Bookkeeping is where it all starts for any business looking to achieve its financial and accounting goals. The simple act of tracking and recording daily transactions, posting debits, credits, producing invoices, maintaining and balancing general ledger are the fundamentals on which an efficient, accurate and productive accounting department is built.
Having helped hundreds of small and medium businesses achieve their financial and accounting goals, where do you think we inspect first? – It’s always the bookkeeping.
When Does Bookkeeping Function Turn into a Problem?
While Bookkeeping may sound like a simple task for a small business, it over time can grow into a complex and inaccurate process as the business grows and transactions volume increases. And when you are not equipped with a dedicated bookkeeper or efficient Bookkeeping services, the fundamental issues with the recorded information can turn out into massive accounting issues and problems that may or may not manifest immediately.
Most businesses ignore these minor bookkeeping issues which overtime turnout into massive accounting issues. But to help you, in this blog we are listing out common accounting problems that arise due to bad or inaccurate bookkeeping – this will help not only you understand the importance of bookkeeping and also assist you in catching these problems much earlier before they turn out into massive accounting issues for your business. So read on, following are 4 common ways poor and inefficient bookkeeping can exponentially damage your business overtime:
Loss of Revenue: The most direct and obvious way incorrect or inefficient way bookkeeping can impact your business is by not accurately tracking the receivables. When your bookkeeping doesn’t efficiently monitor or track the invoices especially from ageing accounts, you will lose money and worse, you might never know you lost it. This is a common situation that goes under the radar due to the large volume of invoices and lack of streamlined bookkeeping or sufficient manpower.
Losing cash flow due to poor bookkeeping can happen in multiple ways and receivable is only one among them. A simple way to solve this problem is to use an automated bookkeeping solution that categorizes receivables such as these to help you follow them up. And even simpler way is to outsourced bookkeeping functions to remote accounting firms like Outsourced Bookkeeping
Misjudging Expenses: Loss of revenue due to untracked or missed receivables is mostly experienced in business with high volume invoices. But one common way poor bookkeeping can thwart every business is by misjudging expenses.
Business payments and transactions involve many key details like hidden fees, charges, interest, recurring payments and a variety of small purchases which over time can add up and result in a massive gap between expected and real expenses. In the majority of small businesses, many small purchases can go under the radar without recording or monitoring that can cop a blow for the finances given they are not expected hence not managed and not taken into account. A bad practice that can go undetected, grow and negatively impact the business in the longer run.
Ensuring accurate expense tracking and monitoring without leaving key details is the solution to this problem but businesses need a streamlined and perfectly executed bookkeeping function to avoid this problem.
Incorrect Reports: Poor bookkeeping can result in incorrect reports not giving enough resources for a business to correct its course of action. For example, not accurately tracking cash inflow can distort a business estimated profit margins and cash flow. Misjudging the expenses may also resulting failure to report expenses and overpaying taxes. Accurate reporting is how a business understands its financial position, manage or strategize for better financial performance and poor bookkeeping doesn’t let that happen.
Legal and tax problems: Inaccurate and poor bookkeeping is a welcome note for legal and tax problems. Loss in revenue and misjudged expenses can cause cash flow problems resulting in cash crunch which can pave way for penalties, loss of trust and even legal problems at worst. Inaccurate tracking a recording of transactions, deductions that result in late tax return filing is another major problem caused by poor bookkeeping practices. Even for businesses with manageable bookkeeping practices, hiring bookkeeping with adequate knowledge of tax policies and procedures is the easiest way to ward off potential legal and tax problems.
Ignoring efficient and accurate bookkeeping is one of the major reasons most small businesses fail to achieve optimal accounting and financial performance. However, failure to find the right bookkeeper with expertise in all the bookkeeping functions, and adequate knowledge in tax policies is what holds back many small and medium businesses. If you are one of them our bookkeeping specialists at Outsourced Bookkeeping can help you.
How Outsourced Bookkeeping Can Help?
With industry experience spanning decades, Outsourced Bookkeeping is famed for providing accurate, effective and all-round expert bookkeeping services for all types of businesses. Our Bookkeeping experts are industry veterans equipped with advanced tools to help you craft, strategize and execute streamlined and accurate bookkeeping services that are in line with your accounting requirements and functions.
Also being an expert back-office accounting firm offering Accounts Payable Accounts Receivable, Tax preparation and filing services, we offer the most comprehensive bookkeeping and accounting services that can help you improve your accounting and financial performance. If you are looking for an expert remote accounting firm to outsource your bookkeeping services, you can contact us here: https://outsourcedbookeeping.com