Do Most Small Businesses Do Their Own Accounting?

When you’re running a small business, you’ve got a lot of plates to spin. The nature of the enterprise means you’ll be doing a lot of things by yourself – and this may extend to doing your own accounting.

However, while this approach may work initially for your small business, it’s not sustainable in the long run.

In this article, we’ll be telling you about the perils and risks associated with a small business doing its own accounting. We’ll also show you how using trusted software, like that made by Sage, can put you in a much better position.

The Pitfalls of DIY Accounting

Lack of expertise and knowledge

You don’t need to be an accountant to know that accounting itself is a task that requires deep knowledge. Most obviously this includes accounting standards and bookkeeping. However, to do it well, you need to know the specifics of how businesses function. This gives context to the financial data.

Someone doing their own accounting with a small amount of this knowledge will naturally be more prone to making errors. But here, those errors could mean more than just embarrassment.

Accounting is about much more than just numbers. It’s heavily compliance-focused, and not following the strict rules set often lands hefty fines – like up to 30% of revenue lost if you don’t file your taxes on time.

Fines aren’t good for any company. But if you’re a small business they can use up capital – something you won’t have a lot of to begin with – and potentially stunt growth. Speaking of which…

Limited scalability and growth potential

Even if your accounting is error-free, there are other drawbacks to doing your own accounting as part of your small business plan.

No small business’ goal is to stay small. Growth is a measure of success – but doing your accounting yourself can make this harder to achieve. A company’s accounting needs will become more complex as it gets bigger. Without the right skills or support, tasks that can initially be done by one person over the course of a day may soon take more time, and more staff, to complete.

But if you’re not in a position to hire more people or are already short on time, then you could be caught in a bind – hitting a ceiling that you can’t break through without outside help.

The Importance of Reliable Accounting Software

The pitfalls above clearly show why when it comes to accounting, doing it yourself isn’t always the best strategy.

Some may be put off investing in accounting software because of a misconception that it’s too expensive or difficult for a small business to implement. However, when it comes to options from Sage, neither of these are true.

Automated Processes

Sage’s types of accounting software let you automate your accounting processes. This includes AI-powered data capture for purchase invoices and receipts, and automated statements, to name just a few. This kills two birds with one stone – giving you more time and space to grow your business, and taking away the worries about non-compliance.

Enhanced Security and Compliance

Similarly, most modern accounting software is now built to comply with regulations like GDPR automatically. It also has advanced protections against fraud and other data breaches, removing yet another extra job from your to-do list as a small business employee.

Comprehensive Reporting

Accounting software also gives you access to features that a business physically can’t have if they are doing their own accounting. Sage Intacct can generate financial reports across eight dimensions, taking into account areas across your business, including transactions, operational measures, budgets and more. So you don’t just have the basic accounting, but can see beyond that for insights you can use to grow your small business further.

Adaptability and Scalability

Arguably the biggest benefit of choosing accounting software over pure DIY accounting for your small business is its sheer adaptability. With accounting software like Sage 200, you can add users (up to a certain amount) as your business grows, without having to worry about how the system itself will cope.

The same goes for its modular system – on top of basic modules you get out of the box, you can add other modules on top to further personalise your experience to meet your business’ specific needs.

Doing your own accounting might be feasible for some small businesses – but the risks involved from users lacking knowledge and facing manual processes show it isn’t a sustainable solution for long-term finances.

Investing in accounting software gives you a reliable, scalable and efficient system that you don’t have to train or monitor for errors. For small businesses, accounting software really is the smart choice.

Sage software is the all-in-one business management solution trusted by over 9,000 UK businesses. Contact us today to learn more – call 01332 959008, or use the enquiry form.