If you slack on your bookkeeping tasks or even don't do it at all, there is a downside to this. Well, you won't wind up in jail, but you'll wind up paying a hefty price tag for not doing bookkeeping. Here's a list of things that will wind up happening if you're not doing proper bookkeeping for your company.
Without proper bookkeeping, your company's finances are left in the dark. You will not have a clear picture of how your company is doing financially. Tracking cash flow and financial reports would be near impossible. This means you will not be able to measure things like recurring variable expenses, hourly wages, shipping costs, overdue invoices, or held inventory. Bookkeeping gives you the ability to determine your breakeven point. If you're not tracking your cash flow, you will not know what bills need to be paid or when money is coming into the company.
Limited Financing Options
What if you need access to fast cash? Your options will be very limited if you do not maintain updated books. You will not be able to get a bank loan without details of your company's financial records.
No Investors or Partners
You will not be able to find investors or partners for your business without proper bookkeeping. Why would someone want to invest in your company or partner up with you if you don't know how much money you profited? Without solid evidence of your company's financial history, it will definitely be an uphill battle trying to bring on partners or investors. It would even be hard to sell your business.
Chaotic Invoicing Cycle
Your invoicing cycle will definitely go astray without proper bookkeeping. You will likely forget who owes you money. And if you have a client who is late on a payment, they're not going to remind you of that themselves. The longer you wait to be paid, the less money you'll have.
Without an organized system of checks and balances, issues can occur with payroll. Payroll records require frequent updating. Expenses, tracking benefits, leave time and payroll must be tracked. It gets way too complicated if everything is pushed to the side. You may even be overpaying or underpaying your employees. And that can cause tax problems for both of you.
Difficulty Managing Expenses
Having a shoe box of receipts won't cut it when it comes to managing your expenses. Managing your expenses becomes very tricky without proper bookkeeping. You could be incurring slow leaks. And what about client expenses? What about those 50 miles you traveled to visit a client? Not keeping proper records and doing good bookkeeping could lead to unclaimed tax deductions. It could also lead to an overstatement of expenses. Something like this can lead to an IRS audit and you do not want to put yourself on the IRS radar. Without proper bookkeeping, tax prep will not be doable for you.
If you don't have the time to do your bookkeeping or you just don't know how to do it yourself, look into hiring an outsourced bookkeeping service. This way, you won't wind up having to constantly sort through a mess of financials.
Turn to AccountingDepartment.com for all of your outsourced bookkeeping needs. You will be supported by a team of accounting professionals and we will take the guesswork out of your bookkeeping for you.