DIY Accounting or Hire an Expert?
It’s a decision every business owner must grapple with: do your own accounting, or hire an expert. On one hand, there’s a lot to be said for taking the job into your own hands and saving a few bucks. On the other, accounting is a task in which it is both easy and costly to make mistakes. Failure to properly keep your books can create internal confusion and, in the worst case scenario, get you into legal trouble. Then again, hiring a professional accountant is rarely cheap.
With so many variables, how does a business owner rationally decide whether to go it alone or hire a pro?
Complexity of the Job
(aWee)
Your first clues as to whether you should do it yourself or hire a pro is how complex the job seems. If you have done your books in the past and envision the job being a rather ordinary, routine affair, consider doing it yourself. No business owner should feel over-matched by a few debits and credits and a columnar pad. However, not all accounting jobs are this simple. Once things like depreciation enter the equation, it’s not just the job that gets tougher, but also the consequences for doing it wrong.
In these cases, it is often best to hire a professional. It’s a lot like car repairs. Most of us are comfortable with changing our oil or putting on new tires. But if our transmission is making noises and the car won’t start, we’re more likely to call a mechanic than “wing it” ourselves and hope it gets fixed.
Your Comfort With Math & Accounting
(Aaron Escobar ♦ (the spaniard)™)
Some people are naturally math-minded. While others see math equations and feel stomach-churning misery, the math-minded literally thrive and never feel more intellectually satisfied than when they are working with numbers. It comes as easily to them as reading and language come to experts in those fields. If you are one of these people (and understand or are willing to learn accounting principles) doing it yourself makes a lot of sense. Since you already enjoy math, the inevitable speed bumps and learning curves of accounting are unlikely to discourage you.
If, on the other hand you are more of a language-oriented “right brained” person, the DIY approach to accounting may be unwise. What gives joy and satisfaction to a math person will probably cause confusion and anxiety for you (especially given how important it is to get your books done accurately.)
Time-Sensitivity
(laffy4k)
Another deciding factor in whether to go it alone or hire an accountant is how time-sensitive the job is. It’s all well and good to treat your books as a relaxed learning exercise if they don’t need to be done for another six months. These time frames offer plenty of flexibility for experimenting and getting comfortable with the do’s and don’ts of accounting.
If your books were due yesterday, that’s a totally different story. A business owner racing against the clock is in no position to trial and error their way through the task. Rather, they would be best-served hiring a proven expert who can come in and do flawless work right away.
Opportunity Cost
(AMagill)
Still another perspective to consider is opportunity cost. In his eye-opening book The 80/20 Principle, business consultant Richard Koch argues that we should outsource just about everything other than our core skill – that is, what we are best at doing. Chances are, unless you run an accounting firm, accounting is not your core skill. Your core skill is sales or carpentry or whatever you are in business to do.
Looked at this way, the question of whether to do your own accounting has nothing to do with your skill level or feelings about math. It is simply a question of economics. If you can make more money in two hours (or however long it takes the accountant) than the accountant’s fees, the 80/20 rule says you should hire one. But if it would cost more to pay the accountant than an equal amount of your time is worth, 80/20 says DIY is best.
Your Long-Term Plan
Think also about what this decision means for the future of your company’s accounting process. Even if you decide you’re up for the challenge of doing your books right now, will you want to keep doing them? If not, watch out! Unless you are capable of doing your books correctly, what you see as a cost-saving maneuver could just create problems for the professional you eventually hire for the long haul. If you envision hiring an accountant “eventually”, why not start right now and make things easier on them (and yourselves?)
Then again, if you’re committed to doing the books on your own from here on out, there’s little reason to hire a pro “just this time.” Pick a path and stick with it, starting today.