Like any business owner, you want to keep your company in good financial shape no matter the circumstances. To do that, you first need to address the bookkeeping and accounting problems that are standing in your way—especially those causing waste and inefficiencies.
It’s true that managing your company’s finances can be tedious, time consuming, and downright frustrating. However, failing to resolve certain problems can cause even greater pain down the road, particularly as your business adjusts to the new normal.
How Bookkeeping and Accounting Problems Can Hurt Your Business
Having a firm grasp of the financial state of your company is what allows you to make sound business decisions and guide the company in the right direction. Given the current business landscape, this is more important than ever. Unfortunately, bookkeeping and accounting problems make it difficult—if not impossible—to have a true understanding of how your business is doing from a financial perspective.
Left unaddressed, bookkeeping and accounting problems can create waste. They can even cause the financial part of your company’s health to plummet. And with it goes the likelihood of your business being able to achieve the growth and success you want it to.
A number of consequences can arise when you allow such problems to go unchecked.
- They can cause you to lose revenue.
- They can lead to bills going unpaid.
- They can result in you overpaying come tax time.
- They can trigger an IRS audit.
- They can cost you in payroll and sales tax penalties.
Ultimately, issues related to the tracking and management of your company’s finances can throw everything out of alignment and put your business in distress, which is the last thing you want right now.
That’s why it’s so important to fix them as soon as possible.
9 Bookkeeping and Accounting Problems to Address Now
Oftentimes, business owners don’t realize just how serious their bookkeeping and accounting problems are until it’s too late. To help you avoid the same fate, we compiled a list of 9 issues that you should address now.
1) There Is No Procedure in Place for Invoicing Customers and Collecting Payments.
Not having a procedure in place for invoicing customers and collecting payments can spell trouble for your business. The simple fact is that your company’s revenue depends on customers actually paying for your offerings. If you don’t have a process for…
- Sending out invoices for products/services provided
- Recording payments received
- Following up on pending invoices
- Sending unpaid invoices to collections
…you’ll struggle to keep your business afloat.
2) You Don’t Have Separate Bank Accounts for Personal and Business Activities.
One of the biggest bookkeeping and accounting problems found in small businesses is a lack of separation when it comes to personal and business activities. Starting out, it may seem easier to house funds in a single account, but it won’t work in your favor later on…
For starters, you could end up withdrawing too much for personal use, leading to cash flow problems for your business. Additionally, it will be harder to prove which purchases are which if you’re audited.
3) The Company’s Books Are in Disarray.
Having accurate, up-to-date data regarding your company’s finances is crucial, especially if you’re working on building your business back up after a downturn. That’s why you need to organize your books, keep them updated, and look at them regularly. Otherwise, you’ll wind up making decisions based on incomplete or inaccurate information.
4) You Don’t Keep Track of Minor Transactions.
It may not seem like it, but failing to keep track of minor transactions is one of the biggest bookkeeping and accounting problems you can have.
Because even small transactions add up over time, putting a dent in your company’s resources. By neglecting to record every single transaction, you lose sight of how your business is faring. Eventually you’ll notice that your company is missing money, but you won’t have any way to explain it.
5) No One on Your Team Understands Key Accounting Information.
There’s no question that managing company finances can be difficult and complicated. However, if no one on your team understands key accounting information, such as common formulas and terms, you put your business at risk.
Without knowing the basics or being able to interpret data, you’ll likely end up making mistakes. Such errors can prevent you from getting an accurate view of your finances. Further, the process of balancing your books will be slow, costing you time that could be spent on other projects.
6) The Company’s Expenses Are Categorized Incorrectly.
When expenses aren’t categorized properly, it can cost you significant tax savings, which is waste you simply can’t afford. Moreover, it can throw off the measurement of your company’s profitability. As mentioned above, it’s important that you or one of your team members have some formal knowledge of accounting practices. Without it, putting income and expenses in the right categories can be a guessing game.
7) Your Process for Payroll Management Is Inadequate.
There are several aspects to payroll management beyond wages, such as…
- Tax liabilities
- And more
If your process for payroll management is inadequate and you don’t know how to classify employees correctly, you could end up misfiling, overpaying, or even getting penalized.
8) Your Financial Records Aren’t Backed Up.
Another one of the most common bookkeeping and accounting problems found in businesses is lack of backup. As with all documentation related to your company’s activities, financial records must be copied and saved for safekeeping—ideally in at least 2 formats.
Because it ensures that you won’t lose important data in the event of a natural disaster, cyberattack, or tech malfunction. Without a backup process in place, it will be extremely difficult to rebuild should something happen to your records. Further, data loss can prove costly to your business, forcing you to spend time and resources trying to recover important files.
9) You Often Forget to Report and Account for Sales Tax.
Failing to report and account for sales tax can put you in a tough position later on. For instance…
- You may be forced to pay uncollected tax out of pocket.
- You may be hit with fines and penalties.
- You may be accused of fraud.
All of these consequences can cause significant harm to your business, leading to resource-draining waste and damage to your credit.
If you want to keep your company in good financial shape, it’s imperative that you address the bookkeeping and accounting problems highlighted above. Not doing so prevents your business from achieving greater success and growth.
Further, it can put your company in financial jeopardy.
Make it a priority to eliminate waste in your accounting processes and financial management. Get your finances in order and recruit outside help if necessary. Remember that you can always contact Smart Business Doctor for assistance.