Terrible bookkeeping is a common problem that can have devastating consequences for businesses of all sizes. Becoming a business owner gives you the freedom to make all the decisions, but it also shackles you with all the responsibility. Part of that responsibility involves establishing a robust bookkeeping system that is accurate, up-to-date, and in compliance with all applicable laws and regulations. This may involve using specialized software, hiring an experienced bookkeeper, or seeking the help of a professional accounting firm.
Bookkeeping can be very difficult at times, especially when you have to manage a whole business at the same time. If you make mistakes, there could be dire consequences. Here are just a few ways you could jeopardise your business setup with poor bookkeeping.
Miss Out on Tax Deductions
If you are self-employed, a lot of the things you spend are tax-deductible. These include office supplies, company cars, etc. In order to successfully receive these tax breaks, you have to be able to prove that you bought them for company purposes. The only way to do that is to keep all the receipts, digital or physical, and be able to access them during tax season. If you fail to do that, you could miss out on valuable tax deductions.
Erroneous Books
In order to have a successful business, you need to make sure your books are balanced. If they aren’t, then you won’t have an accurate picture of your business’s expenses and profit. This means you could be spending even more than you’re earning, which is disastrous for a business.
Audits
The Australian Tax Office can carry out examinations of your financial records. This is known as an audit. Audits are done to make sure that what you put on your books are reflective of the reality of your business.
If you are self-employed or have a small business, you could be audited at any time. If you haven’t kept your books in order, then you could be facing fines or penalties. Even innocent mistakes could cause your business to suffer. These fines could cost you hundreds, if not thousands of dollars. Plus, if you fail an audit, it may increase your chances of getting audited again.
Cash Flow Issues
Money is constantly moving in a business. It’s either you’re spending money on office supplies or earning money through the purchase of your goods/services. Of course, you’re going to need to keep track of all that money moving around. You need to make sure to pay your bills on time and receive cash correctly. If you don’t, you risk having insufficient cash flow in your business, which could lead to disaster.
For example, if you don’t have enough money to pay your employees, you could be faced with a strike. If your employees aren’t working, then you aren’t earning, which means you can’t pay your employees. It becomes a deadly cycle that could kill your business. And that’s just one way it could happen.
To avoid this, you simply need to have good bookkeeping so that you know when cash is expected and how much you can spend at any given time.
Conclusion
Bookkeeping and accounting are very important, so if you’re not good at it or don’t have the time to do it, you should outsource it to someone else. Worried that your accountant doesn’t have experience working with a business like yours? Work with a firm with accountants for a medical practice who can easily translate their skills to a grocery or an office supply company.
Looking for trusted and reliable business accountants on the Sunshine Coast? Contact Wardle Partners today! We are Queensland-based business accountants and tax experts that aim to help your business flourish by handling the accounting side of things.
