It’s easy to think that bookkeeping is really just data entry.
The transactions that happen in your business just need to go into the right categories, so that when it’s time to file your tax return, it’s simple and easy to just fill in the categories.
But bookkeeping is actually so much more than that.
Let’s break down some of the most common misconceptions that there are about bookkeeping.
Misconception #1: Bookkeeping is just data entry
Most people think that bookkeeping is really just categorizing the transactions. While this is a part of the job, analysis and compiling reports is so much more important.
Bookkeepers look at the spending that has been happening to see if the business is spending unneeded money.
They can help create strategies for business spending and even for making more money.
A bookkeeper gets intimate with your business finances so they can really see the details of what is happening with your business money.
Misconception #2: A business owner can do their own bookkeeping and just hire a bookkeeper to review the data
While you can do this, yes, it is highly not recommended.
A bookkeeper gets intimate with your finances. They get deep into the system and really know what is going on with your finances.
When they only review your transactions and data, they aren’t able to get as intimate.
Bookkeeping is more about knowing what is going on in the business and being able to analyze the numbers as they happen in your business. When the bookkeeper doesn’t get to do this process from the time you make the transaction all the way through the review process, your bookkeeper isn’t able to get as deep into your finances as they should.
Misconception #3: Bookkeepers will be replaced by AI
Like I mentioned above in the first 2 misconceptions, bookkeeping isn’t just about data entry. AI will be able to do the data entry portion, but AI won’t be able to do the diving deep into your finances process.
The diving deep into your finances is not something that an AI can do.
It takes a human to do this process.
Misconception #4: Bookkeepers are expensive
But when you do your bookkeeping, how much time and energy are you taking away from your business for what could be spent on money making transactions, like making more sales or landing new clients?
How much money could you make in the time you are saving now that you have hired a bookkeeper?
A bookkeeper is worth so much more than the cost that you pay to have them on your team. They have the education and the training to help you be able to make even more money in your business and even help you save money in your business as well.
It’s also much more expensive to wait until it’s time to have your bookkeeping done at tax time, than if you had a bookkeeper working with you all year long.
Misconception #5: When you do your bookkeeping wrong, the IRS will show up to audit you
There isn’t always a special button that you can hit that will trigger an audit.
What will trigger an audit?
Getting 1099-MISC’s that show you had more income in your business than you reported on your tax return.
5% of businesses who make more than $1 million a year get audited.
The biggest thing that will trigger an audit is the amount of income you report as compared to the 1099-MISC’s that you receive. While this can mean that your bookkeeping was done wrong, it moreso pinpoints that you are just lying on your tax return.
What are the misconceptions you’ve believed about bookkeeping that have held you back?
Have there been other things that you think about bookkeeping that have been proved wrong for you?
Bookkeeping is more about analyzing your numbers and seeing how you might be able to save money, but also be able to make more money.
My absolute favorite part of looking at your business finances is being able to see how things have been happening in your business.
What are you selling that is making most of your money? When do you happen to make more money?
Where are you spending money in your business? What are your recurring payments in your business? Are you spending money on things that aren’t actually helping your business?