What are the disadvantages of bookkeeping?

Answer 1

traditional bookkeeping actually i was also searching for these but few was there and i found out these from various web sites

§ Double entry bookkeeping is harder to understand (worringly, there are fully qualified Accountants who don't "get it",although they are in a minority - I hope)

§ It follows, then that, if you don't already have the accounting know-how, you'll either have to learn or hire/outsource someone to do it for you.

§ If you don't know what you are doing, but plough through anyway, things can get a bit messy when trying to correct errors with journals. (How messy partly depends on whether you have a manual or computerised system and if the latter, which package you are using. But I digress…)

§ It is a bit more time-consuming, not least because by it's very definition, every transaction is entered twice.

§ There are three primary challenges associated with providing a high value bookkeeping service to your clients: the disconnect between your client accounting system and the client's daily transactions, the cost of providing such a service and the scalability of your bookkeeping services.

§ The Bookkeeping Disconnect Between You and Your Client

§ The inherent failure of client accounting is that the client has to keep their own books to an extent, at least to record day to day transactions. This causes duplication of work and frustration because some of this data has to be recaptured or backups need to be exchanged.

§ Over the years things have improved a little as accountants encourage their clients to use the same accounting package enabling backup exchange. More recently on demand systems made it possible for the accountant and client to work on the same instance of their accounts as the accounting package is hosted online.

§ Whatever the method used to bridge the gap, the client still needs to do their own bookkeeping. Generally speaking SME's do not want to do bookkeeping because they can spend this time and money much more productively on their core business activities.

§ The ideal solution is for the accounting practice to handle the entire financial function for their SME clients including daily bookkeeping. There are offerings for this too, but these are generally highly unproductive and unreliable as they depend on the client posting, faxing or scanning source documents to the accountant for capture into the client accounting system. Even worse than this is a service where these source documents are remotely captured into the client's accounting system!

§ The Cost of Providing Bookkeeping Services

§ Providing a bookkeeping service for your clients is extremely labour intensive. You need to employ bookkeepers and absorb the associated cost to company. Absence due to holiday or sickness adds to this burden. Then there are productivity concerns.

§ Because this is a perceived low value activity, it is difficult to charge bookkeeping services out at high rates which further complicates things, because even a moderate drop in productivity can wipe out any profits from it.

§ Due to the nature of the task your bookkeepers cannot be deployed to higher value activities for which you can charge higher rates because they have to do the mundane and time consuming detail work first.

§ Mistakes significantly increases your costs because it often takes painstaking rework to identify any errors and this impacts negatively on productivity. As stated before, this can eliminate your potential bookkeeping profits.

§ Scalability Issues

§ The more bookkeeping clients you have the more bookkeepers you need. In other words the more business you get the more complex your business becomes.

§ In a traditional model there is no way for you to decouple the link between gaining the bookkeeping services of a client and having to employ a person to do this work, which essentially makes this a non-scalable business. You will eventually reach a ceiling for what you are willing to let your payroll grow by, in order to manage your risks.

§ Scaling this business is also very time consuming for management due to the heavy staff contingent and associated management tasks and issues.

§ What is needed is a client accounting system that integrates your clients' business processes with your client accounting system. It must automate all the low value detail work and allow you to focus on high value services, armed with the up to date financial information of each of your clients.