Bookkeeping

Is Bookkeeping Hard?

Is Bookkeeping Hard?

As a cloud based accounting solution we see people often asking if bookkeeping is hard to learn, what does it involve, and how does it work. Most of those asking these questions are either business owners wondering if they should do their own bookkeeping, or people considering their career options. While we'll try and address both sides of the issue, or focus will be on the business owners point of view.

So...Is Bookkeeping Hard to Learn?

You're not going to like this but the answer is both yes and no. And while this might sound confusing at best, we promise you it will all make sense after you learn what bookkeeping involves. So let's dive right into it...

Industry

Depending on your industry, the expertise and diligence required to maintain your books will vary. This is one reason that the question "Is bookkeeping hard?" is more nuanced than it might appear. 

Time

Given a lot of free time, many (not all) business owners are more than capable of doing their own bookkeeping. But business owners often wear multiple hats and need to perform a list of high level tasks for their business to run properly.

Trying to divide your time between higher level tasks and bookkeeping can create a stressful situation. Often it is the bookkeeping that gets neglected, which brings us to our next point...

Consistency

Keeping books consistently is the key to creating a smooth experience. If you don't have the time, the drive, the mindset or the know-how to stay on top of your books--you will find that bookkeeping is ten times the task it should be. 

Trying to dig through records and transactions from months past is a quick way to transform yourself into an archaeologist, only there will be no exciting temples full of treasure or new dinosaurs to name--only stale transactions.

 Via  Giphy

Via Giphy

Enjoyability

Bookkeeping is not for everyone. In fact, a TD Bank survey which polled over 500 U.S. small business owners, discovered that bookkeeping is their most hated, with the next most hated task falling a whopping 24% behind. Needless to say, you are not alone if you don't enjoy categorizing transactions. And no task (even if simple) is "easy" when you not only don't like doing it, but hate it.

 Via  Giphy

Via Giphy

Longevity

Bookkeeping is repetitive, and a sometimes (okay, a lot of times) mind numbing task. If you are someone who does not have patience or a marathoners attitude, you will quickly find yourself burning out on the task.

Communication

Good bookkeeping requires communication. Chron.com writes:

"Durham Technical Community College reported that the most difficult part of their job was not maintaining financial records, which accounted for 50 percent of their time. It was communicating with colleagues. Bookkeepers must maintain and balance financial records daily, including transactions from coworkers."

Whether you're looking into become a bookkeeper for employment, or your a business owner looking to manage your finances--proper bookkeeping will require you to engage with your employees to better understand the businesses's transaction history.

"But wait, all these things you've written make bookkeeping sound hard!"

That's because we haven't gotten to the crux of the matter just yet. As any good scientist will tell you, theory and practice are two completely different concepts. And while we'd venture to say that in theory many business owners are more than capable of accomplishing their own bookkeeping, in practice many fall short. 

Final Thoughts

Is being a bookkeeper hard?

No. Given the right circumstances and knowledge, bookkeeping can be as simple as categorizing things properly.

Is being a bookkeeper hard?

Yes. For the every so busy small business owner, finding the time and energy to properly maintain your books can be a taxing and arduous task.

 

 

 

Bookkeeping 101: The Ultimate Beginner's Guide to Bookkeeping

bookkeeping 101

Welcome to Bookkeeping 101, where you'll learn Everything you Should Know About Bookkeeping basics (And Then Some)

The term "bookkeeping" might conjure up scenes from a classic gangster flick, with back-alley deals, horse betting, and offers "you can't refuse." But the reality is that this couldn't be farther from the truth. Sure, we have our fair share of excitementan unreconciled transaction or an uncategorized charge (we kid, we kid). Bookkeeping is an arduous and time consuming process, a marathon that begins the day you open for business, to the day you (hopefully never) close your doors. 

The purpose of this article is to give business owners a full overview of what bookkeeping entails so that they can:

A. Implement proper bookkeeping practices

B. Decide which bookkeeping methodology to use (yes, there's more than one way to keep your books...) 

C. Decide if it's something you really can and should do. 

Since there is a lot of information contained on this page, we recommend you bookmark this page and refer to it often. 

bookkeeping basics

What is Bookkeeping?

Bookkeeping is simply keeping tabs on all of your financial transactions pertaining to business expenses. Or for the real nerds out there (and don't worry, that includes most of us here in the office), here's the Wikipedia answer:

Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts, and payments by an individual person or an organization/corporation. There are several standard methods of bookkeeping, such as the single-entry bookkeeping system and the double-entry bookkeeping system, but, while they may be thought of as "real" bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process.

WHAT IS THE IMPORTANCE OF BOOKKEEPING?

Whether you own a niche pop culture news site or a multi-billion dollar car companyyou need to implement proper bookkeeping techniques. 

How you go about doing your books is up to you, but even if you don't use a 3rd party bookkeeping service you must keep solid records of business transactions.

If you don't, not only could you lose out on thousands of dollars in potential deductionsyou could also lose compliance with the IRS. If the latter happens, not only will you not be eligible for deductions, you might end up owing the IRS money. 

What are Good Bookkeeping Practices?

Rather than list a million things you should be doing, we will list some of the most common bookkeeping pitfalls and how you can avoid them, starting with unreconciled transactions.

Unreconciled transactions

Do you have unreconciled transactions on your books? Your books cannot be complete until all transactions that occurred in 2015 are categorized correctly. Solution? Think and act chronologically.

Loan payments

Do you have loan payments on your books? You may not have accounted for the principle and interest portions of the payments correctly. If you have categorized the whole payment to a single expense, your books are probably incorrect. Make sure you always account for the principle, as well as interest.

The infamous “shoe box” 

Simply put, if your receipts are sitting in a box somewhere, then you haven’t even begun to keep your books. There is really no way to reconcile this pitfall except for to suggest that business owners abandon this practice and implement correct accounting principles from the beginning. Trust us when we say, it’s a lot easier to start documenting your transactions from the start, than to go through a year of coffee stained receipts to try and categorize transactions you may or may not remember. 

Inventory count

Your books may have inaccurate values for inventory and Cost of Goods. This can be due to a miscount or, just as common, theft. This is especially important for business owners who have a physical product. Always stay current on inventory, and December 31 is always a good date to do a proper inventory check. This is a crucial step as you aim to properly keep your books. 

Payroll

Like a bicycle wheel, you’re payroll needs truing. Such maintenance requires that your income statement show payroll at gross but without a manual adjustment to the standard bank feeds, this account is probably only shown at net payroll. 

Accrual basis bookkeeping

There are numerous accounts that need to be manually updated at year-end. This task is often far too difficult if you do not have an accounting background. It’s best to discuss this process with a CPA or accountant. 

Should I do my Own Bookkeeping?

bookkeeping 101 funny

The question of whether or not you should do your own bookkeeping really comes down to a couple of things.

Time:

Bookkeeping is an extremely time consuming and tedious task. If you are in the early stages, you are most likely stretching yourself as it is--perhaps trying to manage your marketing, sales, PR, customer service, and inventory all at the same time. As a startup, we understand the "hustle" mentality. 

Expertise:  

Does your accounting experience boil down to a couple of college courses? Have you ever taken the time to get to the state and federal tax codes that apply to you? Are you familiar with the term "nexus"? 

Many business owners think they have what it takes to do their own books, and they very well might. But chances are, most business owners overestimate their "expertise" when it comes to proper accounting. 

Side note: On a philosophical level, you also need to ask yourself, what makes you happiest. Why did you start your business? Was it to categorize transactions, or was it to fulfill a need, explore your passions, share your gifts, better a product, or change the world?  

Chances are that you didn't become a business owner so you could practice bookkeeping. Hiring a bookkeeper will allow you to focus on the real reason you decided to put blood and tears into your product. 

What are the Different Bookkeeping Services Available?

bookkeeping 101 small business

The O.G. or “Traditional” Bookkeeping Services: Accounting Firms

The most traditional method of bookkeeping is to hire an accountant or accounting firm. (We’re talking local mom and pop shops and freelancers.) These guys offer great benefits over the DIY self method—like the fact that you’ll barely have to lift a finger and you’ll also be privy to expert insight (pending their qualifications of course).

Of course there are also some drawbacks with these bookkeeping services, such as higher fees and slow turn around times. Many of these institutions charge high hourly fees for consultations which can make it difficult to set a steady course for your monthly budget, not to mention their services can often be “behind the times” in terms of integrating technology. 

When it comes to the traditional method, business owners will have to consider whether or not they want to hire an in-house bookkeeper or an external accounting firm. Both methods can be expensive with hourly consulting fees and salary/benefit considerations for in-house hires. In-house accountants can be a solid option if you own a large operation and need constant oversight. Smaller businesses however, might find that the costs don’t outweigh the rewards when it comes to hiring a full-time accountant. 

accounting 101

The "Semi-Traditional” Bookkeeping Service: DIY Software

DIY software is an increasingly popular option, giving business owners a great UI to track their finances. Companies like Quickbooks provide robust software that can help facilitate advanced accounting functions. Not only are many of these types of tools extremely helpful, they can also save money when it comes to hiring a traditional accountant. Although this is a great option for accountants, it may not be optimal for business owners.

Having a good piece of software doesn’t make you knowledgeable about the US tax code, regulations or requirements. Business owners can miss out on deductions, disqualify themselves as a compliant business, and face IRS auditing through improper tax filing. Having simply taken an accounting class in college is no substitute for the wealth of knowledge an accountant brings to the table. 

Even if you feel confident enough in your accounting, there is still the consideration of time. Anyone who has started a business knows that they will soon find themselves being pulled in lot’s of different directions. Bookkeeping is a time consuming task—business owners need to ask if reconciling transactions is the best use of their time. A more honest labeling of "DIY" software is not a bookkeeping service, rather a bookkeeping tool.

online accounting

The "Fully Automated” Bookkeeping Service: Software+Human Touch

The third and final option which we will most definitely compare to a puppy being wrapped in a blanket—are software as a service options. This hybrid service provides the best of both worlds, giving users access to customized software as well as a dedicated bookkeeper. Instead of having to reconcile your own transactions, a bookkeeper (accountant) will do it for you. Some of these services like Bookly, offer unlimited consultation at no hourly cost. Instead they prefer the more modern “Netflix” model of a monthly flat-rate fee. This gives business owners comfort, knowing the can reach out for advice without fear of incurring extra costs and make more accurate monthly budget predictions. Rather than a mean (tool) to an end, this option is a completely automated solution. 

This option will not be for everyone, for example—extremely large and complicated corporations or accounting firms (just covering our bases). However for the other 90% of business owners—this type of bookkeeping service  is likely to be the most inclusive and cost effective. It offers all of the good (and more) of the aforementioned methods without the bad. The hybrid mixture of cloud-based tech combined with a human element of a bookkeeper takes away the headache of navigating tax law and entering data—while still providing a high touch high tech solution to your bookkeeping service needs.  

Before clicking the X on your browser, or the button below, remember to ask yourself two things: "Do I have the expertise to make the most of my tax returns?" and "Are my talents best spent doing my own bookkeeping?" If you find yourself unsure on either of these fronts—click the button below and we'll give you a no-hassle consultation where you can ask any questions you might have and even get a free month trial of our services. 

 

 

3 Things Your Accountant Wishes You Knew

working woman

Motorcyclists, cops, and Trekkies all of their own "codes." And although your accountant's code of conduct might not be as obvious as the others', they still have one. What you say and how you deal with them makes a difference. But like other arcane worlds, it's hard to learn the ins and outs on your own. 

That's why we've taken the time to reach out to accountants and ask them what they wish their customers knew before they walked in the door. 

Be Proactive

One common response we got from accountants is that they wished clients would take more responsibility for their actions and finances. Often clients will hand off a box of receipts and ask the accountant to basically do a magic trick and fix everything. However, it’s better if you actually participate. 

“Spending the time to review your business operations on an annual basis can be a time to create opportunities for tax savings or keep your compliance in check,” says Lauren Stinson from Windward Tax. “We are here to help you.” 

“I cannot get your return done without all the information I ask for,” says George Sleeman of Tax Man to You. The only way to do this is if you understand your own finances, at least on some level. Otherwise you’ll be more inclined to leave something out accidentally. 

Ask Questions

If you’re confused, don’t stay silent! The more you understand the better off everyone will be, including your accountant. A well-informed client also means an accountant can quickly do what they need to do and not face unnecessarily backlash from someone wary of everything they’re doing. 

“Give me a call if you have a question,” says Chris Peden of The Accounting Scribe, “no matter how insignificant the matter may seem. I would rather have them ask me what they think is a stupid question, than not ask and have something that should have been reported go unreported.” 

“Not all spending is deductible,” Sleeman also said. “Also, you cannot expense everyday clothing because you wear a suit to work.” 

The more questions you ask about subjects like this, the sooner you stop trying to get away with expensing items like this. This makes the accountant’s (and your) life much easier. 

Be Realistic

Don’t expect miracles from your accountant. While sometimes it does seem like they wave a magic wand and everything is fixed, they go through a lot of hair-pulling and mind-warping to get your money in order. However, the more you pressure them, the more heavy sighs you’ll hear when you walk through the door. 

“I cannot get your return done in an hour,” Sleeman continues. Such ridiculous expectations are not only stressful to both parties, it’s just not possible. Also, the chance for errors skyrockets if you put unnecessary pressure on them. 

Has anything in this post opened your eyes about your accountant? Let us know in the comments!