Episode 102: The Real Cost of Doing Your Own Bookkeeping (And When DIY Stops Working

Samantha Eck (00:34)
Hello, hello, hello, and welcome back to the Creative Minds Smart Money Podcast. I am so relieved to be filming right now and to be capturing content because you will not believe the past month I’ve had. By the time you hear this, it’s gonna be about mid-June. but in the middle of May, I had a huge move. I moved locations, as you can see by my background. There’s just a lot of stuff that’s happened and a lot that’s gone on in the past month.

That has caused me to have a lot of setbacks in order to film again. So I’m very excited to be filming and I’m just really excited to talk and and get talking about the podcast. We’ve got lots of things coming up that I’m so excited to explore and so many things that I’m excited to chat about. But

today’s topic is going to be about the cost of doing your own bookkeeping. Now, obviously, we’ve chatted about similar topics like this, but we’ve never done this kind of deep dive into what does it cost you to do your own bookkeeping? And that’s really what I want to cover today and what I want to talk about so that we can kind of get into it. you know, a lot of bookkeepers do their own bookkeeping. They start off by doing their own bookkeeping and

They do it because one, they can’t afford help. which makes sense. Of course, you know, when you’re first starting out, you can’t afford help. You kinda have to do it on your own. You have to bootstrap until you get to that point. And obviously the second thing is sometimes it’s very hard to let go. And I’m no stranger to that. Having someone be super intimate with your business finances is insanely sensitive and insanely scary. And I mean, I would have a tough time.

handing off my finances to anybody, my business finances as a bookkeeper myself, but I also understand the importance of it. And I emp understand the importance of having someone’s eyes on it who cares about your business, who’s going to be looking for all of those things. so and the reason that we stay in this DIY mode, this consistent mode where we’re like, okay, we’re just gonna stay in the do it myself, you know, I want to do it on my own.

is because we’re scared. And and that is the whole purpose and the whole reason behind this episode is because we’re so scared to hand it off to someone else. We’re scared of judgment. We’re scared of them being you know this is a problem. We’re just scared in general.

Okay, so one of the things I want to talk about on the the cost of junior bookkeeping is obviously the time cost.

One of the most important things is how much time does your bookkeeping actually take when you add everything up? And I’m not just talking about, okay, I’m just gonna do my bookkeeping, that’s fine. I’m talking about when you literally look at everything that you’re doing when it comes to bookkeeping, receipt management, whatever it is, how much time is that actually costing you when at the end of the year, whatever it is? And and and I know we’ve talked about it before where we’ve said, you know, we don’t want to look at our books just at the end of the year because that’s obviously not

is not the best thing for us because obviously, if we’re just doing all of our books at the end of the year, we’re not getting a really good picture. We’re not getting the full picture of what we need to be getting out of our books. Okay. There are lots of hours that go uncounted when you are doing your own bookkeeping.

I’ll just sort through these emails with the receipts, tax season, the panic before the 1099 deadline, because now you gotta get on your trip nines, you gotta get all this stuff. There is a lot of stuff that goes unaccounted for. And a lot of that time that you can be used is obviously taking away from time that can be utilized elsewhere. So when you think of the actual time cost, and a lot of people are like, you know, my bookkeeping only takes me an hour a month, it only takes me two hours a month. But if you’re just

Checking it off like a task, right? You’re just doing, okay, I’m just gonna do my bookkeeping, I’m done. You’re missing out on 95% of the actual bookkeeping process and what you actually gain from it. And if you’re just looking at your profit and loss at the end of the month and you’re saying, okay, I’m done the bookkeeping, I looked at my profit and loss, yeah, my money lost. Again, you’re still missing the picture. Just looking at your financial reports is not enough anymore.

You can’t just look at it and say, okay, well, I made money last month, I didn’t make any money last month. Well, why? Like what was the reasoning? And if you can’t deduce that, that’s the problem that I wanna really get in touch with. Okay. So, you know, even if you are being conservative and you’re billing yourself and be $75 an hour, and that’s maybe you’re spending two hours a week on it, eight hours a month, that’s six hundred dollars.

of your time every month. And I want that to be clear. If you are spending if you’re being conservative and you’re saying, okay, my base hourly rate is seventy-five dollars an hour. And at the end of the month, you spend eight hours on your bookkeeping and you track that and across across everything, across receipts, across everything, across reconciling, across getting all that stuff done. Maybe you are taking a good hard look at your books, everything like that. That’s six hundred dollars a month, right?

And that’s if you pay yourself $75 an hour, most of us creatives aren’t. Most of us creatives are above that hundred dollars an hour. So that’s that’s insane. So when you think about the cost of a bookkeeper and you say, okay, a bookkeeper costs, you know, at the start, like my base package is five hundred dollars a month. That’s already comparable to what your time is. That’s eight hours that you could be spending a month doing something else, doing anything else. Maybe you love marketing. Maybe that’s what you want to do.

Now, I want to make it clear from this standpoint. If you love doing your books and you are a pro at them and you understand your numbers and you understand the KPIs, you understand the profitability, you understand the cash flow, then you should not give it up. I a hundred percent and firmly believe that. If that’s something that brings you joy and that’s something you want to be doing in your business, then you should continue to do so. But if you’re looking at that and you’re like, no, this is not what I want to be doing, then that’s where you need to kind of take that step back.

But there’s also a very s natural slowness to what you’re doing that a bookkeeper doesn’t, right? So a trained bookkeeper can do things in an hour. Even a trained CFO or bookkeeper can do things in an hour that might take you three to four hours because we know what to categorize. We know the workflow. We know, you know, things that sometimes we see across all boards. You know, like if we’re using AI as an example, almost everybody has an AI application that they’re paying for nowadays.

So when I see Claude pop up in someone’s books, I’m not going to go and ask them, hey, what is this for? It’s a software cost. I already know it. So there’s just things that you know. Now, of course, there’s inconsistency as well when you are taking the time to do it monthly instead of, you know, looking at everything. Maybe you’re doing it in burst, maybe you’re doing it quarterly, maybe you’re doing it annually. The mistakes that you have that are being made, and and I’m not saying you make them on purpose.

Because you just don’t know, you might not know your books or you might not know how to do your books properly. It’s gonna compound and then the time to catch up and actually correct all of that is going to get worse and worse the longer it goes on, right? So then speaking of that, we have not just the time cost, but the mistake cost. So what kind of mistakes do we commonly make when we’re doing our books ourselves is miscategorizing expenses because

The CPA can only deduct what the books actually show. So let’s say you are a new solopreneur and you had $3,000 worth of expenses that you spent before your bank account was even opened for your business. That three you have no idea how to account for that $3,000. So you just leave it off your books. You’re like, okay, well, but that’s $3,000 of deductions that could be added to your books through a journal entry, through some other method that

your bookkeeper is obviously going to know about, okay. Obviously missing transactions or reconciliations that don’t bounce. I’ve had tons of clients who have they have a credit card, right? And instead of pairing that credit card transaction to the transaction in their bank account, what happens is they just record them. So that double records income and expenses on both sides.

So then by the time you get to reconciling, if you’re not reconciling at all and you might think, Smith, you know, what’s the point of reconciling? It’s so important because even if your transactions are being filtered in automatically, if you’re not reconciling and checking if something got recorded to there on accident, then you’re gonna miss out on a lot, right?

Also, sales tax handled wrong. You know, one of the most common setup errors I see for people who don’t necessarily understand what’s going on is they put their sales tax on the PL. They don’t put it on the balance sheet. Your sales tax is a liability. It should never touch your PL. But people don’t know that. And there’s no way for them to know that. But then you make business decisions off of this data that you are categorizing yourself. And those mistakes compound over time, right? Because the longer they’re sitting there, the more.

that there’s going to be errors and things like that. So maybe you hi you have a hire that just hasn’t happened yet, or you drop a price because you feel like it’s too high, or you have an investment that came out of, you know, the wrong savings bucket, whatever it is, you just don’t have that full picture. So you’re making those business decisions based on kind of like a half picture almost. Because

I don’t want to say you’re not, you’re clueless. Like business owners are smart. And if you’re running your own business, you are smart as heck So the fact that you’ve even thought to run your business and thought to run it in a certain way is leaps and bounds above some of these people. So the next thing that we want to talk about.

is you know, we had the time cost, the mistake cost is the opportunity cost.

When you’re managing your own books, what are you not doing? And what you’re not doing is advertising. What you’re not doing is talking to people, creating opportunities, doing more of what you love, marketing, whatever it is, And the compounding cost of those hours on admin.

is where you could be using those on growth, on rest. Maybe you could take some time off, whatever it is, because if you’re taking the time to do your own bookkeeping, there’s client work that you could have been doing because every hour on bookkeeping is an hour that it’s not work that actually pays you, right? And of course that amend time should be accounted for in your cost, but still you’re not that’s not not what you’re getting paid for. That’s not what you enjoy doing. You’re you enjoy doing the creative work. Obviously your marketing visibility are

Aren’t being done because your books are maybe controlling your weekend. Maybe you spend a lot of time in it. Maybe you didn’t know that you needed to do daily sales receipts because you have Shopify transactions or you have Square transactions. And now you’re like, crap, I need to start doing that, but you have no idea where to go. So you’re spending a weekend trying to figure that out. And then you finally figure it out, but it’s taken you forever. And there’s just compounding, you know, time that goes into this. Obviously, maybe taking some deeper rest, because of course.

You know, during the slow periods, you’re like, I’ll get my bookkeeping done, but you know, it takes up a whole day, a whole two days, a whole three days, whatever time it takes up, you’re missing out on taking that rest, taking that time off. And then of course you’re missing on the strategic thinking, you know, pricing, offers, growth hiring, because when you’re just looking at the numbers and you’re looking at the nitty-gritty of the numbers, you’re missing the bigger picture, right?

You as the business owner needs to be looking at the bigger picture. You don’t need to be looking at the nitty-gritty. You need to be looking at everything as a whole. And when we present those financials at the end of the month and we say, okay, you know, we only made X amount this month because we spent money here, we spent money there. this offer wasn’t profitable because your hours were spent here or there.

It gives you that business owner mindset, right? Instead of being someone who’s working in your business, now you’re working on your business. So by having that teammate, that bookkeeper on your team, you’re now able to work on your business. So of course, there are situations when doing it yourself actually makes sense, of course, because it that’s natural. Doing it yourself sometimes is just gonna make sense.

year one, when you have really simple finances, when there’s not a lot going on, you have maybe one income source, you don’t have any contractors, there’s no really crazy things going on, simple expense categories, then DIY is reasonable and learning is rac actually really invaluable. Because learning to how to do these things, learning what’s going on in your business is so important and so vital. You also have the active learning phase when you’re trying to actually understand

How the business works financially, doing it yourself is part of that education because I want you to understand that kind of thing. So obviously doing it yourself is not a bad thing. That does make sense. Again, I want to make that clear. It’s a learning part, but there’s a threshold that needs to be maybe a passing point where you’re like, okay, well, now I need help. Like if you have revenue that passes 100K in a year, if you’re taking on contractors because there’s a lot of 1099 prep, maybe they have sales tax entering the picture.

If financial decisions get bigger than just knowing, you know, looking at your banking account and knowing what’s going on. If you feel like you’re looking at your bank account, but you feel like you’re missing something, that’s probably a flag. So the signs that you’ve crossed where book DIY just doesn’t make sense anymore is obviously like taking six hours plus a month. You’re just spending too much time on it. you know, you’re missing or guessing on entries. You don’t know what to do when it comes to

square entries. You don’t know what to do when it comes to your POS entries. You don’t know how to account for merchant processing fees and stripe deposits or honey book deposits or whatever kind of deposits there are. Taxes make you feel like you have your pants on fire. The books just aren’t current enough current enough to make decisions from. So maybe you have books that are a quarter past due and you just can’t make decisions from them. That’s also another sign.

I’m gonna talk about now like what does that look like when you get help? So what’s actually on the table when you stop doing it yourself? And what does a full range of support look like when you meet with someone, say like me? So obviously when you work with someone like me, there’s a range of options. There’s a range of options that you can choose from, from like a basic bookkeeping package to full-blown support with like everything included. It’s a fully integrated CFO package.

If you’re thinking about it again and we go over that math, that value math, you know, my base package, the ignition point is $500 a month versus 10 hours of your own time plus mistakes, plus the opportunity to be doing out other things, and you look at that cost comparison, you should be seeing that it’s a very variable. And then obviously once you actually see what we can do together, that’s when it’s really going to bring that value to the table.

Now, what stops being yours when you hand it off is obviously the admin. So yes, the administrative stuff, the late nights, the worry about whether the categories are right right and the tax season panic, because maybe you’re getting in April and you’re like, my gosh, I’m just doing all my books right now. Now, what is still yours when you work together is obviously strategic t decisions. That doesn’t stop being yours. You just now have a second brain in those strategic decisions to talk to.

But now you’re actually informed by numbers and data that you can trust that you can be like, okay, well, yeah, that makes sense. I guess I can make this decision. You know, one of my clients we work with very closely, she’s always messaging me. She never makes decisions without chatting with me. But she has that comfort in knowing that I know her numbers well enough that we can say, Okay, you know what, we can afford a website designer fully this month. You don’t have to worry about not paying it. Everything like that. So there there’s an added

value right to the strategic cost.

If you’re looking at everything and you’re like, okay, what would this actually look like for my business? It’s a conversation I’d love to have with you. And if you’ve been doing yourself yourself and the cost is starting to add up in ways you can feel like the time, maybe feel like there’s some things wrong in your books, late nights, the decisions that you’re just not sure about. You’re like, can I even do this? Can I hire? Can I do these things? Just sho shoot me a message on Instagram at Firestorm Finance and let’s talk about what the real cost is and let’s talk about what

package might be a best fit for you. I’m not someone to force a package on you, but if you’re completely lost and in the dark with your numbers, then that’s really where we want to have that conversation and figure out how we can get you not lost and in the numbers. Okay. As always, you guys, if you enjoyed this episode, please like it, share it, subscribe on social media, you know, bring more people to the podcast. We love seeing all these new faces and all these lessons and I appreciate it so much. You guys know how much I value this education.

And now that I’m settled in, I’m so excited to just continue filming and getting you guys more and more good episodes. As always, you guys, I wish you the best week ever and we’ll see you next week. Farewell, fellow travelers.