Managing bookkeeping can take a lot of work for many small business owners. Balancing your responsibilities to the clients, employees, and suppliers is vital to your role as a small business owner. Sometimes, bookkeeping is the last item on your to-do list. Neglecting your bookkeeping can mean a disaster for your business. If you need help to keep ahead of these tasks, it could be time to contact a professional service to manage your books. Without help, your bookkeeping system could be heading for a disaster.
How Do Bookkeeping Practices Go Wrong?
If you open up your books and get a headache, it might be time to ask for professional assistance. Neglected bookkeeping is one way small businesses can find themselves in a disastrous situation. There are many reasons why bookkeeping gets put to the wayside. When a company does not have the resources or time to keep track of its books, it leads to inaccuracies in the financial records. Some bills are not paid, or transactions need to be entered. With that, you will have a mess on your hands. It can be a challenge to manage the books. When you ignore the problem, it can lead to bigger issues for your business, including putting a strain on your financial outlook.
Signs of Bookkeeping Problems
Many bookkeeping failures are avoidable. If you are not paying attention to your finances and bookkeeping, there could be a potential problem on your hands, and you might not even know it. Some red flags signify issues with your bookkeeping.
Unable To Get Bank Funding
It is a big red flag when you cannot secure bank funding. You might not have the right data to satisfy the bank’s requirements. Banks want well-maintained books to approve any loan. Proper bookkeeping lets you know how money is moving throughout your business. A well-maintained bookkeeping system will help you understand the financial status of your business. With that, you can prevent surprises when applying for additional funding.
Not Compliant With Loan Terms
If your business has borrowed a loan, it usually comes with a few stipulations. These loans often have loan covenants. There are three types of them: affirmative, negative, and financial. With an affirmative covenant, you may be required to submit financial statements or carry insurance. A negative covenant could limit specific actions without approval, such as taking additional debt or selling assets. Finally, you may be required to maintain certain standards with a financial covenant. If you violate these covenants, it could lead to a seizing of assets or calling in the loan. Proper bookkeeping will ensure you are never put in that position with a lender.
Lack of Monthly Closing Procedures
All small businesses should have clear monthly closing procedures. When the books are a mess, it could lead to missing out on something important. If you miss a bill or make a mistake in payroll, it may lead to a snowball effect of errors. One small issue can cause problems that will be difficult to correct in the future.
Unable To Complete Monthly Statements
Monthly financial statements are vital to the success of any business. If the books are not updated, you will not have access to any current data, leading to poor business decisions. You need up-to-date information to help grow your business. Monthly statements are the best way to understand the health of your business.
How Can You Fix Bookkeeping Problems?
First, you may feel overwhelmed with the bookkeeping duties. In those cases, you should use small business accounting services to help manage your financial books. Take a look at other tips to help better organize any book.
Maintain and Organize Receipts
Not maintaining invoices and receipts can cause problems for many business owners. Some businesses do not have the time to keep these books in order. When you have professional services on your side, they can make sure that everything is tracked and organized. Whenever you get an invoice or receipt, you need to account for it. Allowing the receipts and invoices to become disorganized could lead to money management problems in the future.
Separate Personal and Business Expenses
When business owners keep their personal and business expenses together, it can lead to many problems. It can be easy to place the wrong credit in a personal account. However, mixing these accounts can lead to significant bookkeeping problems. Trying to figure out the problem will be a time-consuming process. You can avoid all those issues by separating your personal finances from business ones. When you have a bookkeeper, they will double-check to ensure all the credits and expenses are placed in the proper accounts.
Perform Bookkeeping on a Daily Basis
Many books turn into disasters because it can be easy to forget to update the records. Business owners often focus on other duties, pushing bookkeeping to the side. A professional accounting and bookkeeping service can help you manage your books without taking time away from your business.
Find a Qualified Bookkeeping Service for Your Business
If you want to ensure you have well-maintained books, you need to hire a professional bookkeeping or accounting service. At TMD Accounting, we have over 40 years of experience helping small businesses throughout Gloucester County. We are a family-owned and -operated business that is an affordable, reliable, and flexible choice for your company. Whether you have a disaster-in-waiting or need a new bookkeeping system, we are here to help you. Schedule your consultation by calling 856-228-2205.