Should You Do Your Own Books?
I am often asked by people starting a new business this question – should I do my own books? My answer is always the same. It depends. This is not just a quick answer to avoid providing any information. It is the true answer to your question.
Let’s first address the better question. What do I need to do to know my numbers? As a business owner, you are accountable for knowing your numbers. As a fix/flip professional, you need to know your after-repair value (ARV). Your success depends on it. As a landlord, you need to know your key benchmarks – CAP RATE and CASH OVER CASH RETURN. Other numbers you should know are whatever Key Performance Indicators you create for your business activity. One I prefer is simply cash available in the bank. Knowing this information is critical to the success in your business.
What role does bookkeeping play in knowing this important information? Everything. Up-to-date bookkeeping will assist you in making better decisions. My rule in my business is that the books should be made current every day and promptly reconciled when statements are received so I have the most accurate information available. Accurate record-keeping is necessary for successful business activity.
As the owner of the business, you must make informed decisions on a timely basis. Without timely and accurate information, you are just speculating and gambling. Prior to deciding on who should keep the books, you should set your expectations for your record keeping.
• How often do you want your books updated – daily, weekly, monthly, quarterly, or annually?
• What performance indicators do you plan to monitor in developing your business?
• What accuracy level do you require in your bookkeeping?
• What expertise do you expect your bookkeeper will bring to your business?
Your business – no matter what it is – requires you to create the most value for it and for those it serves. By developing your expectations prior to deciding about doing your own books, you can avoid mistakes that keep your business from growing. I work with someone who started their business doing fix/flips and fix/holds. Their first question was should I do my own books? The answer was it depends. They said they wanted to build a lifelong thriving business. My answer then became no, do not do your own books. You should focus on building the business, developing the cash flow, and having your own in-house book-keeper who you can develop to track the information you need to be successful. You should know your numbers and know your deals. You should not waste your time putting numbers into a financial tracking system. Today, this client is no longer a fix/flip person. He has become a re-developer and is generating significant profits. He built a process and system which includes his own in-house bookkeeper, production team, and a construction crew.
Building your own process and system is one of the keys to creating a successful business. When deciding whether you should do your own
books, first establish the standard you will require before making the decision. One of the biggest mistakes I see in a business decision is to over-rely on lowest cost. When you are purchasing materials such as lumber or paint, lowest price is often considered to be a good crite-
rion. All things being equal, the lowest price is often a better choice. However, if you are purchasing value added services, you should look
at the value being added rather than cost. You decide what value it adds before you decide to do your own books.
As a CPA, I will share with you I do not do my own books. Why? Book-keeping really is not the best use of my time and does not add the most value to my business activity. Many bookkeepers offer the low prices but provide something different - something delivered in an untimely basis to use or loaded with mistakes. To have accurate information in your books, you need to develop an information gathering system to capture your documents in an easy manner so you can snap (Photo to PDF) and forget it. Next, the information should automatically go to the bookkeeper who, to my standards, would update your information daily. So, ultimately, the decision is yours to make, but I caution you that many business owners limit their success by deciding to do too many tasks which do not add the highest value to their business. Should you want to avoid this trap and really create that record keeping process for success, please email email@example.com.