How does bad bookkeeping affect businesses?
A smoothly running business does not just require a great marketing and sales strategy, a great product or service, and innovation, it also requires precise bookkeeping and accounting practices. Accurate Tax & Bookkeeping Services shares the impact of bad bookkeeping on businesses below.
- Credit Issues
When effective reporting and cash management are amiss, credit problems emerge. Poor bookkeeping can lead to mismanagement of transactions, delayed debt payments, rise in interest rates, fewer payment terms, loss of credit, and fall in the credit score. It is imperative to monitor the cash flow with healthy bookkeeping practices.
- Cash flow problems
Accurate tracking of expenses and payables, invoice automation, and effective management of collections offer a clear picture of the cash flow situation. If information such as available credit and overdrafts on accounts are undocumented, the business can soon run into cash flow challenges without any warning. With accurate bookkeeping and accounting systems, budgeting will improve and business owners can arrest cash flow problems before they occur.
- Risk of internal fraud
Lack of policies and sound processes are necessary to segregate powers and duties as well as allow for proper checks and balances. In the absence of external accounting help, internal fraud schemes become a high probability. Small businesses are vulnerable to these losses and business owners must have the insight to protect themselves from this threat.
- Unclear costs, incorrect pricing
Poor tracking of expenses and employee time means there is no proof of the costs the business is incurring. Without costs, competent pricing of products and services is impossible. The business owners will be unable to determine their profits and will eventually struggle with cash flow problems. For a business to flourish, an efficient bookkeeping system is indispensable.
- Legal challenges
Unpaid tax or late filing of tax returns and inaccurate deductions will inevitably lead to legal problems with the government. Lack of clarity on the debts owed can lead to legal action by the creditors. A bookkeeper with accurate knowledge of tax policies, and competency in handling yearly accounting procedures can keep legal troubles at bay by providing better control over income, taxes, deductions, and sales.
- No strategy
Without a strategy, a business cannot survive. And strategy is impossible in the absence of a tight bookkeeping system. A business owner can strive to achieve a vision and curate a plan of action only when the financial facts are crystal clear. A poorly functioning bookkeeping system can not only derail the business from achieving goals but also takes away the ability to set benchmarks and measure progress. The lack of clarity in, for instance, the availability of cash or credit can make businesses miss lucrative opportunities.
- Problems and opportunities
Financial reports give insight into the functioning and competency of various business departments, distribution channels, products, and overall performance. These reports along with balance sheets, budgets, cash flow statements, ledgers, receivables, payables aging reports, and statements on profits/loss offer a clear picture to the business owner. They allow for the identification of problems that need redressal and opportunities that are lying in wait.
Accurate Tax & Bookkeeping Services specializes in handling financial needs for businesses of all sizes.
Greg J. Menia founded the tax preparation service company in 2010, having worked in business tax services since 1995. The team performs tax services for small businesses and large businesses alike, serving all areas around Tampa, FL.
Call (813) 655-9702 today if you find yourself searching for “accountants near me” in Brandon, Florida. Alternatively, contact Greg and the team at Accurate Tax & Bookkeeping Services by emailing [email protected] or visiting the offices at 710 Oakfield Dr. Suite 159, Brandon, FL 33511.