6 common bookkeeping myths busted
Bookkeeping is an extremely important aspect of any business. Despite this, there are so many myths surrounding what a bookkeeper does, and the real value they bring to businesses. As well as this, they often get confused with accountants, who do a very different job. Because of these myths, many business owners miss out on the benefits of a bookkeeper.
So, we are going to bust 6 of those myths to help you make a more informed decision regarding bookkeeping.
1. Bookkeeping is only about data entry
It is very common to think that bookkeeping is all about entering financial information from invoices into a spreadsheet. This myth often comes from a combination of the historical role of a bookkeeper and movie representation. In the past, this type of manual data entry was essential and time-consuming. But since then, with changing technologies, the role of a bookkeeper has changed.
Now there is a lot of focus on internal auditing, taxation, payroll processing, cash flow management, preparation of financial reports, managing accounts payable and receivable, and more. This is along with the remaining data entry that is required such as recording all financial transactions.
2. You can easily do it yourself
We actually have a really great article covering this here. But the basic rundown is this; you can DIY your bookkeeping, or you can hire someone to do it for you. The question will be what you want to invest, time or money. For some businesses, especially those just starting out, investing time is the cheapest and easiest option. Plus DIYing is quite doable at that size.
But, it does get to a point where eventually the time investment begins to take a toll. You could be losing time which could be better invested in your business, costing you money, or spent on your family and hobbies. In this case, it may be far better to invest money into your bookkeeping.
Essentially, this myth depends entirely on the type and size of a business. It cannot be applied to all businesses.
3. Accounting software can do the bookkeeping for you
I’m sure a lot of people wish this was true. Some software developers could even be trying to make this myth a reality using artificial intelligence. While automation and AI have so far helped to reduce the manual processes required in bookkeeping, it hasn’t completely replaced a bookkeeper. There is still a big-time investment required when completing bookkeeping tasks.
This doesn’t even consider the new services that bookkeepers can provide for your business. These services involve using their experience to analyse your financial data and assist you in making financial decisions for your business. Accounting software can’t yet do that, and nor can it help you get your cash flow back in the black.
4. Accountants are a better hire than a bookkeeper
Accountants and bookkeepers both provide immense value to your business. It is not a case of one being better than the other, since they both perform different tasks to each other. They both perform separate tasks that keep your business running smoothly. In fact, they generally need to work together. Bookkeepers collect the raw data and monitor day to day performance, while accountants take that data to complete financial statements and auditing. As well as this, bookkeepers, and accountants both make sure you stay on top of separate obligations, from BAS to tax.
5. You only need a bookkeeper during tax time
Bookkeepers don’t do your taxes. That is the job of an accountant, who are experts in taxation law. Your bookkeeper will assist your accountant, preparing financial statements for them during tax time, but will not do their job. Instead, bookkeepers are there for your business year-round and require that time to pull together accurate financial statements, let alone complete their other services for your business.
If you are hiring your bookkeeper at tax time, you are hiring them at the wrong time. You should get your bookkeeper towards the start of the new financial year.
6. Only big businesses need bookkeepers
Bookkeeping is not exclusive to big businesses. While they will naturally have greater requirements for bookkeeping, small businesses also need bookkeepers too. Without a bookkeeper, the bookkeeping tasks get pushed to the owner of the business. Completing these tasks may have been easy at the start of your business, but as you grow, and get more sales, your bookkeeping becomes increasingly more complex.
Many small businesses have complex bookkeeping requirements, which if the owner were to complete on a regular basis, would take a lot of time. While small businesses don’t need the huge team of bookkeepers that big businesses do, they still need a bookkeeper to help them out.
Bookkeeping is vital for most small businesses. It massively reduces the time you will need to spend managing your business’s finances, so you can focus on pursuing opportunities to grow your business.
For a bookkeeper you can trust, reach out to Link Books.