Sloppy bookkeeping can affect all aspects of your business and leave you with unpaid bills, late payment fees, unpredictable cash flow, unwieldy debt, and a million headaches at tax time. It can also affect your employees if bad bookkeeping starts to affect compensation. No one starts out with the intention of leaving their financial records a mess, but it happens a lot, especially to very small or brand-new businesses whose owners do not have a lot of experience managing financial records. Some of the most pervasive reasons the bookkeeping gets unintentionally neglected and falls into disarray:
Bookkeeping and tax preparation are still the most commonly-cited answers when business owners are asked about the biggest drains on their time. While you cannot cut corners on financial management just to save time—it is too important to your business’s short- and long-term success—there are some ways to streamline the process so that it doesn’t take any longer than necessary. Having a consistently-followed, standardized way of organizing the books makes the process run smoother; having a designated time each week that you go over expenses, review invoices, and pay bills means that you won’t run into a situation where you waited until the last minute and now need to cover multiple weeks of financial updating.
Managing the money for your business is stressful because you are personally and financially invested in your business’s success. Cash flow problems can become a major source of stress when the financial records are not in order. Unfortunately, putting off the bookkeeping won’t reduce its stressfulness—it will only increase it. If you find that the stress of handling the books is becoming a hindrance, it may be time to invest in a virtual bookkeeper whose entire job revolves around handling the stressful aspects of financial management so that you don’t have to. A virtual bookkeeper can:
· issue payments
· record incoming and outgoing money
· maintain budgets
· create invoices
· generate financial statements
· reconcile accounts
Tech tools for businesses can connect your company to a virtual bookkeeper seamlessly so that accounts are managed in real time and transactions stored in a cloud for universal access and retrieval.
Mistakes happen everywhere, including at banks. Companies to whom you subscribe or who are authorized to debit your account may also err. It is vital to good financial management that you get in the habit of reviewing your bank statements every month, comparing them to your own check and expense registries, and reconciling all accounts from which your business draws. If an error does occur—on your part, on the bank’s part, or on the part of another company who deducts money from your account—you want to catch it as soon as possible so that it has the best chance of being corrected before it adversely affects your cash flow or credit.
Too many hands on the books can lead to error, oversight, and redundancy; it can also lead to neglect. It is advisable to have one person in the company designated to handle the financial tasks for your business so that there is consistency and accountability. At the same time, business owners need to maintain a general oversight so that fraudulent activity and costly mistakes do not occur. An automating online financial software that lets you authorize and limit user permissions allows you to delegate the financial work while still retaining your ability to control and oversee all financial transactions and trace them back to their initiator.
You are staying up-to-date with your accounts so you assume everyone else is. In reality, sloppy bookkeeping from one vendor, company, or client can have a ripple effect and impact the funds for anyone else affiliated with them. You may have issued a large check payment to a supplier or landlord, but you still need to double-check that it cleared before you begin issuing more checks from an account that now lists an inaccurate balance. You’ve sent out your client invoices, but you cannot assume they’ve all been received simply because they stated a due date. Late and unpaid invoices are one of the biggest financial challenges to small businesses, who are often heavily reliant on prompt payments and consistent receivables. While you may save time utilizing automatic bill pay, just a few unpaid invoices from your own clients can quickly disrupt the cash flow and create a possibility for you becoming overdrawn on your account.
Sloppy bookkeeping can lead to a drain on your business’s resources, but it is correctable. A professional may be the answer if the books are hopelessly disorganized, but if you cannot afford one, tech tools for better financial management may be the cost-effective alternative.