. Not to mention keeping your records organized.

 How do I choose the best software for me?

There probably isn’t a “perfect” software for any business owner. So many of them will work just fine for most companies. It comes down to which features you need, the ease of use and the style of navigation you prefer, and how customizable your options are. You’ll also need to determine which is better for your success, a good free version or a more comprehensive paid program. 

Is accounting software a good replacement for a bookkeeper?

The short answer is no! While very small businesses, say one or two people, especially ones with a very basic business model, a limited range of expenses, and few customers, can manage their own books using accounting software and good habits, most growing businesses need to eventually transition to some kind of professional bookkeeping help. This might be an in-house employee or even the more versatile outsourced bookkeeping service, which offers you exactly the services you need at a price you can afford. 

Many business owners are choosing to hire an accountant instead of doing their own books. This can be for several reasons. But should you hire someone or handle it on your own? The answer often depends on what kind of business you’re in and how much work you’re willing to put into it. Factors like the size of your business, the number of employees, and the complexity of internal logistics might all affect your decision to either take on bookkeeping yourself or hire it out to a professional. Let’s look more closely at the pros and cons of each one and equip you with the information you need to make the right choice. 

Should you hire an accountant or do your own books?

This decision is unique to each individual and involves several factors. How big is your business? How many employees do you have? Are you already finding it difficult to keep track of your books or does it come naturally? Are you comfortable with accounting software or do you feel that a real set of trained eyes would help you make better financial decisions? Is spending time on accounting worth it to you, if you even have the time? Or would you rather use that time to focus on other parts of your business?

Why people hire accountants

The main reason companies hire accountants is because they want to avoid doing their own books. Some business owners are too busy with other tasks like marketing, sales, and operations to do their own bookkeeping, so they hire someone else to take care of it for them—promoting efficiency and accuracy in the process.

Another reason many owners hire an accountant is that the accountant will make sure that your books are up-to-date and account for all the financial aspects of your business. They’ll help reduce errors by working closely with you throughout the bookkeeping process—helping you develop a better understanding of your company’s finances and accounting systems. Accountants keep your taxes clean and up to date, spot opportunities for better resource management, and free you up to focus on expansion, customer satisfaction, and product development.

If you’re a business with a growing number of employees, or you’re managing a lot of resources, hiring an accountant can help you keep your finances organized. Still, there is sometimes a fine line here. If you have less than 10 employees, there may not be much work for your accountant to do. However, even if you are a smaller company, you may not enjoy handling your own books, feel overwhelmed, or simply want to focus that energy on something else. In this case, why not hire a professional if you can afford it?

Pros and cons of hiring an accountant

Partnering with an accountant is often a great option for many businesses. They will handle all the books for your company, uncover problems early on, and help you pursue new opportunities. Their expertise includes taxes, regulatory reporting, financial statements, internal ledgers, and more. Bookkeeping programs help you with some of this, but having a fully engaged individual to watch over these key financial areas can often make the difference between consistent success and just getting by.

Another benefit of hiring an expert is that they’ll likely have a broader scope of knowledge to explore. Accountants have years of experience dealing with a multitude of businesses. They understand the hidden rules of taxes, know how to pick out seemingly insignificant details buried within financial reports, and help you put together a more focused plan for the weeks and months to come.

The primary drawback is that hiring someone requires a financial investment. Professional services like those offered by CPAs are worth it, but can sometimes be more than small business owners can afford early on.

Why some people choose to do their own books

Doing your own books is a great way to save money. It’s also a wonderful opportunity to learn a new skill, gain a better understanding of your business and get used to using accounting programs. If your business consists only of you or perhaps a couple of employees, learning how to maintain your books can be a significant step toward taking more control over your success.

Some people just like having the control within their own hands. Certain business owners simply prefer to manage most of what they do, including their bookkeeping. This is fine as long as you do your research, get the right tools, keep up with it daily, study your reports, keep detailed records, and ensure you are complying thoroughly with all tax laws and business fees.

Why sole proprietors often do their own books

Many sole proprietors agree that it’s worth it to do their own books and deal with the hassle simply because they have the time and want the control.

If they are diligent, sole proprietors can keep track of every dollar they make and spend and know exactly what’s going on in their business. When your business model is relatively straight-forward, and doesn’t involve complicated financial management, multiple overlapping departments, or employee payroll and benefits, doing the books yourself makes sense. Plus, this will allow you to see how much time it takes to handle your own books. This will help you better determine whether continuing on this path or pursuing professional accounting help is the best choice going forward. 

Some difficulties with handling your own books

Mistakes: If your bookkeeping isn’t handled correctly, it could cause a financial blow to your business.

Time and Confusion: It could be more of a hassle than you originally thought, eating up time you could be using on other tasks. You may also not enjoy it enough to take it seriously and begin to miss key details within your reports. 

Tax Penalties: You could miss paying taxes on time or do so incorrectly.

Energy and Focus: With everything on your plate, you may not have the energy left to spot mistakes or glean vital information from financial reports to make more strategic decisions about the growth of your business.

If you are going to manage your own accounting, make sure you have the right tools in place. Subscribe to a quality program like QuickBooks Online or Xero, or one of several others. Learn all its features and study your reports daily. Even if you;re doing it yourself, if problems arise or things get too confusing, reach out for professional help. 

Conclusion

There are pros and cons to each choice. Learning how to do your own books is an important skill to master. It helps you be a more engaged and focused business owner, with an eye on the details and a better handle on what goes on behind the scenes and beneath the surface.

Hiring an accountant, whether they be in-house or outsourced, can free you up to focus on other things. They can spot errors early on, help you understand trends and patterns that either affect you negatively, or open doors toward growth, help you pay your taxes, keep you accountable to your own budget, and give you peace of mind knowing you have a partner who is looking out for you and your business.

Sound Accounts helps business owners manage their books with confidence and ease. We offer a range of accounting services to meet the varying needs of any business, letting you relax, breathe deep, and focus your attention on everything else.

For answers to accounting questions, see our frequently asked questions below. 

FAQ

Why is doing the books important for me as a business owner?

Keeping up with your accounting each day is the only way for you to be successful in the long run. You’ll see where your resources are going, where you’re realizing the most profit, and which areas are leaking money. You’ll spot trends and have a clear view of where to go next. Not to mention paying your taxes correctly and on time. 

Should I hire a professional or do my own books

This decision is different for each business owner. It depends on the size and complexity of your business, the number of employees you have, how comfortable you are with accounting software and spreadsheets, whether you have or can make the time each day to update financial data and study your reports, and other reasons. If you understand the importance of keeping up with your books, can navigate the software, have few employees, and are fully committed, you can manage your own books. 

However, if you have a more complex business model, more employees, several accounts or departments, each with their own resources and expenditures, deal with a lot of vendors or partners, or simply don’t have the time, energy or patience to do your books, hiring a bookkeeper or accountant is the right choice. They will take the stress and worry off your plate, handle all accounting matters, spot troubled areas and trends and help you make more informed and strategic financial decisions.

As a sole proprietor, should I hire an accountant?

It isn’t always necessary to hire someone. You may well be able to handle your own bookkeeping if you have the time and desire to learn how to do it well. If your business is relatively straight-forward and you want to oversee your accounting, you can use quality software to help you manage it effectively. However, even if you are a sole proprietor, professional accounting services can often be a great choice for you. If it is an expenditure that you can afford and it saves you time and helps you stay current and make better choices, it may be worth outsourcing part-time for monthly help keeping your books. 

What accounting program should I use?

QuickBooks Online is often the right choice for any business. With robust options, a range of features, well-organized reports, and solid customer support, they’ve been doing this for years and continue to improve.  Other great options include Xero, Freshbooks, Netsuite, Sage and countless others. Each carries different features and varying levels of support. It is important to do your research first, and find the program that you’re comfortable with and provides everything you need.