Small business owners know the stress and hassle of having too much on their plate and too little time to handle it. From preparing fundraisers to putting out fires from angry or dissatisfied customers, there’s just too much going on in the early business days which lets procrastinating some mundane tasks become a habit. Among these tasks can be bookkeeping.
As mundane and hassling as it may appear, bookkeeping is one of the biggest pillars when it comes to supporting your business‘s finances, management, and growth. Not only does it encompass all financial aspects of your business, but it also plays a crucial role in strategy development and tax filing, which makes it an indispensable business element.
However, as you’re still trying to get the hang of it as your business grows, you might be neglecting your bookkeeping till the close of the month, contributing to the growth obstacles your small business might face. It’s important to know what would happen if your small business failed to keep up with bookkeeping to help you understand its potential consequences and help you be more diligent with your bookkeeping in the future.
Setbacks Your Small Business Might Face Due to Poor Bookkeeping
Your bookkeeping is the system that keeps your finances up and running. So if you were procrastinating doing your bookkeeping and thinking “I’ll do it later when I have some more time”, here are some serious consequences that you might face due to poor bookkeeping practices to help you reconsider:
1. Your Business’s Finances are Left Obscured
There’s a common saying in the corporate world that goes like: If you don’t know your finances, you don’t know your company. If you were to put a stop to bookkeeping for just a couple of months, your books would no longer be helpful to your business since they won’t show your business’s financial health and progress.
Without updated and accurate books, it might be nearly impossible for you to keep track of your cash flow projection, future expenses, and so forth. Bookkeeping helps you keep a clear cash flow, which helps you keep an eye on when money comes in and what bills are due to be paid. Without bookkeeping, there’s no paper trail to learn and manage your finances.
2. Your Financing Options Become Limited
Small businesses need quick funding from time to time since their operations can be tumultuous and more easily affected by market trends and economic fluctuations. However, your financing options become limited to none if you don’t have accurate and updated books.
Since taking out business loans entails banks asking for your detailed financial records, you might face quite trouble in securing funding. Without an updated, accurate, and detailed financial history, bringing investors on board, securing loans, or selling shares is going to become 10x times more challenging.
3. Your Invoicing Shifts Entirely to Your Head
There’s only so much your mind could keep a mental note of if your bookkeeping isn’t. Are you sure you left a note about the invoice for the client who’s a notorious late payer? Or the one that asks to have their invoices sent to different locations?
No vendor is going to remind you they owe you money. The more you rely on your head to keep track of your invoices rather than letting your bookkeeping organize and handle outstanding invoices, the more your business will have to struggle without those funds.
4. Your Payroll Keeps Your Employees Unhappy
Businesses need to keep their employees happy to ensure operational continuity. This entails ensuring they get paid on time and accurately. But how are you going to ensure they are being paid on time if there isn’t a system in place supervising your payroll?
Without proper bookkeeping, you might under-compensate, or in many cases, overpay your employees. Not to mention, any payroll errors on your end will be reflected in your employee’s W-2 forms and might result in tax implications for both of you.
5. Your Taxes Become Your Business’s Worst Nightmare
Bookkeeping and taxes go hand-in-hand since tax preparation requires accurate and timely financial records that your bookkeeping facilitates it with. Now imagine planning to prepare for your taxes when you don’t have a clue about what’s going on in your finances. While there won’t be an intimidating IRS agent showing up at your doorstep, your business might incur IRS audits, late fees, and penalties due to late or incorrect tax filing because of poor bookkeeping.
Outsource Your Bookkeeping to Set Your Small Business Back on Track
Small business owners are too busy and too tight on budget that hiring an in-house bookkeeping staff might cost you a chunk out of your profits. This might be the reason you might be putting off letting professionals manage your bookkeeping.
This is why outsourcing expert bookkeeping services is the most cost-efficient step you can take to ensure your books are organized and updated on time to ensure your finances get the support they need. Hiring professional bookkeeping services can help you access streamlined bookkeeping integrated with advanced technological solutions to help your business manage its finances with effortless ease and focus on expansion opportunities.
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