Running a small business is a constant struggle with daily decisions. When to spend? When to save? A more complicated decision than it would first appear. Bookkeeping is often at the top of the save list.

Instead of hiring a professional bookkeeper, business owners sometimes try to do the books themselves. Or they hire an inexperienced or cheap bookkeeper. Both options can lead to negative consequences. Both paths may lead to expensive consequences. Consequences you may not see until it is too late.

Break-even point

The effects of bad bookkeeping on your small business

Two possible negative effects of poor bookkeeping are cash flow errors and poor business decisions.

Cash flow shortfall

A good bookkeeper monitors the business’ cash flow and alerts the owners to potential problems or shortfalls. A bookkeeper who fails to monitor the cash flow or doesn’t understand cash flow could see you looking for cash for the weekly payroll.

On the contrary, a good bookkeeper can increase cash flow. They know what aspects of your business could increase your sales, where possible savings lie and make recommendations. They also monitor debtors to ensure timely payment of invoices.

Poor business decisions

Incorrect cash flow projections may affect your business in significant ways. Having the wrong numbers from the start results in navigating the company towards the wrong course. There is nothing worse than thinking you have enough money only to realise that you do not. Imagine getting into a project only to find out the cash has run out? A situation easily avoided by your bookkeeper providing accurate financial information.

Conclusion

DIY bookkeeping can be tempting and risky. And it’s a time-consuming monster. Yes, even a new business. Avoid the risk, the headaches and the stress; work with a professional bookkeeper.

Professional bookkeepers understand business and can detect possible financial pitfalls. As a business owner, having a bookkeeper gives you peace of mind knowing an expert oversees your business’s finances.

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