Doing your own bookkeeping: what it really costs

Key takeaways

Doing your own bookkeeping costs the hours it takes, the errors a non-specialist makes and the decisions made on out-of-date figures. Four hours a week of an owner's time at £40 an hour is about £7,400 a year. It is sensible for a very small business with simple transactions, and expensive once volume grows.

• 4 hours a week at £40 an hour is about £7,400 a year of owner time.
• 6 years: how long a company must keep accounting records.
• Books done monthly in arrears mean decisions on old numbers.
• Hand over data entry and chasing first; keep approval of payments.

What does doing your own bookkeeping involve?

Bookkeeping is the routine recording of a business's financial transactions: sales invoices, supplier bills, bank reconciliation, expenses, payroll entries and VAT. It is distinct from accountancy, which interprets the records and prepares statutory accounts and tax returns.

• The hidden costs of doing everything in-house
• In-house vs outsourced bookkeeping: the cost compared

What do the UK rules require?

GOV.UK requires limited companies to keep accounting records for 6 years from the end of the last company financial year they relate to. Self-employed people must keep records for at least 5 years after the 31 January submission deadline of the relevant tax year. Records must be accurate enough to support your returns.

• Compliance admin burden: what you can hand off

What are the hidden costs?

The hidden costs are time, errors and timing.

• Time: hours each week on entry, matching and chasing.
• Errors: miscoded items, missed VAT, duplicated bills.
• Timing: books updated late, so cash position is unknown.
• Year end: your accountant charges more to clean up.
• Cash: invoices sent and chased late are paid late.

• The cost of missed deadlines for a small business
• The cost of manual processes, and what to fix first

How long does it take?

It depends on transaction volume and how tidy the process is. A sole trader with 30 transactions a month may need an hour or two. A business with 300 transactions, several payment methods and VAT can easily need a day a week. Time it for a month before deciding.

When is DIY bookkeeping the right choice?

DIY bookkeeping is right when transactions are few and simple, you use accounting software with bank feeds, and you update it weekly. It also helps a new owner understand their numbers. Review the choice when volume doubles or when you register for VAT.

• When not to outsource

What does late bookkeeping cost in cash?

Late bookkeeping delays invoices, and delayed invoices delay cash. If a business bills £40,000 a month and sends invoices on average ten days later than it could, around £13,000 is permanently tied up that would otherwise be in the bank. UK late payment legislation lets you charge statutory interest on overdue business debts, but only once an invoice has been issued and its terms have passed.

The other cost is decisions made blind. An owner three weeks behind on the books does not know this month's margin or who owes what.

Which parts need a professional?

Split the work by risk. Data entry, matching and chasing are routine. Judgement and compliance are not.

• Routine: entering bills, raising invoices, bank matching, chasing payment.
• Needs care: VAT treatment, payroll, expense rules.
• Professional: year-end accounts, tax returns and advice.

• HR without an HR department: risks and costs

What do digital record rules change?

Making Tax Digital requires VAT-registered businesses to keep digital records and file through compatible software, and it is being extended to Income Tax for sole traders and landlords above set income thresholds. Paper and ad hoc spreadsheets are no longer enough for those within scope. If you still keep records by hand, check GOV.UK for when the rules apply to you and allow time to move.

How do you keep control if someone else does the entry?

Keep three things: approval of payments, a monthly review of the figures and access to the software in your own name. Someone else can enter, match and chase. You see a short monthly pack, covering sales, cash, debtors and anything unusual, and you remain the only person who can release money.

What does this look like in practice?

A pattern we see in growing firms: the owner does the books on Sunday evenings, three weeks behind. Invoices go out late, nobody chases, and the overdraft covers a gap that prompt invoicing would close.

Across our client work, back-office cost per task has fallen by 42% once the process was written down and run by a managed team.

• Outsourced invoicing and credit control
• See client work
• BPO Solutions for UK businesses

DIY bookkeeping checklist

Review your own setup.

• Count transactions per month.
• Time the bookkeeping for four weeks.
• Check how many days behind the books are.
• Note what your accountant corrects at year end.
• Measure days from job done to invoice sent.
• Decide which routine steps to hand over.

• The hidden cost audit: score your business in an hour

Next step

Tell us your monthly transaction volume and software. We will show which bookkeeping tasks can move to a managed team while you keep approval, in a 30-minute call.