If you ask most business owners what is their least favourite thing about running a business, the chances are good that bookkeeping will rank high on the list. It’s a frustrating and annoying chore that takes up a lot of time and is very easy to put off until tomorrow.
Avoiding your bookkeeping can be dangerous, however. Not knowing your company’s financial status can result in a series of missteps that can ultimately cost you your business.
Here are some consequences of not keeping up with your bookkeeping.
You’ll make poor decisions
It’s only possible to make informed decisions about your business when you have a complete picture of your financial situation, including how much money you have in your accounts, what your cash flow forecast predicts, and how much money you currently owe. Without that information, it’s harder to know when you can afford to spend money or when you need to hold back.
Without the proper bookkeeping, your decisions will be based on how you perceive things to be going, and that isn’t always accurate. You may have just had a busy month and decide it’s time to hire a new team member only to find out you don’t have enough money in the bank to pay them. Waiting a few months to hire employees could be more profitable for you in the long term, but you won’t know that because your books aren’t up to date.
Maintaining your books ensures you have your company’s complete financial picture available to you so you can make smart decisions.
You’ll make financial mistakes
Your contractors, lenders, and employees all rely on you to make sure your payments are on time, every time. Payroll alone requires your full attention to ensure your employees receive their benefits properly.
Not keeping track of the books can result in expensive errors being made, bills not being paid on time, or the correct amount being paid, and benefits being missed. This can result in fees for late-payments or rushed payments, which will also affect your books.
On top of all this, financial mistakes can lead to a lack of trust between employees, contractors, and lenders. These relationships are essential, and payment errors can cause a breakdown in relationships quickly.
You’ll lose money
As well as losing money in unnecessary late fees and payment charges, not keeping track of the books may result in lost money that your business relies on.
You won’t know which of your customers or clients aren’t paying you on time, which means you won’t be able to follow up with them or add interest charges for their late payments.
You could be paying too much in unnecessary expenses, and if you aren’t reconciling your books, you’ll have no idea where that money is being wasted. Maybe you purchased a software program to enhance your productivity in the early days of your business. Perhaps you no longer use it but forgot to cancel it, so each month for the past year, you’ve been paying for a service you don’t use.
Those payments can quickly add up and affect your overall financial position.
Bookkeeping might be and new business owners least enjoyable task, but it’s an important one. If you find yourself putting off the bookkeeping or dread doing it, it’s a good idea to look at hiring someone to do it for you. Bookkeepers are trained experts in the process, and they can save you money and valuable time in the long run.
Otherwise, be prepared to regularly set aside some time to do your books yourself and not let yourself put the task off. It’s too important to the future of your business.
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