Three Consequences of Avoiding Your Bookkeeping
If you ask 100 business owners what they like least about running a business, chances are good that bookkeeping will rank high on the list. It’s one of those chores that takes up a lot of time and is easy to put off until tomorrow. Generally its also the last thing you want to be doing when you spend all day working either in or on your business.
The problem is, avoiding your bookkeeping is dangerous! Not knowing your financial position can result in a serious series of missteps that could ultimately cost you your business.
Here are three consequences of not keeping on top or your bookkeeping processes:
1. You’ll make poor decisions
You can only make informed decisions about your business when you have a full picture of your current financial situation, including how much money is in your accounts, what your cash flow forecast predicts, and how much money you owe. Without that information, it’s a guessing game to know when you can afford to spend money or when you need to hold back.
Without proper bookkeeping systems in place, your decisions will be based on how you think things are going, which isn’t always accurate. You may have just finished a good month and decide it’s time to hire new employees only to find out you don’t have enough money in the bank to pay them. Waiting three months to hire employees might be more profitable for you in the long run, but you won’t know that if your book work isn’t up-to-date.
Maintaining your books ensures you have your company’s full financial picture available to you so you can make smart decisions.
2. You could make serious financial mistakes
Your employees, contractors, and lenders all rely on you to make your payments on time, every time. Payroll itself requires considerable attention to legislation to ensure your employees receive their benefits properly.
Not keeping track of your financials can result in expensive errors being made, including benefits being missed, bills not being paid on time, or over- or under-payments. This could cost you extra in fees for late payments or rushed payments, which also affects the financial picture.
On top of all this, financial mistakes can lead to a lack of trust. You need a trusting relationship with your employees, contractors and lenders. Payment errors can erode that relationship quickly.
3. You will lose money
In addition to losing money in unnecessary late fees and payment charges, not keeping track of your books can result in lost money that your business desperately needs.
You won’t know which of your clients or customers aren’t paying you on time, which means you can’t follow up with them or add interest charges for their late payments (depends on your terms of trade).
You could be paying too much in expenses and if you don’t reconcile your books you’ll have no idea that money is being wasted. Perhaps you purchased a software program to enhance productivity in the early days of your business. Maybe you stopped using it but forgot to cancel it, so each month for the past few years, you’ve been paying for a service you don’t use.
Those payments add up and will affect your overall financial position.
While bookkeeping might be many business owners least enjoyable task, but it’s an extremely important one. Thankfully, with the advent of software like Xero and Pay Hero, we don’t have to manually fill in ledger books these days. If you find yourself putting off bookkeeping or dreading doing getting to those accounts, it’s a good idea to look at help to put systems and processes in place to make it easier Bookkeepers are trained and knowledgeable in the processes, and using the services of a Certified Bookkeeper can save you valuable time and money in the long run.
Set aside time regularly to do your books and don’t let yourself put the task off. It’s too important to the future of your business. If it is not the best use of your time, we can take care of it for you to ensure success for your business.
Want to get your books in order without adding more work to your plate? Get in touch with us to discuss how we can help.