SpendWize – Guide to Wiser Consumer Decisions

There are three general ways that an individual can go about managing their bookkeeping. In each category there are numerous ways to go about each method, some of which will be discussed here. Additionally, each method has its own pros and cons, which will also be discussed.

Using a Ledger

In order of ascending cost, the first method, being the cheapest, is also the least advanced; anyone is capable of keeping track of their expenditures, sales, purchases, etc. throughout the year by simply logging each separate transaction in one central place. Whether using a paper ledger and entering each transaction or upgrading slightly and entering the information into something like Excel, the specifics of this method are determined entirely by the person keeping the record. Anyone unfamiliar with ledgers can easily find tutorials online that recommend what information should be kept track of and a variety of different ways to do so.
A positive point to using this method is that it is basically “free,” unfortunately “free” is a relative term in that this process still requires the individual to spend time entering each individual transaction. Basic economics principles explain that the opportunity cost of using time that could be spent in another capacity, such as working, means that this method might actually end up costing some individuals a certain amount of money in relation to the time spent dealing with the ledger (i.e. the extra time it takes to enter each transaction could be better spent bringing in viable income).
Most basic ledger style bookkeeping methods do not allow for the more in-depth analysis that some bookkeeping programs and services, which will be discussed in the next sections, can provide. Individuals with more advanced user knowledge of programs like Excel could create spreadsheets or databases that allow for a closer look at the total financial picture; however, without that knowledge most excel-based methods will end up being little more than electronic copies of traditional, hard-copy ledgers.

Using a Bookkeeping Software

Typing “bookkeeping software” into any search engine will return hundreds, if not thousands of different types of bookkeeping software available quickly for a no cost download, one time purchase, or subscription plan. Refining the search to find bookkeeping software, also commonly known as accounting software, for personal accounting software or specific types of small businesses accounting software can provide software options that are more catered to the kinds of bookkeeping that are required. Additionally most home office stores such as Staples and Office Max carry several different versions of bookkeeping software in their stores.
In contrast to using a ledger, most bookkeeping programs will be able to deliver the user some kind of up to date analysis or read-out of the current financial situation. Functionality wise, it makes considerably more sense to use a program that will run the numbers for you and provide information about aggregate spending while tracking income and expenses as well as managing debts.
One issue with bookkeeping software is that each program is going to be different and unless you are willing to shell out a large amount of money for more professional programs, it is entirely unlikely that any of them are going to fit with exactly with your current record keeping needs. When individuals and business owners find themselves spending too much time logging transactions and dealing with the quirks of each different program it might be a good idea to upgrade to a more compatible record keeping software or subscribe to a financial service.

Using Bookkeeping Services

Outsourcing bookkeeping and accounting services is becoming more and more popular as individuals and small businesses are looking to find optimal ways to handle their finances while still saving money. Going with a professional service can make sense for anyone who is completely unsure of how to manage their bookkeeping and tax preparation needs as well as for individuals who need to manage large amounts of financial transactions on a regular basis.
Opting to go with a professional bookkeeping service is a great option to help save time and remove the stress of making a mistake from a single individual; however, they are the more expensive option available. While some freelance accounting business offer rates as low as 15$ a month for services such as accounting data entry, billing customers, reconciling bank statements, producing financial statement reports, and basic analytical reviews, more in-depth and hands on services quickly get more expensive.

Our Suggestion

Sometimes the best option is going with a mix of all of the options. While most bookkeeping functions can be reasonably handled in-house, it is always a good idea to have a professional service available in the event that there is a problem. One great suggestion to manage this is to purchase a piece of reasonably customizable bookkeeping software that allows for professional support either on a cost-per-event basis or a subscription plan.