Can I Do My Own Bookkeeping?

As a business owner, it’s common (and recommended) to ask yourself which expenses are truly necessary.  For a long time, bookkeeping services were thought to be unnecessary. However, when the time came to apply for PPP loans a few years ago, many small business owners finally understood the value of having organized and up-to-date accounting books. The businesses that had their financial information readily available were able to quickly take seize the opportunity.

Okay, back to the question at hand. “Can I do my own bookkeeping?” The short answer is yes. Professor Google and YouTube have taught many students. A better question is, do you WANT to do your own bookkeeping even if you can?

What to Consider If I Want to Do My Own Bookkeeping

• Chart of Accounts – You need to understand and create a chart of accounts, as it is the starting point for recording business transactions. The chart of accounts is what you use to categorize each business transaction as an asset, liability, equity, revenue and/or expense.
• Checking Your Work – You need to double-check your bookkeeping work and preferably on a monthly basis. Checking your work includes reviewing all of the transactions that you categorized in the chart of accounts and also comparing the amounts that you recorded to reliable source documents like a bank statement.
• Document Retention – You need to maintain or easily be able to obtain documentation (for example, receipts, checks and bill copies) for all business transactions in case they are needed for future reference, tax and/or audit purposes.
• Interpreting Your Work – After business transactions are recorded, they get summarized on financial statements to show you how your business is doing. You need to be able to create and understand these financial statements so that you can make business decisions.
• Knowledge of Technology – You need a place to record your business transactions. This can range from a notebook, to an Excel spreadsheet, to QuickBooks Online. Whatever you choose, you need to fully understand how to use it for bookkeeping purposes.
• Services Required – Do you have employees on payroll, pay independent contractors, issue client/customer invoices on a monthly basis and/or pay sales taxes? If so, determine if you are able to do these things accurately and in a timely manner.

When Should I Hire a Bookkeeper?

• Number of Transactions – Does your business have 1 to 10 transactions per month or 50 to 100+ transactions per month? If you don’t have a lot of transactions, doing your own bookkeeping may be simple. If you have many transactions and also work with third party apps (e.g., Shopify, Stripe, Amazon, etc.), the bookkeeping may be more difficult and better suited in the hands of a professional.
• Annual Revenue – If the entity for which you want to do bookkeeping is a nonprofit organization, the organization may be required to have an annual audit and/or a Single Audit. Are you confident that the books would be in audit-ready shape if you are the one who does the bookkeeping?
• Tracking Multiple Projects/Grants – Does your business or organization have multiple contracts, projects or grants? If so, a bookkeeper will be able to clearly keep track of each one separately.
• Do You Plan to Grow the Business? – If so, decide if it is the best use of your time to do your own bookkeeping as your business grows. A bookkeeper can free up your time.
• Basic Understanding of Tax Law – Bookkeepers can make you aware of issues in relation to Federal or tax law. For example, during a diagnostic, we discovered that an individual who was not the owner of an S corporation was paying themselves via payroll instead of via distributions. The owner was unaware that this should not be done until we made them aware.

The Choice is Yours

The above is not a complete list, but it is a good starting point. You may be a great candidate to do your own bookkeeping if you are confident that you can do what’s listed. If not, then hiring a bookkeeper is a good decision. Of course, bookkeepers are human and can make mistakes, so it’s still good to have a general understanding of how bookkeeping works. However, the likelihood of mistakes decreases with a trained professional. You can also try out a bookkeeper and cancel their services if you are not satisfied.

Disclaimer: This article has been provided for informational purposes only. Please consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.