Common Bookkeeping Myths - Answered
Myth: Bookkeeping is just "cheap accounting". Answer: While there are tons of similarities between accountants and bookkeepers, the biggest difference between the two is when they get involved. Accountants tend to deal exclusively with year-end reporting and tax filing. Bookkeepers work on a monthly basis to record all of your business transactions, help with budgeting, talk through your financial statements and reports, and process and record your payroll. Without bookkeeping, accountants would have a pretty difficult time preparing annual accounts. What would they even base it on?
Myth: Only big businesses generating lots of revenue need a bookkeeper. Answer: Actually, it's usually the small or new businesses who don't think that they can afford a bookkeeper that need one the most. In the early stages of running your business you may find yourself feeling completely overwhelmed at the breadth of tasks that need to be performed. Hiring an external bookkeeper can be really beneficial in the long run as they’ll be able to identify where savings can be made, not to mention the fact that they’ll free up your time to concentrate on bringing in more income.
Myth: Anyone can do bookkeeping. Answer: They probably can, if they study the qualifications and develop a strong understanding of the theory of double-entry accounting. When someone says this they normally mean that their husband/wife/child/dog can do data entry, which is a very different skill-set than knowing exactly how things should be categorized and what is and isn’t allowable for tax purposes. I like to tell people that 90% of bookkeeping could be done by just about anyone if they really wanted to spend their time doing it. The other 10% though, can only be done by an actual bookkeeper, like me. That 10% of bookkeeping has nothing to do with data-entry, or running reports. That 10% of bookkeeping comes from being a trusted advisor, knowing that business, and helping the business owner analyze their business performance.
Myth: QuickBooks does my bookkeeping for me. Answer: Any accounting software like QuickBooks is a great tool for business owners to "up" their financial tracking game. QuickBooks will definitely help you, but no, it will not do your bookkeeping for you. As I mentioned earlier, bookkeeping isn’t just data entry. Pretty much anyone can enter numbers into software, but do you know what the numbers mean? Strategy and thought still needs to be taken into consideration to make sure that the information is being recorded accurately.