Common Pitfalls of Doing Your Own Accounts

May 9, 2019 Doing Your Own Accounts

We’re all familiar with the arguments made in favour of outsourcing various aspects of running your business. It saves you time to concentrate on the important business of making money. You get access to people with specialist skills and knowledge who can really add value in areas you are not an expert in.

But when you are faced with tight margins and difficult decisions have to be made about controlling costs, it is natural to want to do everything you can to keep things in house. Does it really make sense to spend money when you can do certain tasks yourself?

One of the areas business owners frequently look at when looking to reduce expenditure is doing their accounts themselves. Yes, there are regulatory and technical elements to accounting which can be complex. But with so many how-to guides freely available online these days to talk you through virtually every aspect of business management, surely it is just a matter of finding the time to upskill yourself? Once you get through that phase, won’t the long term cost savings be worth it?

Many business owners do manage their own accounting and do so without a hitch. But there are pitfalls to be aware of. Here are some of the main ones.

Time is money

The main thing you have to consider about doing your own accounts is finding the time to do them. Yes you have to pay a professional accountant, but you have to weigh what it would cost to hire them versus the cost of the time you will have to put in. Remember, they are an experienced specialist who will probably be able to complete the tasks you need in a fraction of the time you will take. What else could you be doing with that time? Will it impact on other areas of the business you should be focusing on? Will you have to do it in your own time, impacting on your work-life balance? What about the risks of making mistakes if you are rushing, tired or distracted?

Missing out on tax savings

One of the biggest reasons for using a professional accountant is tax efficiency. Taxation is arguably one of the most stubbornly complex areas of business finance, for the simple reason that there are so many rules and regulations governing it. So in the first place, when it comes to submitting tax returns and statutory accounts, you have to be sure you get things right – mistakes can lead to audits which can lead to fines. But the other risk of handling your task administration yourself is that you miss out on available tax relief. Not paying an accountant becomes a false economy if you end up paying more than you need to in tax, which a professional tax advisor would have been able to flag up.

Missing the bigger picture

There is no getting around it, accounting and tax administration can be a laborious and tedious process. The risk of doing it yourself is that, after a while, it all just becomes a long list of numbers – the significance of what they mean for your business is lost in a mire of digits. Professional accountants are trained to see the woods for the trees – it isn’t just a case of completing paperwork and submitting compliant tax returns, part of an accountant’s skill is understanding the financial relevance of the numbers they’ve crunched. A good accountant doubles up as a financial adviser, able to make recommendations on where you could make savings, or drawing attention to red flags they spot.

To find out more about KJG’s accounts and cloud accounting services contact us today.