As a small business owner, you might think bookkeeping is boring. In fact, many people think bookkeeping is boring and you’re probably right. However, do you know what is worse than something that is boring? Your small business failing because you didn’t stay on top of your finances. Or even worse, losing money because you simply didn’t keep track of what money was coming in and going out of your business.
Why Bookkeeping Matters
Small business owners are often great at landing new customers or creating new products or services, but many fail to keep track of the fundamental financials. To put it in simple terms, bookkeeping keeps track of your finances. As a business owner, it’s difficult to deny the value in seeing a financial snapshot of money going in and money coming out each day, week, and month. Businesses who lack financial clarity will often run into cash flow problems, rack up huge amounts of debt, fail to know which products or services are profitable/ losing money or forget to invoice customers.
Without the books, you have no numbers and without the numbers, you have no point of reference. Your small business will be unable to make business decisions, and won’t even be able to complete basic tasks such as submitting tax returns.
If you are unfamiliar with accounting and bookkeeping, than it is possible you don’t understand the serious implications of bad bookkeeping. Here are a few consequences your small business might face:
#1. IRS Audit
People sometimes fail to accurately file their tax returns for various reasons. For example, some taxpayers may underreport their cash income, which can lead to tax penalties. For this reason, the IRS picks out tax returns that seem suspicious and proceeds with the audit process.
If incorrect information is discovered on your tax filing, then it is possible your small business will be facing expensive fines and fees that could have a negative impact on your current cash flow. If you have been summoned for an audit by the IRS, you should know that the odds of escaping without owing additional taxes are slim. In general, the IRS does not spend its resources on conducting tax audits unless there is a good chance for revenue to be gained.
The best solution for any small business that is unfamiliar with bookkeeping is to hire an outsourced part-time bookkeeper that can handle all your record keeping and ensure tax compliance. Outsourced bookkeepers will come at a fraction of the cost of hiring a full-time in-house bookkeeper. Get in Touch to learn more about Limitless Investment and Capital’s Bookkeeping Services starting as low as $199/month.
#2. Cash Flow Problems
No matter how great your small business model is, how profitable you are or how many investors are interested in supporting your business, you can’t survive if you can’t properly manage your company’s cash flow.
In fact, a prominent study from the financial services company U.S. Bank found that as many as 82 percent of startups and small businesses fail due to poor cash-flow management. So, even if you’re a brilliant and experienced entrepreneur in every other way, you must stay focused on managing your small business’s cash flow to avoid putting your business in danger and risk losing money.
Having cash flow is especially important for paying your employees. What will happen if it is time for payroll and you don’t have enough money in the bank to pay your employees? Costs come up every month and if you aren’t tracking your inflow and outflow then you may be caught in a situation where there isn’t enough money to pay your bills.
These problems can be completely avoided by hiring a good bookkeeper or Certified Public Accountant who has the expertise to track the records and help ensure long-term business success.
#3. Poor Business Decisions
Although your business may be based on an aesthetic vision or a personal ideal, it will only be able to operate successfully if it is financially sound. As a small business owner, you will not be able to make accurate business decisions without understanding the current financial health of your company. When you are faced with tough decisions such as hiring new employees, business development, or marketing costs, having accurate and updated financial statements can help ensure your company is making the right moves based on the current financial trends that you are experiencing.
If you want to create a successful business in the future, then 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.
Limitless Investment and Capital Small Business Bookkeeping Services Starting at just $199/Month
Limitless Investment and Capital is a CPA firm that specializes in helping small and medium-sized businesses. We’ve helped many clients clean up their books and save money. During their onboarding process, it’s not easy to get their books in order after they’ve neglected them for quite some time. In many cases, the owner/executive was focused externally on customers, members and/or program participants, and the bookkeeping and other office processes got lost in the shuffle. This can be extremely detrimental in the long run, since it’s more expensive and time-consuming to fix your books after-the-fact than to set up a good system on the front-end. Our Certified Public Accountants are dedicated to getting your books cleaned up, or helping your small business set up a proper bookkeeping system to ensure long-term success.