In today’s connected world it’s easier than ever to learn how to do almost anything or “do-it-yourself” (DIY). Sometimes it can be fun and exciting to challenge yourself to do something you couldn't previously do and it is oftentimes quite rewarding when you are successful. But there are things that, despite having a basic or conceptual understanding of, should be left to the professionals. This week I’m writing about why sometimes it makes sense to not DIY. To keep it relevant for readers, I’ll tie my advice back into accounting related areas.
Opportunity Cost
Opportunity cost is best defined by Investopedia as a benefit that a person could have received, but gave up, to take another course of action. For example, if you chose to spend your time doing bookkeeping for your small business then you might find you’re giving up the opportunity to pursue new sales prospects or allow yourself some much needed downtime to recharge. Yes, anyone can teach themselves how to do almost anything, but is your time really worth spent doing everything yourself? Not to mention that we as human beings cannot really master everything and will inevitably encounter something we can’t handle, or will unknowingly do something wrong. In short, is your time really worth doing things you can hire others to do the right way the first time? Sometimes hiring a professional first may be a better use of time in the long-run.
How Much Could It Possibly Save?
Above I mentioned you’ll spend your time in lieu of paying someone to do something for you. But consider this, how much could you possibly save for a certain task? Think of your taxes, if you do them yourself you still have to buy software and then you have to enter the info and follow directions. The Q&A style software packages that are available are not designed to “think” but instead guide you to a reasonable answer. It might tell you that rental property is depreciable and guide you to receive the appropriate deductions, but does it also tell you that by itemizing each rental property asset you can receive a greater tax deduction? Do you see the difference here? In addition, you are the one preparing your taxes which likely takes even the most prepared person a couple of hours. So now not only have you paid for a program to guide you (at best), but you also just spent a couple of hours of your life all to save yourself a couple hundred bucks from a tax preparer. I can promise you this, the best professionals, no matter what you need done, will save you time and money, and will deliver a quality product that a non-professional can't even get close to.
Jack of all Trades, Master of None
You simply cannot be a master of everything in life. Our brains are not wired to retain that much information and I have to imagine someone who is a “know-it-all” probably does not lead a very exciting life and is probably not fun to be around. I have always followed the guidance to do what you love. Pick a few things that really interest you and hone those skills. Get well-trained in them, I mean ridiculously trained, and then help others using those skills. If you have a genuine interest in something, you’re far more likely to excel at it than if you’re learning something out of necessity. For things that you find less interesting, find someone who performs amazingly well at them and bring them on your team to help out. You’ll be happier if you only ever have to do the things you love rather than the things you need to do.
Knowledge, Training, and Experience
Finally, we arrive at the defining trait; experience. Anyone can gain the knowledge of how to do something. Most can even receive some sort of training (formal or informal). But nothing will ever substitute experience. I don’t care if you know exactly how to do your books down to the penny and you’ve seen a hundred Balance Sheets & P&Ls in your time, if you’ve never prepared one or handled a general ledger system, you will mess it up. Even if you ran one successful business 10 years ago your thinking may be so outdated and irrelevant at this point that it doesn’t matter. If you truly want to DIY, consider shadowing a true professional in what it is you want to learn. Offer your time for free for a while in exchange to learn a skill. Most professionals would likely welcome the free labor and be happy to teach someone with a genuine interest to learn what they know. By learning from a master, you will not only save yourself endless hours of learning things the hard way, but you will have less errors in your work, dramatically improving the quality.
I hear it over and over again from my clients that they’ll take care of certain things themselves only to get the unfortunate news from me that things have been prepared or performed incorrectly, or worse, that they’re out of compliance on items. It’s usually only after it’s too late that my clients approach me to clean things up and do the work going forward. My challenge to anyone reading this is to consider that path from day one rather than as a backup plan. Don't leave it to chance that things will be okay. Instead, ensure that you’re receiving the best service and quality of product you can instead of burning yourself out trying to learn something simply to save a few bucks. In the world of business, it only takes one error to set you back all the money you "saved".
I’ll leave you with one final example. This is a real life example of a conversation I had with a client. My client approached me for a tax consult early one year after he received his 1099-MISC from one of his largest clients and explained that he had an LLC setup to be taxed as an S Corporation but the 1099-MISC was written to him personally (it had his name and SSN on it). I explained that since he had personally received payment all year, and the 1099-MISC was addressed to him, that it would unfortunately have to be reported on his personal tax return. I further explained that if he had been set up with his client for them to write checks and issue tax documents to his LLC, that he could have potentially saved thousands of dollars under certain allowable corporate tax deductions. Although we agreed that it would be time-consuming and costly to try to amend and correct everything that had happened, he was able to apply this newly found knowledge to future years. My point here is that if had obtained a tax consult from the beginning, he could have saved himself thousands of dollars from day one.
Any interesting DIY stories or mishaps in your past? Any questions? Comment below and let us know!