Do-It-Yourself Accounting & When to Make the Switch

Trying to avoid an accountant can be like trying to skip out on the dentist, you might be able to get away with it for a short period of time, but you risk a lot of pain down the line. Not every business needs to hire an accountant, but you’ll quickly realize how expensive it can be not to have one. Time and time again, we’ve taken on clients long after they realized their mistake and they ended up damaging their bottom line by trying to avoid the accountant.

The accountant industry’s secret is that we don’t like dealing with backed-up ‘emergency and disaster relief’ bookkeeping files (who knew?) during tax season. So accountants typically charge much higher fees and pay much less attention to disorganized clients.

How do I know when I need to hire an accountant?

With a university degree and the power of Google, you may be able to find out minimum filing requirements or basic credits. However, if your business meets any of the below criteria, go talk to an accountant now:

1. Number of Monthly Transactions: 50
   Typically, two things determine the need for an accountant here – the number and complexity of regular transactions. Most of our clients have at least 50 simple monthly transactions but some have as few as 5 complex ones. Correctly entering all your information into an accounting system is critical for keeping your books accurate. You can’t grow if you don’t know.
2. Number of Employees: 1
   Yes, just one employee is enough to need an accountant. This is because the alternative to hiring an accountant is to purchase a payroll system in order to make the right payments and remittances. Doing payroll manually through an accountant is a lot cheaper when you have one employee than buying a payroll system.
3. Annual Revenue: 30k
   In Canada, the threshold for HST remittances is 30k and necessary quarterly installments. If you miss HST remittance payments, then you’ll end up paying interest and possibly penalties.
4. Capital or Property Value:  100k
   If you or your business owns any assets you’ll need to classify them correctly now in order to save money later. If the value of those assets goes up or down over the years you could end up paying a lot of unnecessary tax.
5. Inventory Value: $10k/mo
   Calculating inventory is one of the biggest areas that our clients struggle with. Once you start seeing more and more products move out the door, it becomes incredibly difficult to tell how much you’re making on each sale.
6. Multiple Revenue Streams
   Recognizing how much you make on each product or service might be feasible if you have a single service or two completely distinct operations. However, if you have several offerings and you want to understand which areas of your business to expand and which to ditch – talk to an expert.
7. Multicurrency
   Multiple currency operations can easily get very complicated very fast, not only do accountants help you find out what you’re making in your local currency, but they’ll direct you towards a better exchange strategy as well.
8. Cross border operations
   Taxation rules, reporting rules, incorporations, and forms are just some of the complex compliance issues we deal with for business across state/province/country borders. Cross-border business strategy is an even larger area which non-experts simply shouldn’t approach.
9. Complex Structures
   Most businesses have a very simple structure that can be built and managed by amateur accountants. If you don’t have a simple sole proprietorship or single-owner corporation, pay your local accountant a visit.
10. Multiple Investors / Stakeholders
    If you don’t know how much money you’re making, how do you decide how to split it up? Keeping financials transparent is essential to keeping everyone involved happy.
11. You have a loan
    Sometimes interest is a necessary expense and sometimes it’s an unnecessary expense. You’ll need to know how much you can spare before you can pay off that loan.

What are the measurable costs of avoiding an accountant?

1. You’ll end up paying more than double for someone to fix the books
   Yes, more than double the standard rate is the typical estimate given for backlogged accounting files – because it’s usually more than twice as much work.
2. You’ll mess up on your taxes – over deduct, or under deduct
   If you don’t file correctly, you’ll end up paying back taxes plus filing penalties plus interest on missed payments – this usually adds up very quickly. Accountants are there to get it right and then find areas where you can deduct more.
3. Missed Payments or Collections
   Paying late or forgetting to collect can cost you extra in penalties, but more importantly, it can damage your business if you lose out on inventory, much-needed services, or relationships.
4. Litigation Fees
   In rare cases, our clients have had to pay large legal fees to handle claims related to audits, investors, or creditors.
5. Grants and loans
   Not only can an accountant help you prepare your books to apply for specific government grants, but they know programs you might not be aware of.

What are the Qualitative Costs or difficult to measure costs?

1. Advice and Strategy
   The main reason to hire an accountant is to get a clearer picture of everything that’s happening in your business. If you already have a clear understanding then you might not need an experienced accountant, but you should want one. The experience that a professional offers will enable you to see your biggest threats and opportunities for growth without having to learn hard lessons by yourself.
2. Won’t be ready to make major decisions
   Are you ready to invest in a marketing campaign? Can you offer a new employee a competitive salary? Can you bid for a recently vacated location? If you can’t answer these questions today, how long before you can answer them? Having an accountant by your side can greatly shorten the time it takes to make big decisions so you don’t miss the timing.
3. Wasted time on low-value activities
   If you’re not paying for accounting services with money, you’re paying for it with time. Would you hire someone on a business owner’s salary to do a service that they have no experience in? Accountants will always do a better job, in less time. Good accountants will try to set you up with the right software in order to save time for both themselves and the clients.
4. Disagreements and mistrust
   There are many relationships that you risk if there isn’t documented financial information verified by a third party. Not only will governments and banks not want to do business with you, but partners and investors won’t have certainty in what you do. Beyond that, employee theft or negligence becomes easier to hide.
5. Stress
   Accountants are there to help you make decisions. They also help you pay staff, government, and suppliers on time. Accountants also give you a clearer picture of how your business is doing today. For a business owner, you can’t measure your mental wellness but financial stress is a very costly aspect of DIY accounting in our experience. 
6. Foresight
   No one can predict the future, but it’s our job as accountants to come as close as possible. Our experience through budgeting and projection in various industries has given us the ability to build better models of where your business will be next year.

As consultants, we want to offer the best solutions for you, not for us.

If you can care for and process all your financials by yourself, then that’s the best solution for you. We don’t want to work with clients that we can’t create a net benefit for, so don’t hesitate to call run[Accounting] for a quick consultation and we’ll find you the best solutions for your business.