5 reasons why you should stop keeping your books by hand

Our firm is located in rural Eastern North Carolina. As such, we still have some clients that maintain a manual set of books for their business. Some use the long green ledger paper while others are still using Dome Books. These methods of bookkeeping have always seemed sufficient to some business owners. But I believe that it is time to move to a computerized bookkeeping system such as QuickBooks.

Here are five reasons to move from keeping your business’s books by hand to using a computerized accounting system:

Better Audit Evidence: Let’s face it, nobody wants to go through a tax audit. But if your business is audited, I can assure you that you will want to have computer printouts instead of manual documents.

Why? Because in any tax audit situation, you want to present your financial information to the auditor in as concise and clear a manner as possible. Not only do computer printouts give the appearance of accuracy, but they make the entire audit process easier for the auditor. Hand ledgers must be footed and cross-footed to check monthly and annual totals for each line item. I can think of no better way to anger your auditor than to present hand ledgers.

And while experienced tax auditors have probably seen all types of bookkeeping systems, newly hired auditors will want to see a computer printout.

Improved Record Retention: With a computerized accounting system, you have the ability to backup your data to protect yourself against the loss of records due to fire, flood, or other disaster. This is not possible with manual records. Furthermore, QuickBooks has the ability to store scanned copies of your invoices and other financial records.

Without a backup of your data, you could end up facing an audit with no accounting records. This could be detrimental to your case.  We strongly recommend that our clients backup their computerized accounting systems regularly and keep those backups off-site to protect against data loss.  Your original paper documents may be lost, but you may still have adequate documentation for the auditor.

Less Time Consumed: How much time does it take to keep your books by hand?  I often hear clients say, “it really doesn’t take that long, just a little more than recording the check in the register.” That is probably true, until the end of the month or the end of the year when you must reconcile bank statements and total columns.

Computerized accounting systems end these time-consuming redundant activities, so you can spend less time adding up figures and more time running your business.

Many clients using QuickBooks are just using the program as a glorified computerized check register. 95% of the clients that I see are not posting journal entries, tracking inventory, or any of the other traditional bookkeeping activities. My advice to clients just starting out in QuickBooks is simple. Just get the information into the program and get your bank account reconciled regularly.

Simpler Payroll Processing: If you are currently preparing payroll checks by hand and using withholding tables to calculate withholding taxes or stressing about whether the Social Security, Medicare, or unemployment rates or thresholds have changed, then you definitely want to consider preparing payroll through your computerized accounting system.

QuickBooks warns the user when a payroll update has occurred.  With automatic updating turned on, all tax rates and schedules are immediately updated.  The guesswork and stress is eliminated.  Once you have correctly set up your employees, simply enter a couple of numbers each pay period to complete accurate paychecks.  QuickBooks also creates a pay stub for your employees.

Instant Comparative Data: Want to know where you stand as compared to last year? Just run a report. It does not matter that it is only the 12th of the month. QuickBooks allows you to run balance sheets, income statements, and many other reports at any point in time with comparative figures for the prior month or year. You can even run the report to show dollar and percentage changes from one period to the next.

Keeping books by hand? Just wait until the end of the month, then add up your line items, then pull out last year’s ledger, then compare the differences. Want to know the increase or decrease from last year? Better have a calculator, because you will need it.

As a bonus, the same internal reports that you need for your business can be provided to your bank and other third parties.

The Bottom Line

So now is the time. Invest some time and money into QuickBooks or another accounting software program of your choosing and stop relying on your manual system.  Worried you don’t have the computer skills needed for this new program?  No problem!  My firm can assist you with training you or your staff on QuickBooks.  Or better yet, consider using my firm to perform your bookkeeping and payroll duties for you, giving you more time to focus on what you enjoy doing in your business (and we all know that isn’t bookkeeping and payroll).

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About David

About David

David is an accountant and adviser for small business owners. He also coaches clients on leadership and success. David is an avid reader. He blogs regularly on the books that he is currently reading.

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