Many small businesses fail because they underestimate the expenses of staying afloat during the first few years. This can be attributed to poor financial management on the part of whoever is in control of the money. It goes without saying that precise accounting is crucial to the long-term success of any business. However, most small businesses still insist on keeping the accounting in-house because owners want to be in control, they're worried about confidentiality and security, they don't have confidence in the abilities of a third party, or because they think that outsourcing is too costly. These are all valid reasons, but the problem is that most owners and their makeshift accountants don't have the accounting background to successfully manage company finances. Here are some downfalls of leaving bookkeeping in the hands of someone who isn't qualified to do the work.
Inaccurate Reporting
Every small business should be able to track the flow of each company dollar. The only way to stay on top of all the numbers is to be very meticulous about recording transactions. Balancing the books isn't a job for an in-house amateur. It's a job for a professional who is organized and detail-oriented. Without these attributes, you'll eventually start wondering where some of your money has disappeared to. Minor errors will add up over time to cause huge issues. Without knowing exactly what your profit margins are, you could end up making investment decisions that you'll pay dearly for. Every business decision will be affected when you're working with numbers that aren't accurate.
Improper Payroll Calculations
For many small businesses, payroll is the number one expense. This is especially true for those that have a large number of employees. Paying your workers is a very important part of any business agreement, and they all expect to be paid in full and on time every time. People have bills to pay and families to support, so they can't afford to be given a check worth only two-thirds of the hours they worked or two weeks after the regular pay interval. Failing to pay workers on time and in full could mean a huge decrease in productivity because you have taken away their motivation to work hard. As a result, your profits could take a huge dip. Whoever is in charge of payroll needs to be good with numbers, highly organized, and have a good understanding of the tax laws and regulations.
Failure to Meet Deadlines
Running a business is expensive. There are so many different things that you have to pay for, including rent, utilities, product, employees and more. Many of these expenses must be paid off at regular intervals. If your in-house bookkeeper isn't adept at the job, he or she will probably end up spending way more time than necessary on every task. This means forgetting to pay bills when they're due, failure to produce financial reports in time for making important business decisions, or worse. You could rack up hefty penalty fees, destroy your credit score, or even run out of money to keep your doors open.
Spending More for Less
If you only have one accountant on payroll, you're probably paying him or her a pretty decent salary considering how crucial those duties are to the success of your business. Unfortunately, many small business owners are paying incompetent bookkeepers way more than they deserve. That money could be far better spent on outsourcing the job to a professional accounting services company. In many cases, you'll end up saving some money as well. Even when you don't, having an experienced third party manage your company finances is well worth the extra money and peace of mind.
Whether you need help with basic bookkeeping--or require more advanced oversight from a dedicated controller, our team can help. Schedule a free 30 minute consultation today to find out!
