After a long & stressful day at work, you just want to relax. It becomes easy to forget to do the ‘boring’ stuff like bookkeeping, especially if you don’t have a bookkeeper. The more & more bookkeeping work you put off, the more you dread starting it. So you ask yourself “what happens if I don’t do any bookkeeping? What’s the worst that can happen?”.
We’ll walk you through exactly that. You’re going to find out that not doing your bookkeeping is going to cost you alot of time & money. Here are a few consequences of not doing your books:
1. You won't have a clear picture on your companies' financial health.
When you skip on your bookkeeping work, you won’t be able to know your key numbers & metrics. Basically you’ll be left in the dark about the financial health of your small business and that’s a scary thing to hear. Without accurate books & numbers, you won’t truly know your net income, cash flow, assets, liabilities.
If you don’t have a clear view of your cash flow, you could skip over on huge issues. You could not have enough money in the bank for payroll, for example. You could also miss the fact that a vendor has double billed you. Getting a clear picture on the financial health of your business can only be viable through consistent & accurate bookkeeping.
2. Catch-up bookkeeping drains your money & time
Remember that time in college when you didn’t study for your final until the very last day? You had to pull an all nighter and for the next week you were too mentally & physically drained to do anything productive. Catching up on your books, especially during tax season, is really the same thing.
Scrambling to look up transactions & reconciling items from a year ago is no fun. Now imagine doing in an already stressful period like tax season with impending deadlines. It’s not good. Yes, you can do it. But it’s going to take so much time & energy away from what you do best – running your business.
In addition, with no bookkeeping system in place, your tax CPA can also be stressed trying to reconcile everything for you and may miss certain deductions because they were rushed.
Thinking about just hiring someone at the end of the year to play catch-up? During a busy season like that, bookkeepers and firms will often deny clients or charge an extra premium to catch up your books. So be careful or else this can cause unnecessary money to go down the drain. Money you could be using elsewhere!
If you need low cost catch-up bookkeeping, be sure to check out Narwhal’s reasonable & low pricing plans!
3. Financing options become extra hard to obtain
If your business is struggling & needs to obtain financing options like small business loans, the banks will require you to send over recent & accurate financial statements. Trying to ask the bank for a loan without detailed financial statements will result in an easy “No”.
Your pool will be limited without accurate books. Banks & investors will not put in a single penny without knowing the financial health of the business they are sending money to. They will only know this if your books are handled properly.
Especially in this COVID-19 environment, don’t limit your pool of financing options. Have accurate books so when the time comes, applying for loans or receiving grants will be easy.
4. Possibly pay fines to the IRS
Yes, the IRS does not audit every company. But if they do choose to audit yours, and your bookkeeping system is not in place, you’re in for one hell of a headache.
Going through an audit without proper receipts or accurate bookkeeping, is what bookkeepers & accountants call “Accounting Hell”. You’re going to scramble & the pressure from the IRS chasing you will not be fun. In addition, you could incur fines if you do not respond in a timely basis because you don’t have organized books.
5. Internal & external fraud becomes a possibility
Without a bookkeeping system in place, it becomes sometimes difficult to have separation of duties. When you’re unsure of exactly is coming in & out of your bank, you lead yourself open to fraud. A bad employee can cut a check to himself and cash it knowing you don’t have a firm grasp on your cash flow. An external vendor may double bill you on purpose knowing you don’t have accurate books.
By having accurate and up to date books, you’ll know exactly what’s going on. You’ll know whether or not someone internal or external is trying to cheat you of money. In addition, having a strong bookkeeping system with clear separation of duties prevents any bad employees from misbehaving.
Bookkeeping should not be put on the backburner
As you can see, if you simply don’t do your bookkeeping, it can get yourself into a lot of trouble. You’ll save time & money by having a solid bookkeeping system. In addition, you’ll want to make sure you have a great bookkeeper to ensure your books are accurate.
If you are ready to outsource your bookkeeping work so you can focus on running your own business, check out Narwhal. Start a free trial with no credit card needed, and we’ll close a months worth of your books for free.