What If a Small Business Neglects Bookkeeping During the Holiday Rush?

If your small business experiences an upsurge of business during the holiday season, it may be tempting to cut corners on seemingly non-urgent things. Bookkeeping and accounting may be one of those things that fall off of your priority list when you are busy keeping your head above water. Your strengths may lie in advertising, customer service, product manufacturing, and other parts of your business. The accounting part of your small business can be better left to professionals.

As you are focusing on building your business and gaining your best holiday profits yet, find ways to lessen the stress in your life. Putting off bookkeeping to be done at a later time will only lead to unnecessary setbacks and fees for your small business. If you are shoving receipts into a bin, hoping to get organized come January, here are some things that may go wrong:

Potential Loans Are Unlikely

There may come a time that you need to go to a bank for a loan. Your bookkeeping will have to be in order if you hope for a bank to invest in your business. A loan officer asks for a detailed account of your income vs. expenses. They are looking for a specific percentage that will allow you to take on more debt while being able to pay back that debt in a timely manner. If you don’t have the books to show them, then your loan will be denied.

When you put accounting on the backburner, you won’t be prepared when you’re in a pinch and hoping to present your small business favorably to a potential investor. If you have a friend or business associate interested in your product and company, they’ll want to see the numbers before investing. It is vital to keep your business organized and presentable if that chance were to present itself.

Tax Fees and Auditing Red Flags

The problem with putting off bookkeeping for the final quarter of the year, during your holiday rush, is that you have to file for taxes come the new year. Setting yourself up for unorganized books and a backlog of purchases and income statements to go through by the tax deadline is a bad idea. In fact, if your books are not kept in real-time, it allows greater scrutiny from the IRS. If you have a strong accounting system in place, or better yet, hire a small business accounting service, then you will never be lost when it comes to taxes. The last thing you want to do is subject your growing business to tax fees and penalties because you failed to do your part with bookkeeping.

A small business that does not have acceptable bookkeeping practices in place is more susceptible to audit by the IRS. Your business is more likely to be audited if your books are not comparable to other companies in your industry. When you maintain good bookkeeping, you will clearly understand how to report your income and claim tax deductions. And you will also have nothing to worry about if you do happen to be audited by the IRS.

More Vulnerable to Theft

A small business without a strict accounting system, including checks and balances every step of the way, is vulnerable to fraud within the company. No matter how much you trust your partner or employees, every company must have systems in place that will not allow for “skimming off the top.”  The most honest people can have desperate moments if they know there is no way to get caught. Your bookkeeping system needs to have strong internal controls that will identify missing money or uncounted inventory.

Strong internal controls can include having two people be present when checks are signed. More than one person counts the money and goes to the bank together to make the deposit each morning. Inventory is counted and checked regularly. There are many ways to have checks and balances in your business to keep employees honest.

Invoices Go Unpaid

As your business grows, it may no longer be plausible to remember which client hasn’t paid or usually pays late, etc. A detailed account of outgoing services and incoming payments should always be present in your books. It will leave you feeling more confident when you seek out late payments, knowing that your books are organized. Your company’s reputation lies in sending out invoices and expecting them to be paid on time. If customers catch wind that you don’t ask for payments here and there, it will reflect poorly on your business overall.

Payroll Mistakes

When your books are not organized, then it is likely that you could be overpaying or underpaying your employees. If you have employees that are commission-based, detailed records are essential for calculating their income each month. When it comes to tax withholdings on your employees’ paychecks, if the amount is not correct, then you could be withholding the wrong amounts that will have to be corrected later if caught. This will lead to more fees.

Waste of Time With the Backlog

When you neglect to keep your small business’s books in real-time, you set yourself up for a mess of records to organize and sift through. Not only is the threshold for mistakes more likely, but the time you put into sorting and recording could be better put into building up your business for the future.

There may be some aspects of your business that you can put on the backburner during your busy times, but keeping proper books is not one of those things. If you are feeling overwhelmed, instead of skipping over accounting processes, hire a small business accounting service that will take care of it all for you. The relief that it brings you during a stressful time will be worth it.

Use Your Small Business Bookkeeping to Plan for Future Success

When your books are in order, you can use your calculated earnings and expenses to prepare for your business’s growth in the future. You will be able to hire the right amount of staff and order enough inventory for busy times ahead of you. Take a look at some ways that your diligent, consistent bookkeeping and small business accounting systems will set your business up for future success:

  • Cash Flow Projections: If your small business has an organized bookkeeping system, you will be able to predict your cash flow better and use it optimally. You can invest in higher amounts of inventory, knowing you have the money to spare and that you can expect significant returns. When you have a clear view of your cash flow, you can make deals with vendors and confidently show the business you will be offering them. This will give you the assurance to make deals that benefit your small business and the supplier’s business.
  • Clear View of Fixed and Variable Costs: Detailed books will give you a breakdown of your fixed and variable costs. When you combine this knowledge with your cash flow summaries, you will be able to have a look at which variable costs return the most profit. Making better investments into your small business is going to set your business up for success.
  • Forecast to Optimize Profit: When you get through your holiday rush this year with great success, you will want to go into the next busy season with bigger goals. It is essential to focus on asset optimization, which is the best price for each product or service that will keep the customers coming. Having records that look back on the number of customers related to the particular promotion you were offering at that time will help you plan for sales and promotions in your small business.

It is essential to use your organized accounting system to make decisions for your business. When you get through the holidays and have detailed bookkeeping to look back on, then you can use those numbers to improve your business. You can take your successful holiday season and make it even more successful for the next year.

Contact Small Business Bookkeeping Professionals

As an entrepreneur, it is tempting to do it all yourself in order to save the most money. This isn’t always possible, and it’s certainly not always true. When you hire experts on small business accounting, you can rest assured knowing that your books are well-organized and accurate. When you hire outside accountants to help your small business, you can focus on the parts of your business in which you are most passionate.

We want to help you during the holidays! When you hire professionals to take care of your bookkeeping and finances, you will receive a clear breakdown of your small business’s accounting. Having a good handle on accounting can help you better predict and prepare for the future of your company. And your small business has a greater opportunity to grow. Give our team at Easier Accounting a call and receive the accounting relief that you need this season: (888) 620-0770.

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