Were you aware that out of all the new businesses established each year, that only 20% of them make it through their first year? And of that twenty percent, only half of them survive 5 years. Even though there are plenty of reasons why they don’t succeed, in many instances it relates directly to finances.
As money is required to operate, entrepreneurs must not only learn how to generate profits but manage those profits accordingly. Accounting and bookkeeping, for this reason, are of the utmost importance to a company’s lifespan.
Why DIY Accounting Isn’t Always Efficient Enough
It is not uncommon for an entrepreneur to take on accounting and bookkeeping responsibilities in the first few years of their establishment. Ultimately trying to save money on the cost of hiring an accountant, they delve into the company finances with only basic knowledge (in most instances), of how it should be managed. Though there is a lot of reading material out there on how to do your own accounting and several online platforms you can use to make it easier, in many cases, it isn’t efficient enough. Here’s why:
Lack of Skill
While many business professionals have some basic education in accounting and may even be great with managing their personal finances, business accounting and bookkeeping is a lot more involved. The lack of skill or comprehension essentially leaves too much room for error.
The learning curve for accounting and bookkeeping can be taxing. There is a wealth of information that must be remembered including formulas, processes, records, as well as local and federal laws that must be adhered to. As accounting isn’t their only concern to grow the business, many other areas tend to fall by the wayside.
Waste of Money
Contrary to popular belief, it is a lot more affordable to outsource your accounting to a company who specializes in online bookkeeping services, than it is to continue doing it yourself. Consider your hourly rate of pay. Now multiply that amount by the hours you spend working on the books? This is money being flushed down the drain. Not to mention, when errors are made or financial opportunities are overlooked, this too can cost a lot.
Finding an Accountant That’s Right for You
As you have learned, the first five years of starting your business are crucial. Without full knowledge of how to effectively manage the finances, you stand to waste a lot of time and money. Though hiring a full-time accountant may be out of the picture for awhile, there are service providers who you can outsource to. Here’s some advice on hiring the right one.
Referrals are always the best place to start when looking for an accountant. Ask other entrepreneurs you may know who they’re currently using.
It doesn’t make sense to hire someone to do your accounting and bookkeeping tasks if they’re no more skilled than you are on the subject-matter. Be sure to check that the candidate you’re looking at has the proper educational background and licenses.
Experience is often the best teacher which is why you want to look for a financial professional who has had several years of experience working in small business accounting.
The more you can get help with the better, so look for a service provider that offers an array of online accounting services to help your business stay in line. This can include bookkeeping, tax services, payroll, and more.
You want to hire a forward-thinking firm or contractor to complete your accounting for you. When talking with professionals ask what ideas they might have to improve your current accounting system and what goals they might set to help your business expand.
Trying to do everything yourself may seem like the only thing you can do when funds are limited. While it may work in some areas of business, when it comes to accounting and bookkeeping, the very lifeline of your company’s success, it is best not to take risks. Outsourcing these efforts to the right service provider will save you money and help you beat the odds in your first year and beyond.