This post was published more than 45 months ago. Due to the rapidly changing nature of business and taxation, some concepts may no longer be applicable
Many businesses look to minimise their accounting and bookkeeping costs as they will often see it as an expense with little benefit. Their push to save money will often end up costing them more in the medium to long term. You either do the job right or not at all.
Many start-up businesses come with the idea that they can save costs by maintaining a list of income and expenses in a spreadsheet and providing that to their bookkeeper or accountant for processing. This is certainly doable and can be cost effective initially, especially when the lists of income and expenses are relatively small.
But, as your business grows, you will get to the stage of having too much information to manage in a spreadsheet and inevitably mistakes will be made. A proper bookkeeping system is designed with checks in place to ensure that when (not if) a mistake is made, the mistake is easily identified and able to be corrected.
Hunting for errors without a proper bookkeeping system will add considerable time and cost to your costs no matter how good you think your spreadsheet is and no matter how diligent you think you are.
Xero and similar accounting systems go one step further by providing direct feeds of banking data into the accounting system, reducing the amount of manual processing and thus reducing the chance of errors.
If you are thinking short term only and not preparing for growth, the growth will be challenging.