How Can Bad Bookkeeping Destroy Your Business? | Bonafide Accounting Services How Can Bad Bookkeeping Destroy Your Business? | Bonafide Accounting Services

May 29, 2024

How Can Bad Bookkeeping Destroy Your Business?

You may never have considered how bad bookkeeping can destroy your business, or how having a handle on your financial position will affect the decisions you make for your business.

How do you know if you can afford to replace or upgrade existing equipment? Can you afford to hire more staff, or take on additional clients?

Without a full understanding of your finances, you may quickly find yourself adding to the number of failed businesses within a few years of your start up. Establishing simple procedures and good bookkeeping, along with your hard work will more than compensate the investment of spending a few extra dollars each week or month on bookkeeping.

Everyone has heard stories about taking one’s car to a “cheap” mechanic, or using “fly-by-night” construction or other trades people. So why would you consider handing the lifeblood of your business to an inexperienced bookkeeper?

Professional bookkeepers are working everyday on the accounting bookwork for a variety of small business owners. They see patterns, notice developing trends, and they have the benefit of experience that you can take advantage of in your small business.

For some small business owners, bookkeeping is seen as additional expense for the business. There’s a common misconception that you can save money by doing your own bookkeeping. Another cost-cutting practice is to hire a cheap bookkeeper or have an inexperienced staff do it for you without understanding the damage it can have on your business.

Some of your friends may have a spouse or relative doing their bookkeeping for their business. Who would think that by having a relative doing the bookkeeping could destroy your business?

By the time a lot of business owners contact us, they have a set of books that have been incorrectly completed. There are some mistakes that can have devastating effects on your cash flow. It is only then that the business owner realizes that cash flow is the heartbeat of your business. The control of cash flow is an important part of bookkeeping.

Many problems faced by businesses relate to the lack of adequate systems and procedures for financial record-keeping. By having these systems in place and staying ahead of your bookkeeping, you are in a better position to see what is happening with the cash flow of your business. You can easily see which bills remain unpaid, which customers owe you money, and how much money you owe your suppliers.

When businesses collapse, no one blames the bookkeeper. There’s always a heap of other reasons such as problems with cash flow, being unable to pay the bills, suppliers no longer providing stock, and so on.

Often business owners rely on their accountant to give them a summary of how their business is performing, without thinking that often the figures the accountant is looking at are over a year old.

Bookkeepers that do not have sufficient experience do not always understand the importance of financial management in a small business, and how necessary it is to keep accurate and up to date accounting records.

Bad bookkeeping can be like dining at one of your finest local restaurants, having a wonderful meal and waking up the next day feeling sick in the stomach. It’s not until after the damage is done, that you discover you are suffering from food poisoning.

A small mistake made through lack of bookkeeping experience can be extremely costly to a small business. So saving money by hiring an inexperienced bookkeeper can often lead to a huge expense down the road that could have been avoided.

By focusing more on your financial record keeping, and having a good bookkeeper in place you should not have to discover how bad bookkeeping can destroy your business. Contact us today to see how we can help you get your business on the right track.