Many entrepreneurs find bookkeeping a tedious and time-consuming task. They didn’t start a business, based on a passion they have, to spend hours every month doing their books! The problem is that if they ignore the bookkeeping they can and will find themselves in a world of pain!
Efficient, timely and accurate financial reports assist you to see how your business is performing in all areas. It gives you the good, the bad and the downright ugly! Your books will also help you to spot any problems and inefficiencies whilst giving you the opportunity to address these.
What happens when you have an inability to make smart decisions…
If you don’t reconcile your accounts and do the required reports, you leave yourself with a distinct lack of information. Without accurate data, you can’t make smart decisions to move your business forward. By not having a cash flow forecast you will be uncertain of so many things:
- can you afford to hire new employees?
- is the idea of moving into better premises a clever one?
- can you indulge in some new furniture for the office?
- should you undertake a bigger and better marketing strategy?
- Is the time right to invest in new tools?
- and so on and so forth!
You could make decisions that then create a burden on your cash flow and then you may really start to feel the effect of bad bookkeeping. Without having an exact picture of the financial situation, it is not possible to determine if you are creating or growing more problems.
You could run out of money…
There is little doubt that neglecting your bookkeeping will lead to a scenario where you could run out of money! That is a possibility whether your business is good or bad. Unless you track your receivables, you don’t know who owes you money or when that money is due. Some customers don’t pay attention to their bills and won’t pay you until they have to. If you have really ineffective bookkeeping, you run the danger of your debtors not knowing they owe you because they never received an invoice.
It is also a possibility that you may allocate payments or debts to the wrong vendor. You then run the risk of creating relationship issues. If you have not maintained reports, you could also be paying unnecessary things. Things that you don’t notice until it appears on the credit card statement.
Payroll errors can be costly and unsettling
The employees of the business are the frontline, without them you do not have a business! You can’t operate without them and as a result of this, they should get paid first and on time, every time their payment is due. You may choose an interval to pay them, but you must stick to that schedule. Efficient bookkeeping ensures that they pay benefits of your employees are tracked and distributed accurately. By not handling the payroll efficiently you can be in danger of:
- Fail in the collection of taxes
- You could overpay employees who may not report this
- You could have to rush payment to employees putting your cash flow at risk
Errors in payroll can adversely affect your relationship with your team members. Moreover, you could also have to pay fines to the government by failing to pay payroll taxes to the ATO.
Inability to raise Money
You may need financing from a bank at some point in your business. This includes a one-time loan or a line of credit. Without accurate records, the banks will not trust you and are not likely to lend you the money you need. Banks make use of your records to analyse whether to give you a credit or not.
Even if you convince a bank to offer you some credit, the terms and conditions will be poor, and you will pay extremely high fees. Bad bookkeeping also creates a possibility that you’ll miss the payments or make late payments, this will also affect your credit rating. You could also think about raising credit from investors. The investor would also like to see all your financial data dating back years before they make any decision. If you fail to show them the data, they are less likely to invest in you.
IN SHORT, BOOKKEEPING CAN NOT BE NEGLECTED
Bookkeeping is no doubt a challenging task and for many, not an enjoyable one. It takes a very particular skillset to look for small details and maintain accurate books. You could not be having much time every day to get the books done. By having an accurate bookkeeping system in your business, you can leverage the power of efficient financial reporting. This will allow you to make accurate decisions and protect your business from unnecessary expenses.
If this is not possible for you to do yourself then you should look at outsourcing as an option! This will give you the confidence to make decisions about the growth of your business and expansion.
The cost of a bookkeeper is nowhere near the cost to your business of bad bookkeeping and financial records…
If you would like to chat with Liz and her team about their approach, please do get in touch. You can email Liz here or give her a call on 0405 801 119 for a discussion about where you are right now and where you would like to be.