Would you rather spend a Friday night in catching up on your company’s bookkeeping or would you much rather be spending a well deserved night out with your friends? Or you could also be staying in to watch Netflix with a glass of wine (like we would)?
The answer is pretty clear, right?
It’s easy to let the boring stuff (aka bookkeeping and record-keeping) pile up. But what if you let it stack up until tax season? What if you stopped bookkeeping indefinitely? We shudder at the thought.
Hopefully this is not the case for you. But just to prove a point, we’re going to indulge in the fantasy of not doing bookkeeping and show you some likely scenarios if you let your small business accounting fall behind!
Your Business Finances are Left Obscured
Cutting off bookkeeping completely means that your books will no longer paint a clear picture of your company’s financial viability. Lack of accurate records make it nearly impossible to track cash flow projections and statements.
If you can’t accurately measure cash flow, items like held inventory, overdue invoices, or recurring variable expenses like hourly wages, sales commission, or shipping costs can easily be obscured. A clear understanding of fixed and variable costs will allow you to identify your break-even point.
Remember, your cash flow helps you identify money-in (what you’ve made) and money-out (what bills need to be paid). If your small business is failing to track cash flow and you’re struggling financially, having a record trail can reveal the problem. But, without bookkeeping there is no trail—just a stack of records on a desk somewhere.
Say Farewell to Your Hard Earned Money
Ever learn about the ways you can invest your money (i.e. mutual funds), only realizing this was something you should have started months—maybe even years ago? It’s the feeling of missing out on money that could have been yours, but isn’t.
Think of it this way: if you don’t organize your records, money that could be yours ends up in someone else’s pocket. And there are a couple ways this could happen:
You lose track of your invoicing cycle:
Keeping a mental note of your accounts receivable is great but we’re all human—we make mistakes. Are you positive that you didn’t forget about the invoice for that one client who always pays late? If you did, they’re likely not going to voluntarily remind you that they owe you money. I mean, would you? The slower you are at organizing your outstanding invoices, the longer your business will go without the funds.
Payroll problems start to rise:
If you’re a larger business with payroll systems in place, then payroll is another potential issue. System of checks and balances must be in place for everything to run smoothly. For instance, payroll records need to be up-to-date with staff paid on time. This includes tracking leave time, expenses, benefits, and more—can be extremely complicated if left unorganized.
Without accurate bookkeeping, you could be under-compensating (or overpaying) employees. Any errors on year-to-date earnings will be reflected in your employee’s T-4 Statement of Renumeration Paid form from your records—causing tax problems for both of you.
Managing expenses become tricky:
Storing receipts away in your shoebox may sound organized to some, but know that this is not going to save you money in the long run. Without proper bookkeeping, your business could suffer from slow leaks. Did you track those lunches you spent on your client 2 weeks ago? What about those miles you drove 3 weeks ago to visit a client? Improper logging of expenses could lead to unclaimed tax deductions or an overstatement of expenses to the CRA—which is huge red flag! The last thing you want is to be audited by the CRA.
Financing Options Become Limited
Need access to money, fast? If your books aren’t up-to-date, you can forget about financing options—they’re going to be limited. Without detailed records, you likely won’t receive a loan, and a cash advance might be your only option.
As an investor, would you invest in a company that turns a blind eye to bookkeeping and inventory and has no clue to how much profit they’ve earned? Yeah, probably not.
It’s easy to let the boring tasks pile up, but when it comes to bookkeeping—you want to be proactive rather than not, because there is just too much to lose.
Never worry about your books not being done again. Kashoo makes it easy to keep your records up-to-date and accurate. With our mobile and iPad app, you can access all your data on-the-go on record your invoices, income, and expenses on-the-fly. Get started with our 14-day free trial—no credit card needed.