The Negative Impact of Poor Bookkeeping on Your Small Business
Running a small business is a constant struggle. Entrepreneurs have to decide when they should spend or save, which is a lot more complicated than it sounds. Unfortunately, bookkeeping is one of the most neglected aspects of many businesses. Instead of hiring a professional bookkeeper to do the job, some business owners tend to do it independently. Unless they have enough knowledge of proper bookkeeping, letting an inexperienced person do this work can lead to many consequences.
People do not often see the effects of their mistakes in bookkeeping until it is too late. As a business owner, you do not need to wait for these things to happen to you. In this article, we will enumerate the possible consequences of bad bookkeeping for a small business.
The Effects of Bad Bookkeeping on Your Small Business
To give you an idea, here are some terrible outcomes of having bad bookkeeping practice:
Getting audited: No business owner wants an audit, given the stress it often results in. An audit is a way for any business to prove that they are submitting and declaring correct information to the IRS. That means there are no misstatements or errors committed in their files. Failing to pass an audit might result in expensive penalties that could affect your business.
Mixing personal expenses with business expenses and hidden income are two of the main reasons companies get audited. With an experienced bookkeeper and accountant, you can avoid all these because they know the rules too well.
Failing to track the cash flow accurately: One of a bookkeeper's jobs is to ensure that the company's cash flow is in check. If they foresee any potential problem, they can alert the management immediately. If your bookkeeper fails in this aspect, you might find yourself looking for cash to pay up your bills and employee payroll.
On the contrary, a good bookkeeper should help a business increase its cash flow. They know what aspects of your business could increase your sales and recommend it to the management.
Making poor business decisions: A wrong cash flow projection can affect your business in significant ways. Having the wrong numbers from the start results in navigating the company towards the wrong course. Nothing is worse than thinking you have enough money and realizing that you do not. You could avoid that if you have a bookkeeper and accountant ensuring that every financial information you get is accurate.
DIY accounting and bookkeeping can be tempting, especially if you are a startup business. However, it also has risks, just like the three possible problems mentioned here. Apart from these, bookkeeping is a time-consuming task, even if your business is new. You can avoid headaches and stress if you choose to work with a knowledgeable bookkeeper.
Conclusion
Professional bookkeepers know what to do. They understand businesses and can help you detect the possible financial pitfalls you might face. As a business owner, having a bookkeeper has many advantages. You can have peace of mind knowing that someone knowledgeable oversees the finances of your business. That way, you can be assured that your business would steer clear of any financial trouble.
Have a professional bookkeeper to prevent you from facing any of the consequences mentioned in this article. Totally Booked is a bookkeeping services provider in NYC. We are QuickBooks Online Certified ProAdvisors, and our goal is to streamline and create efficient accounting processes for your business. Call us today to learn more about our service.