The Serious Consequences of Bad Bookkeeping on Your Small Business
There are many things that you need to worry about as a small business owner. Not only are you evaluating cash flow to make sure that you have enough money for payroll, but you are also carrying the burden of overseeing employee management, budgeting, business development, customer service, marketing, and more. These responsibilities can add up, making it easy for important tasks to slip through the cracks. Certain tasks can be handed in the future, but don’t procrastinate financial matters resulting in a situation where you are facing bad bookkeeping practices.
It is essential that you are tracking the money that is coming in and going out so that you have detailed information for tax filings, profit and loss reports, and more. Without the right financial tracking, you are setting your business up for failure.
Some small business owners attempt to manage bookkeeping in-house. If you have professional experience as an accountant or bookkeeper, then you might have the skills to handle these responsibilities. Even though you have the skills, there are advantages to outsourcing these tasks. For example, it can be a challenge to keep up with the changing tax laws and other factors that impact your finances. Plus, most business owners don’t want to spend their free time crunching numbers.
Jotting down a transaction on a piece of scrap paper isn’t good enough for your financial tracking. Instead of “getting by” with unproven systems, right now is the perfect time to implement an effective bookkeeping program. This step will help you overcome some of these common mistakes that happen when an inexperienced person handles bookkeeping for a company:
- Lack of consistency where transactions are recorded
- Hand-written accounting, instead of using a computer system
- Only using manual calculations
- Overlooking small transactions
- Missing tax payments and paperwork
- Organizational problems causing lost invoices and paperwork
- Falling behind on data entry
- Failing to complete regular audits and checks
Tracking your financial records might be the most important thing that you can do to support the future success of your company. If you let these tasks fall to the backburner, then you will face big challenges that need to be overcome before you can lead your business to the goals that you desire.
If you don’t know a lot about accounting and bookkeeping, then it is possible that you don’t understand the serious implications of bad bookkeeping. Here are a few consequences that you might face:
- IRS Audit: Resulting in time, stress, and money for accounting services to work through the audit. If incorrect information is discovered on your tax filing, then it is possible that you will be facing expensive fines and fees that could negatively impact your current cash flow. The best solution is to have an experienced professional who will help you follow the rules and avoid the risk of an audit.
- Cash Flow Problems: What will happen if it is time for payroll and you don’t have enough money in the bank to pay your employees? Costs come up every month for business development, payroll, office supplies, and more. If you aren’t tracking your inflow and outflow, then you might be caught in a difficult situation where there isn’t enough money to pay the bills. These problems can be avoided by hiring a good bookkeeper who will track the records and help you avoid cash flow problems.
- Poor Business Decisions: How can you make accurate decisions for your company if you don’t understand the current financial health of the business? When you are facing decisions about hiring employees, business development, or marketing costs, you need an accurate picture of the financial health of your company. This information is essential so that you can run financial reports and then make decisions based on the current financial trends that you are experiencing.
There is no reason why you should be handling the stress of managing the bookkeeping for your company. As the business owner, you have enough to worry about for the business development, employee management, and more. Let a professional bookkeeper oversee the financial tracking for your company, freeing up your time to focus on other activities that will help your company grow.
Freedom Business Management is experienced in all aspects of small business bookkeeping. If you need a trusted professional to partner with your company, then we invite you to call or email us today to learn more about the services that we offer. We are here to help with the financial success of your company!