One question business owners and individuals often struggle with is whether to use accounting software or hire an accountant for their regular bookkeeping and year-end taxes. Unfortunately, there is no easy answer. Both solutions have their pros and cons, and can depend on how complicated your individual situation is and how confident you are to complete the task yourself.
In this article, we’ll take a look at whether you should use accounting software or hire a professional accountant, and the pros and cons of both.
Consider Your Tax Situation
When deciding whether to buy accounting software or hire a professional accountant, it’s important to consider your individual tax situation. If you’re a salaried employee with no other sources of income from investments, and have no other financial obligations, your situation may be simple enough where accounting software makes sense.
If you own a small business, hire employees, have other sources of income from investments or property, or have other uncommon financial obligations, hiring a professional accountant could end up saving you money in the long run.
Before making a decision, consider your entire financial situation and how confident you are completing the process yourself. If you have any doubts, consulting an accountant could be a great first step.
Using Accounting Software
The best accounting software depends on your individual situation. If you’re a small business, there are versions of most accounting programs designed specifically with you in mind.
Intuit’s QuickBooks is one example of an accounting application with multiple versions to choose from, depending on the needs of your business. Whichever version you choose, you can add on payroll support to pay your employees and payroll taxes at the same time. Not sure which version is right for you? Intuit offers a 30-day free trial so you can test drive the service before you buy.
The biggest advantage to using accounting software is the price. Most applications are a fraction of the cost of hiring an accountant. Some accounting programs even break down the cost by charging per-month rather than having to pay a licensing fee all at once. If you decide that accounting software is not for you, you can cancel at any time and you won’t be stuck with an unused program.
Another great benefit of using accounting software is the educational experience that comes with it, although you’ll also have to consider the learning curve, which can be steep if you’ve never done it before. Once you’re proficient with the software, accounting on a regular basis won’t seem like such a big chore. You could also consider taking a few accounting classes or running through a couple of software tutorials to get you started.
Since you’ll be relying on yourself and the software to keep accurate records, consider what human error could end up costing your business in the long run. If you submit payroll taxes incorrectly or miss a deduction or credit at the end of the year, the cost of hiring an accountant may seem like a small price to pay for the added security. Although most accounting and tax software will run error checks to look for common mistakes, it’s not foolproof. You’ll also have to consider the added time it will take you to do your own accounting, which can take valuable time away from your core business practices.
Hiring an Accountant
If you’ve never had to keep track of your own accounting or you have no idea how to get started, using accounting software may not be the best choice. If your accounting or tax situation is complex, you’ll only be adding to an already complicated situation if you decide to go the do-it-yourself route.
You have a couple of choices if you decide to use a professional accountant for your small business. You can choose to hire an accounting firm to handle your bookkeeping and taxes, or you can add a full-time or part-time accountant to your payroll and have the individual work directly for the business. You’ll have to consider the added cost of paying an additional employee and the payroll tax that comes with it if you decide to go this route, plus the cost of the software if you decide to keep things in-house.
The main benefit of hiring a professional accountant is the knowledge and experience they can bring to a complicated process. Accountants have not only spent time in school studying the industry, but it’s their job to stay up to date with tax and accounting laws. A professional accountant will be able to give you expert advice when filing your taxes at the end of the year, which could end up saving you money even after paying the extra fees or added salary.
If you decide to hire an account, you’ll be able create a professional relationship and may even learn a thing or two you can use on your own in the future. In addition, you’ll have more time to spend on your actual business and less stress at the end of the year making sure things are done right.
Making a Decision
Ultimately, choosing between accounting software or hiring an accountant is entirely up to you. If you feel that your bookkeeping situation is simple enough or you have the time to learn the process, accounting software could save you money. For more complicated situations or for business owners who don’t have the time to do things correctly, hiring an accountant would make more sense.
This type of decision should not be taken lightly, as errors in your accounting and taxes could cost your business in penalties and fees. Take some time to consider your situation, weigh the pros and cons, and look at the overall cost of using both methods. If you have any doubts as to the accuracy of your records, consider consulting with an accountant for professional advice.
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