Effects of Bad Bookkeeping

The Effects of Bad Bookkeeping on Your Small Business

As the owner of a small business, it is important for you to know that seemingly small mistakes can lead to serious financial damage in the future. Larger corporations have the big bank accounts to cover these types of mistakes. But, smaller companies might go under if the wrong accounting and bookkeeping practices are in place. If you want to increase the chances of success in the future, then you need to make sure that you are building the foundation with solid bookkeeping and accounting support.

Why Bookkeeping Matters

Why does it matter if you have a good accountant for small business to help with your business efforts? These services encompass some of the most essential tasks that need to be addressed in every company. Without a good bookkeeper, your books will be a mess, and you won’t be able to keep up with the numbers in your bank account.

Typically, bookkeeping encompasses a variety of services to ensure that all financial transactions are recorded. These services can include sales, receipts, purchases, payroll, payments, earnings, and more.

Having a bookkeeper stay current with these transactions ensures that the money continues to flow in and out of your business as needed. Not only will you have the money moving through to support business efforts and profits, but you will also account for every dollar that is spent or received.

Later, you can use the information when you are making big financial decisions that impact the future of your company. If you are putting together anything that will affect the organization of your business, then you need to be sure that you are staying ahead of these details. Then, you can lean on the financial reports knowing that the numbers are accurate.

Bookkeeping, Accounting, and Business Decisions

What will happen if you aren’t keeping up with the bookkeeping and accounting tasks that need to be addressed in a small business? Every decision that you make can have an impact on the profitability and cash flow of the company. If you make too many bad decisions, then it will lead to the downfall of the business.

At the same time, a series of wise decisions will lead to the future success that you desire. So, you need to stay apprised of the numbers to ensure that you are considering these details whenever you make a decision.

The financial reports in your company should be used when you are looking at monthly or annual revenue, considering loans or payments, calculating and paying taxes, buying new equipment, or hiring more employees.

Consider this situation: it might be a good month in your company, resulting in an influx of cash in your bank account. Even though the numbers are high, it doesn’t mean that you have extra cash to spare for new office equipment or furniture. Instead, you need to look at the reports and anticipate any potential upcoming payments for payroll or taxes.

Failing to consider these details could leave you in a situation where your bank account is overdrawn because you spent money that wasn’t really available for your business. Bad bookkeeping practices will leave you in debt, and you could potentially be in trouble with the IRS if tax payments and other details are missed.

Biggest Accounting and Bookkeeping Issues for Small Businesses

What are the biggest issues that you might face for your small business? These are some of the leading causes that can result in financial problems for your company:

  • Not being serious about your bookkeeping or accounting practices
  • Procrastinating important daily, weekly, and monthly tasks
  • Leaving the financial accounting to a low-paid, inexperienced employee
  • Overlooking small transactions
  • Failing to communicate with your accountant
  • Spending money that is needed for taxes or payroll
  • Inefficiencies in regular work systems

In addition to efficient, effective bookkeeping and accounting practices, you also need to make sure that you are implementing good management over your staff and employees. Set expectations, teach the right techniques, then ensure that everyone is following the same practices in the way they are handling sales, data entry and more.

Financial Mistakes that are Costing You Money

Many common financial mistakes will cost your company money. Not only will you lose out on cash upfront, but some of these mistakes could potentially lead to the downfall of your company. Here are some of the most common financial habits that you need to avoid:

  1. Not Hiring an Experienced Bookkeeper: It might seem like a great idea to pay your niece $15 per hour to do the books. But, a lack of experience is one of the top causes of poor record keeping. If you are handling bookkeeping and accounting in-house, then it probably means that mistakes are happening regularly. Even though you might feel like you are saving money on the cost of payroll, you will end up paying more in the future when you need to hire an accounting team to clean up the mess. Don’t trust an inexperienced employee with the important task of managing the financial records for your company. Instead, hire a professional team who can eliminate some of the common errors that occur. Outsourcing is a great solution to help you save money and reduce your stress at the same time.
  2. Procrastinating the Bookkeeping: When things get busy in the office, paperwork and bookkeeping are often the things that fall to the backburner. If a customer needs immediate attention, then you aren’t going to turn that person away so that you can focus on the data entry! So, many business owners let the bookkeeping slide until they finally make it a priority to get caught up on The problem is that procrastination can lead to serious issues in the future. Not only will you miss some of the transactions, but your business can be crippled because you are making decisions without assessing the full financial information.
  3. Skipping Tax Payments: Tax deadlines are important to ensure that you aren’t missing anything important for the IRS. There are specific deadlines that need to be met for payments, filing, paperwork and more. Don’t run the risk of facing an IRS audit in the future! Instead, work with an experienced accounting team to ensure that you are keeping up with the ongoing deadlines and requirements. If your bookkeeping is a mess, then it means that you are probably paying the wrong amount on your tax deadlines. Or, you might run into cash flow issues that make it difficult to pay the taxes when they are due. Avoid issues with the IRS by hiring a professional accounting team instead.
  4. Ignoring Cash Flow Issues: Sometimes it can be a challenge to keep up with business payments, which means that you might be facing cashflow issues throughout the year. While these problems seem small, they can have a big impact on the future of your company. Always putting things on the business credit card can lead to high-interest costs and major problems down the road.
  5. Manual Calculations: Spreadsheets can be useful for many reasons, but they shouldn’t be used for your bookkeeping or accounting system. The risk of errors increases if you are using manual data entry and other methods to manage the bookkeeping. Instead, implement an accounting software that uses automated systems and checks and balances so that you can overcome the domino effect of manual errors.

The Long-Term Issues of Bad Accounting Habits

A few small financial issues right now won’t bring down your company. But, these problems can lead to major issues in the future. If you want to create a successful business in the future, then the financial tracking and planning is a critical part of your long-term success. Failing to keep up with the numbers is one of the biggest mistakes that you can make as a business owner.

Luckily, many tools and services can be used to simplify the process. Don’t be afraid to hire help or pay for the right accounting software. These systems are important so that you can free up your time and focus on the other tasks that matter for the future growth of your company.

For example, outsourcing the bookkeeping and accounting tasks will enable you to focus on product development, customer care, and employee management. All of these factors can lead to more sales and higher revenue. Your business will continue growing, and you can enjoy the fruits of your labors.

If you need assistance with the bookkeeping and accounting systems for your company, then you need to call the best team in the industry: Easier Accounting. We offer the support that you need to keep your business running throughout the year. In addition to the daily, weekly, and monthly financial tasks, we also offer tax planning and filing. Our goal is to take care of the financial details so that you can be ready for massive growth and business success in years to come. Call us today to learn more about the services that we can provide for your company: (888) 620-0770

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