Most business owners who take bookkeeping into their own hands tend to slack and find a hard time keeping it up-to-date. Bookkeeping can be time-consuming, and multi-tasking various business activities can cause burnout. They often end up skipping or making errors on tasks like bookkeeping. This can cost the business owners their hard-earned money and above that, they find it hard to track their business performance without accurate data. It gets worse when the tax deadline gets closer and have to pay a fortune to catch up with the bookkeeping and tracking expenses of the past year.
Here are some scenarios of what happens if you ignore bookkeeping.
Unreliable financial records.
Keeping a financial trail is necessary to scale your business performance. Without bookkeeping, it is almost impossible to have a reliable financial record. It won’t be accurate and you won’t have an exact idea of the financial position of your company. You simply won’t have enough data to scale your business, where the cash is coming from, or where it should be going. It will be hard to understand your business costs and working capital to survive in the market.
While running a business, you should have detailed knowledge about sales, income streams, inventory held, variable expenses, and so on. If you skip bookkeeping you won’t be able to understand the money that goes in and out of your business. without proper cash flow management, it won’t be easy to track your invoices and this can lead to cash crunches. This makes it hard to meet your expenses on time and it will be harder to find out where you’re struggling financially.
Hard to manage expenses.
Your business is prone to lose money if your books are not up-to-date. Unaccounted expenses can be a huge problem while filing for taxes. If you do this multiple times, it will be much harder to track your expenses at the time of filing taxes and you might end up paying penalties to the IRS.
Limited financing options.
Nobody will consider investing money in a company without accurate financial records. If you’re approaching a blank to get a loan, your application will be turned down for the same reason. Banks and investors need accurate profit and loss statements, cash flow statements, etc. to provide you a loan or invest in it. Without bookkeeping your options to get loans or find investors are much limited.
Making sure your employees get paid on time is important. It will be hard to track employee activities like leave taken, overtime, incentives, etc. without accurate bookkeeping. You might end up either underpaying or overpaying your employees. Both scenarios are not good for your business, they can cause tax troubles and affect the work culture.
Drains your time and money.
If your financial records are not organized, your money could end up in someone else’s pocket. You might have to pay penalties for inaccurate financial data. You will end up paying late payment fees if you missed paying any of your expenses on time. If your bookkeeping gets piled up, you should spend a significant amount of time and money on catch-up bookkeeping services at the time of tax season to track all of your expenses down.
Inaccurate tax filing and losing money consistently are some of the major triggers of IRS audits. Wrongly classifying the employees, large expense deductions, etc. are some of the other red flags. if you fail to comply and prove yourself at an audit, you might lose a fortune in penalties and even more paperwork!
Do you have trouble maintaining your books up-to-date? We can help you out!
Outsourcing your bookkeeping can help you take the burden off your head and focus on running your business. Get in touch with us now to book an appointment.