The core method of keeping your financial data up to date is proper bookkeeping. Without accurate and up-to-date financial data, you are not able to make informed business decisions. It is essential for understanding for every aspect of your business, from monitoring your cash flow to calculating your cost of goods sold.
But when you’re busy getting your brand up and running, bookkeeping can be frustrating and time consuming. Knowing what you can and should take on yourself, and when you should outsource those responsibilities will establish the groundwork for a healthy business as you scale.
In this month’s Accounting Basics from Accountfully, the focus is on accounting best practices.
Do what you do well
Claire Pelton from Accountfully says they often see founders moonlighting as their own bookkeepers. Their confidence is high as they sign up for accounting software. But it can quickly dwindle after weeks of trying to maintain the books properly. Once they take over the books and are staying on top of it, many business owners wonder why they even tried to tackle it in the first place.
While there are some exceptions to the rule, founders should focus on what sparked their desire to start their business in the first place and let number crunchers handle the boring yet vitally important stuff.
It has never been easier to tackle your own bookkeeping. The systems that exist these days like QuickBooks Online have relatively inexpensive versions that can be set up quickly. Before you know it, you are handling your bookkeeping. But the software doesn’t guarantee accuracy or expert-level management.
But the question of when and if to outsource depends on a lot of factors and individual circumstances. If you are going to commit to doing your own bookkeeping, you will need to start with some best practices, to set things up for success. Here we outline some facts and ideas to help you decide.
1. Create a System that Works for you
Launching a new business means setting up dedicated business account(s) and credit cards that are used exclusively for your company. This will simplify all of your transactions and keep them in one place. All outflows and inflows will flow through these accounts, making it a lot cleaner for DIY bookkeeping. You can export transactions from your business accounts and log them in a spreadsheet. This spreadsheet will house information on the transactions themselves and allow you to code each one.
Not only will this give you the proper, professional tools to get your business management started right, but it will also simplify your bookkeeping and minimize confusion across any additional businesses or personal accounts.
2. Get an Accounting Set up and Use it Consistently
We hope your business is so successful that you are quickly outgrowing your manual bank account transaction export and spreadsheet process. This is where that modern accounting software comes in. Once you’re ready to move forward to an accounting system like QuickBooks Online, it’s time to get it set up. Be warned that setting things up in the app is only step one.
Step two is following a regular, dedicated process to update your information. You will need to ensure that you are dedicating time each week to this. It can be as simple as setting aside 30 minutes every Monday or Friday and going in to pull credit card and bank transactions, invoicing customers, etc. Without dedicating that time, any application and bookkeeping endeavors will be useless.
time will tell if and When it’s time to outsourcE
As a new business owner, we challenge you to start doing your own bookkeeping. There are some upsides to doing it yourself if you are capable. In addition to monitoring the health of your business and understanding your bookkeeping process, it does save some money as you are getting off the ground.
As you stay consistent with your business processes, you will start to get a sense of when it becomes too burdensome. Is your time better spent talking to prospective clients or industry influencers?
do you need to outsource your bookkeeping? Probably not right away. First, try to do it yourself. Get some consistency, get some systems set up and see if that works for you. If not, outsourcing might be the best option.
About Claire Pelton
Claire Pelton leads the marketing team at Accountfully, an outsourced accounting firm specializing in CPG businesses. As an entrepreneur herself, she understands the struggles of being a business owner; especially those related to managing and accounting for inventory. Claire brings simplicity to these common accounting struggles under the guidance of the accounting subject matter experts at Accountfully.
Accountfully‘s services range from basic bookkeeping to advanced CFO-level advisory functions and are designed to be flexible and scale alongside a growing business. Accountfully provides easy-to-understand pro tips designed to help emerging brands better understand and more effectively leverage accounting basics in their daily business practices.