Successful and routinely profitable businesses require their owners to exude many things including the appropriate personality traits, a passion for creativity and a keen eye for market gaps.
While knowing how to effectively advertise, price and sell your products guarantees a decent chance at business ownership survival, it's really only half of the ongoing battles you'll face.
Being familiar with your numbers makes up the other crucial fifty percent of the challenge, and is something you'll want to keep on top of quite frequently.
Let's look at the main reasons why putting off balancing those books is nothing short of a bad move and how a bookkeeping professional can place your business back on the right path.
You’ll Continue Making Terrible Business Decisions
There are three vital elements and questions to ask yourself before executing any risky business decisions:
How much money do I actually have on hand?
What does my cash flow forecast look like for the next three months?
How much do I still owe?
Failing to be able to answer these without extensive, time-consuming revisions done by professionals makes it difficult to know whether to spend or save.
Basing decisions on how you believe your finances are can be a high-risk, (not to mention ‘rookie’) error, and purchases should never be even contemplated without knowing these things first.
One of the most common pitfalls for small businesses in Australia is hiring new staff without doing the maths or ensuring sufficient ongoing funds are available to pay their wages. Having up-to-date books may provide valuable information, with the numbers suggesting a more appropriate period for employee recruitment.
Saving Becomes Virtually Impossible
Without having a grip on your finances for months or years on end, how can you possibly know where you could be pulling money from to save for other things? Accurate bookkeeping records ensure you can make the appropriate calculations when extracting savings portions of your income.
It’s all about having, and most importantly, maintaining a full grasp of your business’s entire financial situation and making smarter decisions from the get-go. Planning ahead by putting aside rainy-day funds is also a must-do for any small business as one day it could mean the difference between survival and closing the doors for good.
Others Begin Questioning Your Trustworthiness
Ill-kept books are undoubtedly going to land you in hot water, with frequent financial mistakes almost a guarantee. These mistakes radiate towards your employees, contractors, lenders, business partners and others holding some sort of financial stake in your operations and how they run.
Payroll on its own is one area that becomes particularly complicated when errors start being introduced, and it becomes a challenge to get back in front of the eight-ball when staff aren't receiving payments properly or on time.
Others you have contractual agreements with see your reliability dip to dangerous levels too, contemplating whether it’s worth continuing business with you.
You’ll Waste Profits
Not paying attention to the intricate details of bill-paying and expense handling also heightens your risk of overpaying for things. For example, being short just a few dollars on a bill due to a numerical input error will likely see you paying late fees or other corrective fees, which is ultimately an unnecessary waste of money.
Another way you’ll be wasting cash is by not knowing it’s supposed to be there in the first place. Customers may go weeks past their invoice due dates without you even being aware, making it difficult to follow up with non-payment situations and chase money you’re owed. All of those late payments could have also been accruing interest, compensating you for any losses.
This can also create legal complications, which in turn becomes extra hassle, money you’ll need to spend and lost efforts you could be positively applying to your business.
The bottom line here is that poor relationships are a business killer and you want to do everything possible starting with your books to ensure they remain healthy.
You might even be overpaying for services or products and aren’t realising. For example, there could be memberships, apps or software you signed up for years ago that’s still being deducted monthly. How would you know if you haven’t seen your books in years?
Why You Should Avoid Doing It Yourself
Unless you’re somewhat of a bookkeeping software expert, you’ll likely spend countless hours navigating your way around it without achieving any real productivity. You may not even know which software to choose to begin with.
In addition to the probable time wastage, tax accuracy could be your next issue. A professional bookkeeper knows all about compliance requirements, where to look for common problems or discrepancies and have everything in line ready for July 1st.
Just remember, making mistakes also costs money, so if it’s the added expense of hiring a bookkeeper that scares you, think of the cost of not getting things right initially.
By now you should be able to see why keeping up with your bookkeeping is an absolute necessity. It also takes little to put a repetitive plan in place ensuring scheduled record-keeping revision is undertaken throughout the financial year.
It might not be the most enjoyable job, but it needs to be done.
Dreading it? Don’t want to set aside the extra hours each month? Then it’s probably time to look into leaving it to a professional.
Contact Ironbark Industries Bookkeeping today to discuss our bookkeeping services, your specific requirements, or any other financial management enquiries.