How Bookkeeping Can Make or Break Your Business

Financial numbers are the heartbeat of a company. This is why Accounting and Bookkeeping are the key functions in any type of business. However, as many small business owners try to achieve balance in the midst of a super hectic schedule, it might still be a struggle for them to manage every aspect of their business especially during this pandemic.

As a child who grew up in helping my father run the family business, I've noticed that he spent more time focusing on sales, marketing, and maintaining good relationships with customers rather than on the company's finances. When I went to university to study Accountancy, I've learned how important a company's financial performance is. Without accurate accounting and bookkeeping, the company might suffer and face major threats to its growth.

Here are the most common bookkeeping problems that small businesses face and how to overcome them:

1. Failure to monitor the cash flow

2. Mixing personal finances with business account

3. Overpayment of Taxes

4. Inaccurate recording of transactions and financial reporting

5. Fraud

According to a study in the US Bank, 82% of small businesses fail due to cash flow mismanagement. To overcome this problem, you must keep track of the company's receivables and payables. Failure to do so, would put you in the position where you might run the risk of losing income from unpaid accounts.

Another problem is mixing personal finances with business accounts. If you are practicing this, I advise you not to do this in the future because you won't be able to closely monitor how much profit was generated out of your capital. Thus, you can never really tell whether your company's business is going well or not.

Overpayment of taxes and inaccurate recording of transactions are also huge challenges that small business owners face. Incomplete and unorganized books don’t provide an accurate record of the business income and expenses that you might need for tax preparation. This will give you the risk of paying more taxes than you should. This is why you should monitor and record your daily transactions accurately.

Among the many challenges, fraud is something that you really need to look out for. According to a report from the 2018 ACFE's Report To The Nations, private companies and small businesses rank highest in occupational fraud compared to large corporations. Small business owners put a huge amount of trust to their employees. Unfortunately, there are some people who would take advantage of that trust. To prevent this, you need to establish consistency and transparency in your accounting and bookkeeping functions. Make sure that everything is being taken into account.

To sum it all up, the best way to overcome bookkeeping problems is to find the right bookkeeper who can make you rather than break you. As a small business owner, you can't do everything on your own. This is why most successful small business owners are outsourcing bookkeeping services.

By outsourcing a bookkeeper, you can save much on lost productivity costs that come along with hiring an in-house bookkeeper. Looking for trustworthy and reliable bookkeeping services can give business owners more time to focus on their core business needs.