Even in a successful business, following solid accounting practice matters. You’re working for a reason, and overlooking areas where money could be saved means you have to work that much harder to achieve the same level of profit. If your business isn’t robust, these opportunity costs have the potential to sink you entirely.
The good news is, many of the most common erroneous accounting practices are easily fixed. You only need to be aware of them and make minor changes in order to reap the benefits. Additionally, hiring small business bookkeeping services can ensure you have detailed information for tax filings, profit and loss reports, and more. Without the right financial tracking, you are setting your business up for failure.
Potential Problems in Your Small Business Bookkeeping
Jotting down a transaction on a piece of scrap paper isn’t good enough for your financial tracking. Instead of “getting by” with unproven systems, right now is the perfect time to implement an effective accounting and bookkeeping program. This step will help you overcome some of these common mistakes that happen when an inexperienced person handles bookkeeping for a company:
- Lack of consistency where transactions are recorded
- Hand-written accounting, instead of using a computer system
- Only using manual calculations
- Overlooking small transactions
- Missing tax payments and paperwork
- Lack of communication with a bookkeeper or accountant
- Organizational problems causing lost invoices and paperwork
- Falling behind on data entry
- Failing to complete regular audits and checks
- Hiring an inexperienced person to do the bookkeeping
Tracking your financial records might be the most important thing that you can do to support the future success of your company. If you don’t keep up with these tasks, then you will face big challenges that need to be overcome before you can lead your business to the goals that you desire.
Consequences of Bad Small Business Bookkeeping
IRS Audit: Resulting in time, stress, and money for accounting services to work through the audit. If incorrect information is discovered on your tax filing, then it is possible that you will be facing expensive fines and fees that could negatively impact your current cash flow. The best solution is to have an experienced accountant who will help you follow the rules and avoid the risk of an audit.
Under-reported Revenue: Poor bookkeeping could lead to unreported or under-reported items, such as revenues, investment income, rental income or other types of earnings. Flawed bookkeeping records could lead to tax problems with the Internal Revenue Service as well as state and local government agencies. Your company may incur late fees and other penalties due to poor bookkeeping.
Inaccurate Payroll: Your company’s payroll may be impacted if your record-keeping methods are antiquated. A system of checks and balances needs to be in place to ensure that each employee receives the proper payroll amount. Poor bookkeeping could cause an employee to receive inaccurate year-to-date earnings on his year-end pay stub or W-2 form.
Not Filing Taxes on Time: Entrepreneurs are prone to putting off taxes because they’re so busy running the day-to-day operations of their businesses. By the time tax day rolls around, they’re still gathering up receipts and throwing them into a box. Delayed filing of tax paperwork can result in some hefty fines and it may also signal to the IRS that the agency needs to give your paperwork more scrutiny. If you’re also committing one of the other big mistakes, an audit can be agony.
Cash Flow Problems: 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 for business development, payroll, office supplies, and more. If you aren’t tracking your inflow and outflow, then you might be caught in a difficult situation where there isn’t enough money to pay the bills. These problems can be avoided by hiring a good accountant who will track the records and help you avoid cash flow problems.
Failure to Balance Bank Accounts Regularly: If a key piece of equipment broke tomorrow, could you afford to fix it? If business was booming, could you purchase more equipment? These are imperative business decisions that can only be made if you know with total certainty what’s in your account and how much of it can be spent. Make sure to balance all bank accounts at least monthly.
Not Billing On a Cycle: Unfortunately, if you don’t set the precedent for payments, people aren’t going to pay in a timely manner. Billing them on a regular basis shows that you’re organized and sends them the subliminal cue that they should be paying timely as well, plus it allows them to budget for their payments to you. Either way, that puts money in your pocket quicker.
Poor Business Decisions: How can you make accurate decisions for your company if you don’t understand the current financial health of the business? When you are facing decisions about hiring employees, business development, or marketing costs, you need an accurate picture of the financial health of your company. This information is essential so that you can run financial reports and then make decisions based on the current financial trends that you are experiencing.
The Bottom Line: Get Accounting Help if Your Small Business Needs it
The benefits of following sound accounting practices seep into every area of your business. If you’re struggling to follow them, whether because finances are overwhelming, you’re too busy running your business, or for any other reason, don’t hesitate to hire small business bookkeeping services
Limitless Investment and Capital Small Business Bookkeeping Services in Denver
As an accounting and bookkeeping firm serving Denver, we focus primarily on making sure your business financials are in order and reported accurately. We don’t take shortcuts, nor do we expect you to do your own books on our clock. We offer an accessible and affordable way to get a handle on your books before it’s too late. Contact us TODAY to get started!