As the owner of an accounting firm that specializes in helping small and medium-sized businesses and not-for-profit organizations, I’ve helped many clients clean up their books and save money. During their onboarding process, it’s not easy to get the books in order after they’ve neglected them for quite some time. In many cases, the owner/executive was focused externally on customers, members and/or program participants, and the bookkeeping and other office processes got lost in the shuffle. This can be extremely detrimental in the long-run, since it’s more expensive and time-consuming to fix your books after-the-fact than to set up a good system on the front-end.
Here are some important reasons why good bookkeeping matters and how bad bookkeeping can hurt your business:
Make Better Business Decisions
Have you ever been given the wrong directions? If so, you’ve likely ended up at the wrong location, and wasted valuable time before reaching your desired destination. The same frustrations can occur if your financial records are inaccurate and out-of-date.
Your financial statements are your map to making sound business decisions about your practice. An inaccurate understanding of your financial status, including key performance indicators, can lead you to make erroneous decisions that can impact your operations. For example, in the short-term, if you don’t understand your cash in-flows and out-flows, you may experience overdrafts, late fees and have difficulty making your payroll on time. In the long-term, if you don’t know your sales profitability, you may miss opportunities to invest resources in the more profitable lines of your business, and sunset the less profitable products in your inventories. Similarly, in not-for-profit organizations, if you don’t know the true costs of your programs, you may make bad decisions on which programs to invest more resources. These unpleasant situations can be prevented by maintaining accurate books and records and investing the time to understand them and how they can help you manage your operations.
Facilitate Financing Options
Do you desire to grow your operations? To do so, you may need to purchase new equipment and technology, or make leasehold improvements to your office. Like many organizations, you may need to pursue loan opportunities. If that’s the case, potential creditors will want to review your financial viability to repay the loans, so having up-to-date financial statements is a must. Bad bookkeeping can wreak havoc on your ability to obtain the financing you need to achieve your growth goals. Even more importantly, having an accurate understanding of your financial status can help you make the decision on whether you are able to grow and what it will take to sustain your operations.
Manage Tax Compliance Risks
Accurate financial records are essential to filing your tax returns properly and can minimize your chances of being audited and/or incurring tax penalties. Businesses who have bad bookkeeping practices tend to file late and/or lack the proper documentation to support their filings. This raises red flags with the IRS. If you’re audited and cannot support your income and deductions, the results can be costly to your organization.
Getting Your Records Straight
In the early stages of your operations, it’s understandable that your focus lies with serving your clients, customers and program participants. However, to help ensure your business or not-for profit thrives, you need a clear and accurate picture of your financial status – in other words, good bookkeeping matters! So that you can continue investing your time and energy on what matters most, consider the benefits of outsourcing all or parts of your accounting functions to a reputable outsourced accounting firm. A seasoned professional can not only help you maintain accurate and timely financial records, but also help improve your back-office operations through streamlined processes and integrated technology solutions. This leads to better financial decisions related to your practice.
How Consultance Accounting can help: Consultance leverages exceptional talent, proven processes, and top technology platforms to deliver timely & accurate financial solutions that help small and medium-sized organizations improve productivity, increase profitability, and achieve their goals. We use cloud-based technologies that integrate with each other to streamline the process. Contact Us if you have questions and/or need more assistance.