Having poor bookkeeping might seem like it’s a minor issue and there are more important things in your business than bookkeeping, but poor bookkeeping can lead to surprise costs and slow your business growth, or even put you out of business. Here is a quick overview of how poor bookkeeping can harm your business and how to avoid it.
- Missed Growth
Incorrect bookkeeping or no bookkeeping would make it very difficult to plan for growth and access outside funding like loans or investments. Without a clear picture of your financials, you might just miss opportunities to take your business to the next level.
Avoid this by maintaining financial reports and reviewing them periodically, you can then use this information to make inform business decisions.
- Government Compliance
As a small business owner you need to be aware of all your government compliance (like ATO, Superannuation, Fairwork, Portable Long Service Leave, Payroll Tax and many more), by being unaware of all the government compliance and not having correct numbers available to provide to them can cause significate financial penalties and legal issues.
Maintain complete financial records on an accounting system so numbers are readerly available and engage a professional to advise you on what may be required like an accountant or bookkeeper.
- The stress of poor cashflow
Without up-to-date bookkeeping it’s hard to keep track of what you owe and what’s owed to you, these types of mistakes can jeopardize the day-to-day operations of your business.
To avoid poor operating cash flow you should regularly reconcile your bank accounts and implement an accounts receivable and payables system. Most accounting software should be able to help with this.
- Missing Fraud and miss management of business funds
Poor bookkeeping makes it easier for other parties to commit fraudulent activities or for errors to go unnoticed, this can easily result in significant losses if not caught.
Implement internal controls to avoid this, even basic controls like balancing the till at the end of the day or doing regular stocktakes can minimise the risk of fraud. Internal audits are always great to look for inconsistencies or suspicious activities.
Conclusion
The hidden costs of poor bookkeeping can be the reason your business could fail or succeed. Inaccurate financial data, timely reporting and internal controls are all proactive ways to avoid some of these issues to ensure your business has the best chance at long-term growth. Without these, you could be wasting time, and money and be more stressed than you need to be.
If you want help putting internal controls in place or having a professional bookkeeper in your corner then our team of Geelong Bookkeepers can certainly help.