Can You Do Your Own Accounting for Your Business? (DIY Accounting Guide)

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Short answer: Yes, you can do your own accounting.

Just like you can fix your own plumbing, cut your own hair, or repair your own car, there’s nothing legally stopping you from managing your own bookkeeping and business finances.

But, and this is important, DIY accounting comes with risks. Mistakes can be costly. Dealing with tax authorities without professional support can be stressful. And misunderstanding key accounting principles can lead to unexpected tax bills.

If you’re determined to handle your own business accounting (whether to save money or maintain control), this guide will walk you through the essentials you need to know.

1. Use Accounting Software (Not Spreadsheets)

If you’re serious about DIY accounting, start with the right tools.

We live in the age of cloud technology. There’s no reason to manage your business finances with a shoebox of receipts or a 10-year-old spreadsheet.

Modern cloud-based accounting software can:

• Sync directly with your business bank accounts
• Automatically categorise transactions
• Generate financial reports
• Track GST/VAT and tax obligations
• Manage invoices and accounts receivable
• Simplify payroll

Popular options include:

• Xero
• MYOB
• QuickBooks
• Pocketsmith

Most platforms are affordable and designed specifically for small businesses.

While Excel is powerful, it is not accounting software. Dedicated platforms reduce errors, automate calculations, and ensure your reporting aligns with tax requirements.

If you’re doing your own bookkeeping, proper software isn’t optional, it’s essential.

2. Understand the Difference Between Profit and Cash

One of the most common mistakes in DIY accounting is confusing profit with cash flow. They are not the same thing.

What Is Profit?

Profit = Income − Expenses

It is calculated over a specific time period (e.g., monthly or annually). Taxes are based on your profit, not your bank balance.

What Is Cash?

Cash is the actual money sitting in your bank account. While income increases cash and expenses decrease it, not all cash movements affect profit.

For example:

• Receiving a loan increases cash but it is not income.
• Repaying a loan reduces cash but it is not an expense (except for interest).
• Taking money out of the business for personal use reduces cash, but it is not a business expense.

This means you could have $0 in your bank account and still owe tax, because tax is calculated on profit, not cash.

Understanding this difference is critical for small business owners managing their own accounting.

3. Know the Difference Between Assets and Expenses

Another key concept in small business accounting is understanding assets vs expenses.

What Is an Expense?

An expense is something that helps you earn income and is typically used up within the year.

Examples:

• Office supplies
• Software subscriptions
• Utilities
• Small equipment

What Is an Asset?

An asset is something the business owns that has long-term value.

Examples:

• Vehicles
• Machinery
• Large equipment
• Buildings

If you purchase a business vehicle, you cannot claim the full purchase price as an expense immediately (in most cases). Instead, you claim depreciation over time.

Depreciation spreads the cost of the asset across its useful life.

Tax rules differ by country, so always check with your local tax authority regarding asset thresholds and depreciation rules.

Getting this wrong can significantly impact your tax calculations.

4. Loan Repayments Are Not Fully an Expense

This is a big one for DIY accountants. A loan is a liability, not income.

When you receive a loan:

• Your cash increases
• Your liability increases

When you repay a loan:

• Part of the payment is interest (an expense)
• Part of the payment is principal (reduces the loan liability)

Example:

A business takes out a $10,000 loan.

Two months later, they make a $1,000 repayment:

• $900 = interest (expense)
• $100 = principal (reduces loan balance)

Only the interest portion is deductible as a business expense.

If you record the entire repayment as an expense, your financial reports will be incorrect and so will your tax calculations.

5. Keep Accurate Records

If you’re handling your own bookkeeping, record-keeping is non-negotiable.

You should:

• Reconcile bank accounts regularly
• Keep digital copies of receipts
• Track accounts receivable and payable
• Review financial reports monthly
• Monitor GST/VAT obligations

Good record-keeping reduces errors and protects you if the tax office ever audits your business.

When Should You Hire an Accountant?

DIY accounting works best when:

• Your business is small and simple
• You understand basic accounting principles
• You use proper accounting software
• You stay on top of reporting deadlines

However, as your business grows, things become more complex:

• Hiring staff
• Managing payroll
• Expanding internationally
• Applying for finance
• Structuring for tax efficiency

At that stage, professional advice can save you far more than it costs.

Even if you manage your own bookkeeping, it’s often wise to consult an accountant at least once a year for tax planning and compliance review.

Final Thoughts on DIY Accounting

Yes, you can do your own accounting.

But doing it properly requires:

• The right software
• A solid understanding of profit vs cash
• Knowledge of assets and depreciation
• Correct treatment of loans
• Consistent record-keeping

DIY accounting can save money in the short term. Just be aware of the limits — and know when it’s time to call in a professional.

Until then?

Happy DIY accounting.