It is becoming more and more commonplace for franchisees and independent companies to reach out to third-party accounting experts for small businesses. Whether that is because it is too overwhelming to manage growing bookkeeping needs alone or because there is a backlog of accounting tasks that need to get done before tax season, it might be a good idea for these business owners to connect with online pros for advice on how to improve your financial practices. Because the consequences of bad accounting can add up, and not in a good way.
10 Consequences of Bad Accounting
One of the first things you will learn is how to avoid the far-reaching consequences of having a messy bookkeeping department. While some accounting issues might not affect the daily operations of your business, they eventually can take a toll on the overall health of your future prospects. Below, we are going to talk about 10 consequences of bad accounting that you should know about right away.
Late Deadlines
Missing your tax deadlines is a big no-no for many reasons; aside from the obvious risk of earning an audit from the IRS, failing to meet important deadlines can result in having late payment fees and a loss of accurate records, which will only damage the reputation of your company over time.
Zero Accounting Strategy
You don’t need to have a full suite of accounting pros on your team right when you open up shop. However, it is important to have a financial plan in place so you know exactly how you can spend, how much you should be spending, and what you should be earning as time goes on. Financial strategies should also include plans for tracking expenses, recording transactions, and taking care of all other types of bookkeeping requirements.
Lost Expense Reports
In order to accurately predict your company’s upcoming cash flow and available capital, as well as your spending and earning habits, you need to track every kind of expense that you incur as a cost of running a business. Losing track of these reports can have devastating effects later down the line, as it will become easier and easier to let your spending spin out of control.
Fraud Risk
When you have a tight handle on all of your expense reporting processes, it is difficult to break that chain. Losing that handle could increase your risk of suffering from major accounting oversight, whether intentional or not. It is important to ensure that employees don’t take too much advantage of a wavering accounting department by stealing funds.
Declining Workplace Culture
A poorly-run department, even bookkeeping, can take a toll on the overall morale of your employees. They will see the neglect of one department and worry about the future of their job, and the integrity of it, and whether it will decline as time goes on. Bad accounting simply leads to a loss of confidence, a loss of passion, and a loss of jobs.
Improper Cash Flow
One of the first symptoms of a poorly-run accounting department is improper cash flow. It is really important to track accounts payable and accounts receiving with a fine-toothed comb.
If you are worried about not having enough time in your schedule to properly track these expenses on your own – and not enough money in the coffers to hire a full-time accountant – you can invest in customized automation techniques to accurately and securely track your expenses for you.
Lack of Accounting Knowledge
Even if you make a point to stay apprised of the information you are tracking through your accounting department, you still may not have accurate knowledge of your company’s financial health. Poor financial tracking, missed deadlines, and inaccurate reporting can all lead to misinformation that will put your company in a worse place than ever before.
Problems with Invoicing
Humans are prone to making mistakes, and one or two small issues will never cause too much of a disruption. But consistent issues with invoicing and too many big mistakes can lead to disaster. Your clients may not end up getting paid on time, in the proper amounts, or from the correct vendor. You don’t want to destroy entire relationships with your customers or ruin your chances to turn a profit because of bad invoicing.
Bad Pricing Decisions
It can be difficult to set prices and determine the golden number when it comes to buying and selling your goods. Accurate forecasts of your financial health, profit margins, and goalposts can help you make much more informed decisions in the future. The worse your pricing model, the worse your cash flow will be. Improve your strategy so you can make more accurate predictions moving forward.
Fees Upon Fees
Turning forms in late, misreporting the numbers, and inaccurately reporting transactions can all result in your company getting in a lot of trouble. One of the biggest ramifications of sloppy accounting is the risk of incurring different types of fees. You can be sinking tons of much-needed capital into paying off these fees because you missed a tax form deadline or because your expense reports had too many mistakes.
Indevia’s veteran accounting experts can provide you with some of the newest and best ways to improve your accounting processes and boost the health of your company without breaking the bank. No need to hire a full-time team – our automated systems will work for you. Get in touch with us today to get started.
