Some small business owners have the mistaken belief that as long as they have all their paperwork together in one box that they’re doing a good job with their finances. Nothing could be further from the truth. In bookkeeping circles this is known as “shoebox bookkeeping” and many times it’s a bookkeeper’s worst nightmare at year end.
Bookkeepers generally charge by the hour so the additional time it takes them to sort and categorize your paperwork will end up costing you more than if you’d spent a little time organizing your paperwork.
Also when a bookkeeper only looks at your paperwork once a year it can be difficult to answer questions about specific expenses when so much time has passed by. This may mean missing out on an important business expense because you can’t give an adequate explanation for it.
Not only that, but most businesses typically must submit remittances to the government either monthly or quarterly. If your information is kept in a box, this makes getting reports in on time that much more difficult.
Furthermore, business owners who use shoebox bookkeeping have no idea how they’re doing financially throughout the fiscal year. They can’t tell if they’re spending too much or bringing in enough revenue to make a profit. They tend to judge their finances by the balance in their bank account, which doesn’t take into account monies owed by them or to them.
So if you are a small business owner who is using a shoebox bookkeeping system, you really need to consider whether this is saving you money or whether it’s time to find yourself a freelance bookkeeper.