Bookkeeping may appear to be a small contributing factor to the success or failure of your business, but since keeping books involves keeping your cash flow in check, knowing you have enough money on bank to sustain the growth of your business gives you greater peace of mind. There are business owners who remain complacent about their business because of the profit obtained. However, a profitable business does not guarantee a steady flow of cash. Profit and cash flow are separate entities. So how can bad bookkeeping hurt your business?
1. It creates credit problems.
Small businesses need to borrow money from creditors to keep the company alive. Once approved, you need to make sure that you have the ability to repay debts in a timely manner or as agreed. Only a savvy bookkeeper will enable you to pay your debts without shouldering late fees and interest rates. Credit problems can cause you to settle for less favorable payment terms and suffer the loss of credit. It will be difficult for you to regain the trust of your suppliers and vendors if this happens because you failed to keep an accurate record.
Keeping track of your cash flow is also your bookkeeper’s responsibility. You should know when your receivables will arrive and when your bills should be paid.
2. It leads to legal problems.
Improper deductions and late or unpaid taxes are reasons why small businesses are faced with legal problems. If your funds are not enough to pay creditors, there is also a great possibility that you will be sued especially if your bookkeeper is not familiar with tax policies. A good bookkeeper provides annual bookkeeping procedures so you can handle your payroll, sales and income taxes.
3. It causes you to lose sales and profits.
If you always miss payments or fail to pay your bills on time, it results in losing access to vendors and suppliers. It is easy to lose sales when you cannot provide the service or products your customers are asking for. If it takes time for your company to deliver goods, this alone can cause your clients and customers to find other businesses that can provide their needs. It will be difficult for customers to go back to you if they have already used a new company.
4. It decreases opportunities.
When you need to reduce debt or increase your marketing, accepting opportunities to grow your business has to take a backseat. This happens when you have less money because your bookkeeper has failed to provide accurate financial reports. If you do not ensure accurate bookkeeping, you will also lose the ability to run your business efficiently.