Machine learning in accounting is changing how startups manage their finances. Learn how it could apply to your business.
April 8, 2021
“If I knew how to do my own bookkeeping, I wouldn’t need to pay a professional.” Most startup founders and small business owners feel this way in the early days of their business. It’s tempting to do everything themselves to minimize costs, and in some situations, it might make sense to handle your business’s bookkeeping on your own.
However, if managed incorrectly, DIY bookkeeping can lead to expensive mistakes, such as miscalculating your available cash, incurring penalties for incorrect tax filings, or lengthy financial audits down the line.
To help you decide if a DIY approach is the best choice for your business, we’ll cover the basics of how to do your bookkeeping yourself, questions to consider when making your decision, and the alternatives to doing your own bookkeeping.
Bookkeeping is the practice of processing and recording financial transactions made by a business. The person managing bookkeeping must understand the business’s chart of accounts, and effectively use debits and credits to balance the books using a double-entry bookkeeping system.
For most businesses, bookkeeping involves the following core tasks:
These tasks can seem daunting, but a variety of online resources can guide you through how to do bookkeeping for your own business. For example, on the Zeni blog, we cover many of the key bookkeeping basics for entrepreneurs, including how to manage SaaS revenue recognition and how to create a cash flow projection for your startup.
To help you decide if doing your own bookkeeping makes sense for your business, ask these three questions:
If your business is a pre-seed or seed stage startup with only a few customers, you may only need to devote a few hours each week to record business transactions and pay bills. However, if you’re processing employee payroll or have a high volume of transactions, completing all the bookkeeping tasks and meeting all of your bookkeeping deadlines may require more time than you can spare alongside your other duties.
Accurate bookkeeping is critical: Incorrect accounts can cause huge issues when it comes to paying your taxes or making business decisions based on your financial situation. Make sure you have a solid understanding of bookkeeping processes to avoid the most common mistakes startups make; for example, using cash accounting instead of the accrual accounting method. If your business has complex tax returns or an unusual business model, you’ll likely need significant bookkeeping experience to correctly handle every task.
You don’t need a bookkeeper in order to present financial information to venture capital investors (particularly if you don’t yet have sales figures to show), however, you will need to present the potential financial benefits of investing in your business. Without a professional bookkeeper or accountant to build your financial analysis and projections, you may not be confident in the figures you’re presenting.
Doing your own bookkeeping can be manageable if your startup has a simple business model and only a small number of customers. However, we still strongly recommend working with a professional bookkeeper as soon as possible—particularly if you don’t feel confident in your bookkeeping skills or your business manages a high volume of transactions.
Passing these finance tasks to an experienced bookkeeper means you won’t need to spend hours on completing them each week—and you’ll know your books present an accurate picture of the business’s performance.
There are two main ways to start working with a bookkeeper:
This person would join your company and handle your everyday finance tasks for a set number of hours each month.
Outsourced bookkeeping businesses have a team of bookkeeping and accounting professionals who remotely handle your everyday finance tasks. In many cases, an outsourced or online bookkeeping service can scale to connect your business with the finance experts your business needs, from bookkeeping experts to CPAs and CFOs.
Zeni is a full-service finance firm that can manage all your bookkeeping, accounting, tax, and CFO needs, removing the burden from startup founders’ plates so they can focus on growing their business. When you outsource your bookkeeping to Zeni, your company’s finances are always accurate and ready to present to your board or investors, so there’s no last-minute scramble to retrospectively fix business accounting issues. Plus, your bookkeeping is set up using proper accounting processes to support the business as it grows.
Because Zeni charges a fixed monthly fee based on your business’s monthly expenses, outsourcing bookkeeping can cost much less than you might think—particularly when you factor in the cost of your time and the price of DIY bookkeeping mistakes.