Bookkeeping is among all businesses’ least favourite things to do. It can be tempting to skimp on your business bookkeeping and pile it up until the far end of the tax season, only to finish it in a hurry when the deadline is around the corner. That is not the way to run a business!
Not staying up-to-date with your bookkeeping has significant costs that could end up consuming even more of your time and resources than if you had done it in the first place. Plus, you will have no idea how well or badly your business is performing. Here are seven things that risk happening if you do not do your bookkeeping:
1. Your records become inaccurate and unreliable
When you do not update your books, your company financial records become outdated and unreliable. You no longer have an accurate idea of where your cash is coming from or where you owe money.
This makes it harder to sort out your fixed and variable costs and thus obscures what your company’s breakeven point is. Essentially, without bookkeeping, there is no financial trail you can refer to if there are discrepancies spotted.
2. Financing options become limited
The lack of updated books of records limits your access to financing, which is a massive disadvantage if you need funds fast. A bank, for instance, will ask to see financial records before granting you a loan so that they know you have the necessary assets to offer as collateral. Without written evidence of your transactions, your credibility with banks, investors and lenders will be extremely low.
3. Invoicing falls behind and cash flow suffers
Without bookkeeping, you are likely to lose track of all the invoices you are owed and which you need to pay, particularly over a long period of time. This could lead to unnecessary shortages of funds, and on the other hand, you risk piling up late fees for your accounts payable. In short, your entire cash flow for the business goes astray.
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4. Payroll problems start to rise
Payroll is among the most critical aspects of running a business. Your employees need to be paid on time and accurately. Without bookkeeping, however, it gets difficult to track leave taken, overtime worked, bonuses due and so on.
You thus risk underpaying or overpaying your employees without even knowing it. And any errors will end up reflected on the employee’s payslips and cause you both tax problems. As a growing company, you cannot afford to land yourself in such troubles.
5. Managing expenses becomes tricky
Without a proper system of bookkeeping in place, you risk losing money in slow but steady leaks over time. Small expenses that are easily forgotten end up not being recorded and can add up to a significant amount.
This, in turn, could lead to unclaimed tax deductions or overstate your expenses to the HMRC, which can lead to problems if your company is being audited.
6. Bookkeeping backlog drains your time and increases costs
It is possible in theory to catch up on your business records at the end of the year before tax season, but it is immensely time-consuming. Not only does it take you away from business-critical activities, but it could also lead to your accountant charging hefty overtime fees for having to wade through stacks of unsorted receipts. Ultimately, you end up more stressed and with extra bills to pay.
7. Do not risk playing “catch me if you can” with HMRC
Without formal bookkeeping practices in place, you risk arousing the suspicion of the HMRC. Failing to report incomes that have already been reported, not issuing information returns, claiming unusually large expense deductions and wrongly classifying your employees are all red flags that could put you on the authorities’ radar.
In case an audit is requested, you need to be able to provide complete records of all your business transactions – in the absence of which you risk having to pay hefty penalties.
Take help if you are struggling
If your bookkeeping chores are causing you stress and trouble, it is best to outsource it to experts. Good bookkeepers will help you keep a record of your expenses and receipts, track accounts payable and receivable and also create a balance sheet.
When your basic bookkeeping is sorted, you will be better equipped to plan an efficient tax strategy for your company and also ensure your business management is functioning based on accurate financials.
Plus, you can then offer your clients more value-added services which will not only drive more revenues for your business but also strengthen client relationships.
If you need help, then Agility Bookkeeping is fully equipped to help you move over from routine bookkeeping and transition to a modern, paperless and outsourced system. Would you like to discuss our partnership further? We would love to talk to you!
Please complete our contact form or email us at sales@agilitybookkeeping.com for an initial, no-obligation chat.
