The Pros and Cons of Doing Your Own Bookkeeping

The issue of doing your own bookkeeping became prevalent with the advent of low cost accounting
software in the early 1990's. On September 27, 1994 Intuit purchased a program called MoneyCounts
from Parsons Technology for $64 Million. Intuit changed the name of MoneyCounts to QuickBooks and
created a very effective Unique Selling Proposition "You can save money by doing your own
bookkeeping". That USP resulted in Intuit capturing almost 85% of the small business market.
Accountants were no fans of this extremely popular software program for several very valid reasons.
First, it was not a true accounting program with serious security flaws. Second, it was promoting
inexperienced individuals take on a crucial segment of the financial process. Third, it was distracting
business owners from their core business, and last, it drastically cut into the accountants business.

Addressing all of the issues concerning DIY bookkeeping in great detail would require a book. I will cover
as many of the main issues here to provide the reader with an opportunity to gain a better
understanding of an extremely important subject. I welcome any questions and comments regarding the
subject matter in an attempt to assist entrepreneurs that may not have had the opportunity to properly
make an informed decision.

The Issues

If you're reading this special report chances are you're one of the millions of small business owners
struggling with the issue of "doing your own books". For many, the idea of retaining an outside
bookkeeper or accountant to handle your personal financial matters is sort of like opening up your
closet to a complete stranger. I believe that this issue of personal privacy is valid. To be perfectly honest,
one of the reasons I decided to become a CPA was because I knew I would be in business and wanted to
be in control of my own finances. Most entrepreneurs don't have that option or the skill set. The issue of
DIY bookkeeping is of tantamount importance because it could affect the financial viability of the
enterprise. There are a number of issues to address including:

The use of bookkeeping information to prepare tax returns

The integrity of the financial information produced

The validity of historical data to project future results

The management of cash flow

The cost of retaining a professional

The time, effort and frustrations of keeping your own books

Addressing the government's increasing propensity to audit

The time and effort learning about bookkeeping

Creating the bookkeeping processes

The trust factor

As you can see there are a lot of issues to address in making the right choice. This is by far, not all
inclusive. There may be many other legal, financial and/or personal issues at stake. The point here is
that the subject of creating and maintaining a set of books and records for a small business is of
significant importance. The decision as to how it will be done should not be made on a whim or by the
uninformed. An individual operating a small business doesn't know what they don't know. Operating a
business comes with certain responsibilities and obligations. Not knowing is not a valid reason when the
books and records fall into question. I submit that as business owner it is your duty to know exactly what
the issues are and make an informed decision about addressing each of them. You are, by default, the
President of your company which comes with all of the associated responsibilities including tax, legal
and personal liabilities.

Reasons & Excuses

Most, if not all startups take on the task of creating their own set of books and records for a few simple
reasons:

No funds to retain a professional

Limited amount of transactions

Exposing personal financial information

The perception that it's easy

The propensity to procrastinate

Fear

The Facts

Every business must file a tax return. Eventually the issue of bookkeeping must be addressed. Millions of
individuals choose to prepare their own tax returns which is another issue all by itself. Let me address
that before going further. It's a real easy one and not because I prepare tax returns but because of the
complexity of the tax laws, both Federal and State.

I can compare the idea of an individual preparing their own tax return to pulling out my own teeth.
When I was a child my teeth came out naturally. I didn't have to go to the dentist to have them pulled
professionally. Even if I pulled them out when I shouldn't have, eventually my permanent teeth would
grow in to cover up my mistaken belief that I was a dentist. As an adult I know better. Hopefully, if you
own a business you know better. To attempt to prepare your own tax return would be the same as
trying to be your own dentist.
There is simply too much at stake. Potentially missed write offs or even worse, over aggressive write offs
resulting in an audit and the very unfortunate mistake of not incorporating your business and exposing
your personal assets to a lawsuit, just to name a few. If you haven't figured out my position on this
subject let me make it clear. Doing your own tax return is a monumental mistake. If you are going to
open a business you need to enlist the advice of a good tax accountant.

Getting back to the do it yourself bookkeeping issue, another fact to consider is the financial aspect. This
is valid as most start ups have zero funds to begin with. The idea of investing in professional guidance
takes particular shrewdness. One thing to consider is the very popular "Free consultation". I don't know
many professionals that would not offer an initial strategy session to a potential new client. That pretty
much makes this issue null and void.

If you decide to retain the professional to guide you they will understand the financial issues involved.
The right person will be willing to nurture you and your new business and come up with a pricing
structure that will work. Don't expect a good accountant to work for free and don't enlist a family
member or friend that is willing to work for free. They will not treat you as any other client for the
simple fact that you're not. Some of the worst clients I ever had to work with were friends and family.
The problem is that many times I was the bearer of very bad news putting me in a precarious position. If
you have a friend or family member that is in the business, ask them to refer you to one of their
associates. You will all be happy you did.

The remaining issues all really have to do with your personal mindset. Fear, procrastination, perception
etc. all have to be addressed at the mindset level and I'm not qualified to address those issues so I
won't. Business and personal mindset coaches are in abundance today.

Twenty years ago when Intuit perpetrated the missguided USP that "You can save money by doing your
own bookkeeping", business coaching was not mainstream. It was probably more in the realm of
psychotherapy or business consulting which was either in the category of extremely personal or too
expensive for a start up. Today therapy and business coaching is standard fare making the issue of
mindset really an issue of - are you serious about this business or not?

That really only leaves one remaining issue to address; which is the volume of transactions. Does it really
make sense to seek the help of a professional bookkeeper when the volume of your transactions are
minimal? This question leads to another question which is, what constitutes minimal? If it's not minimal,
should you still be doing your own books?
Now I can really get into the subject matter of whether or not a business owner should be doing their
own bookkeeping. Let's first start with the definition of bookkeeping. It seems obvious that a subject so
crucial to a business needs to be defined in order to properly make an informed decision on the matter.