How Inefficient Bookkeeping Can Damage Your Business Performance

Your bookkeeping is where everything starts looking to achieve its financial and accounting goals. The simple act of tracking and reconciling daily transactions, posting debits and credits, and balancing a general ledger are the fundamentals on which an efficient accounting department is created.

We've helped hundreds of small to mid-sized businesses scale with accurate and timely financials, and the first thing we always look at is their bookkeeping.

When Does Bookkeeping Turn into a Problem?

While the tasks that makeup bookkeeping may seem simple for a small to mid-sized business, it can over time grow into a more complex and inaccurate process as your transaction volumes grow. And if your company isn't equipped with a full-time bookkeeper or an outsourced bookkeeping firm, the fundamental issues with recording transactions can turn into a massive accounting snafu with problems that may or may not manifest immediately.

Many businesses ignore these minor bookkeeping issues, which over time turn out into massive accounting issues. We've identified common accounting issues that arise due to inaccurate bookkeeping to help you understand the importance of bookkeeping and to help you identify these problems before they turn into massive accounting issues for your company.

Loss of Revenue:

The most obvious way inefficient way bookkeeping can impact your business is by not accurately tracking your receivables. When your bookkeeping doesn't efficiently monitor invoices from aging accounts, you can lose money, or worse, never know you lost it. Unfortunately, this common mistake usually goes under the radar due to the large number of invoices a bookkeeper has to track and code; with a team of bookkeepers, you can avoid this type of mistake.

Losing cash flow due to inefficient bookkeeping can happen in multiple ways. A simple solution to solve this problem is to outsource your bookkeeping or use automated bookkeeping solutions such as Xero or QBO that categorize receivables to help you follow up.

Misjudging Your Expenses:

Lost revenue due to untracked receivables is usually something experienced in companies with high volume invoices, but one common way poor bookkeeping can impact revenue is by misjudging expenses. This is because payments and transactions involve many hidden details like fees, charges, and interest, adding up over time and creating a massive gap between expected and actual expenses. While a bad practice that can go undetected it can grow and negatively impact the business in the long run.

Ensuring accurate expense tracking and monitoring without leaving key details is the solution to this problem, but businesses need a streamlined and perfectly executed bookkeeping function to avoid this problem.

Inaccurate Reporting:

Inaccurate bookkeeping can result in reports not providing enough information for a business to correct its course of action. For example, you can distort estimated profit margins and cash flow by not accurately tracking cash flow. Accurate reporting is the only way a company can understand its financial position and strategize for a better tomorrow.

Tax Problems:

Inaccurate bookkeeping is a welcome note for legal and tax problems. Loss in revenue and misjudged expenses can cause cash flow problems resulting in a cash crunch, which can pave the way for penalties, loss of trust, and even legal issues. Inaccurate tracking a recording of transactions, deductions that result in late tax return filing is another major problem caused by poor bookkeeping practices. Even for businesses with manageable bookkeeping practices, hiring bookkeeping with adequate tax policies and procedures is the easiest way to ward off potential legal and tax problems.

How can outsourcing your bookkeeping help?

Basis 365 provides accurate, timely financials for all types of eCommerce, Tech, and Professional Service companies with industry professionals spanning decades. In addition, our bookkeeping experts are trained and equipped with advanced tools to help you strategize and craft a streamlined bookkeeping process that aligns with your account requirement and functions.

If you are looking for an expert remote outsourced accounting firm to provide bookkeeping services, you can contact us here.