"Do It Yourself" Accounting an article by David A. Townsend
There is no question that properly prepared records will save accounting fees and perhaps more importantly, an audit reassessment if something gets missed. Most of my clients do their own accounting and I see a cross-section of accounting programs, spreadsheets, manual accounting and some combinations thereof.
Many long-term clients have been preparing their own books for many years and I am comfortable with that. The information is not perfect, but it can be followed and explained. That is the major concern if a CRA (formerly Revenue Canada) auditor comes knocking.
For those who have been doing their own accounting for years, "if it ain't broke, don't fix it". However, for someone new starting out, I suggest that you consider the following before you decide to keep your own books.
- Are you incorporated? The filing requirements for companies are much more onerous than for someone with a business filing strictly for tax return purposes. In my experience, most sole proprietors keep adequate enough records to put together a reasonably accurate statement of income and expenses. With some fine-tuning and questions, I can then put this into a form acceptable for tax purposes. If you are not incorporated, you can probably stop reading here.
- However, if you do have a company, a balance sheet and income statement are required. There are also other income tax implications to consider such as shareholder loans, salary, and dividends. In other words, things are a lot more complicated. You must have a systematic record keeping system.
- Do you or any other family member have some accounting experience? You need a basic understanding of the concepts and an aptitude for the job. I have seen big problems created by well-meaning employees who were handed the accounting responsibility simply because no one else was available. I also sometimes see business owners struggling to do their own accounting when they could be using their time more productively elsewhere.
- Don't expect a $300 off-the-shelf accounting package to automatically solve all your accounting worries. Although the marketing may suggest otherwise, an accounting software program is not a substitute for a good bookkeeper. If there is no one with the time and aptitude to learn and use the package, save your money. See my article on "Choosing Small Business Accounting Software".
- Consider hiring a bookkeeper. Most owner/managers are hands on and therefore prefer to keep their finger on the bookkeeping. However, delegating this responsibility can produce considerable savings in time and frustration. The owner/manager then has more time to concentrate on other areas of the business. See my article on "When to Hire a Bookkeeper".
