Wow! Am I ever terrible at keeping up with my blogs! I’m long overdue! Alas, with this entry, I would like to address those who are attempting to do their own bookkeeping. First of all, why? Your time is far too valuable and it should be spent on your business and making you money. Non-revenue generating activities (you know, those mundane tasks like keeping up with your paper work) should absolutely be outsourced to a qualified practitioner. But if you insist on doing it yourself, I have some skill testing questions for you which will help you determine whether or not you should be doing your own bookkeeping. Consider these scenarios:
- Do you know the difference between debits and credits or that the balance sheet accounts and the income statement accounts are affected differently by each?
- You have a WSIB payment to make. While the bank account will be credited, do you know which account receives the corresponding debit? Or that it depends on whether or not the expense has already been recorded to a liability account?
- How would you record it if the bank made a withdrawal or deposit to your account in error?
- Do you know how to record a personal purchase made with company funds? Or vice versa? How to record a business purchase made personally?
- Do you understand how to prepare payroll and how to record the expenses and liabilities that go with it?
Does any of this make sense to you? If so, then great! Carry on! If not, then I’m not surprised. You are not trained in accounting so why would you know any of these things? My point exactly. Why are you trying to do a job that is non-revenue generating and one that you know so little about? Mistakes are usually many and costly. Not only will you pay an accountant at year end to fix your errors, there is a chance that you are over paying your remittances like HST or, worse, underpaying. Underpaying will cause you to incur penalties and interest. And your corporate tax is affected by whether or not your sales and expense entries are entered correctly. If expense entries are missed or entered incorrectly, your income may be overstated causing you to pay more tax than necessary. I’ve even seen companies double paying their suppliers for lack of proper recording. Keep that hard earned money in your pocket! And what about your financial reports? Can you really rely on them for making important business decisions if you really don’t understand how all of your entries affect the balance sheet and income statement?
The bottom line is, you guessed it, you shouldn’t be doing your own bookkeeping. Hire a qualified and experienced bookkeeper to do these tasks for you, even if it’s just quarterly. You can be sure that everything will be entered correctly, interest and penalties are reduced or eliminated, financial statements are reliable and it will be done in likely half the time it would take you to do. Best of all, you can spend your time making money! And isn’t that what being in business is all about?!
