As a small business owner, you need to know that bad bookkeeping can lead to permanent damage to your finances in the future. Large companies have substantial bank accounts that cover such failures, but in the case of small businesses, there are no cover-ups. One single mistake and the whole enterprise goes sinking under. To have numerous chances of success in the future, you need to make sure that you have a solid foundation that firmly supports your account and auditory records.
What is the Importance of Auditing?
It matters if you run a small business and whether you have a good accountant to help with your business records. The question remains, why is it important? The reason is that without a good accountant, your bookkeeping records will be a mess and you will not have the slightest idea of the numbers that are in your account.
Auditing encircles a variable number of services that make sure financial transactions have been recorded. Such services are sales, purchases, receipts, salaries, and many more. With an auditor who is up to date with your bookkeeping, not only will you be in a position of having the money transferred through businesses and profits, but you will also account for every cash that has been spent or gained.
This information can be used in the making of big and promising financial decisions which will have an impact on the company’s financial future. If you are collecting anything that will benefit the success of your company’s future, then you need to fully trust and use the financial reports, especially if the numbers acquired are accurate.
Auditing, Accounting and Business Resolutions
If you are not keeping your audit records up to date, then the decisions that will make in the future will have a high chance of being wrong. What is even worse is that if you make the wrong call, your business will could end up burning to the ground. But also, at the same time, a wise decision made can propel your business to a level which you desire. Therefore, having the numbers on your fingertips can give you the edge of making choices based on factual evidence and not some gut feeling.
Financial reports of your company should be used when monthly or annual income is looked at. Therefore, you need to consider your loans, taxes, and payroll as you are calculating because if you do not discuss these details, then you will have a situation whereby more money is spent than the money that you are earning.
Poor auditing records will leave you and your company in a lousy business position of being in too much debt. More so, you can even be in trouble with the government if details such tax payments are not mentioned – the biggest drawback of bad bookkeeping.
If you do bookkeeping online, accounting software can create such records for you. It also helps you tracking how your business is doing financially.
What are the Biggest Problems in Accounting and Auditing?
You may be wondering what could be the worst problem that can hit your small-scale business. Well, these are some of the root causes that can lead to serious financial problems:
- Taking your auditing practices for granted.
- Procrastination of tasks – it can be daily, monthly, or even yearly.
- Giving a massive workload of accounting to an inexperienced underpaid employee.
- Ignoring small transactions.
- Poor communication with your accountant.
- Being extravagant with the money that is expected to be used to pay the employees or for taxes.
In addition to proper auditing, make sure that good management over funds, employees, personnel is put to action. You need to set assumptions to teach the correct techniques and ensure that everybody is adhering to the right routine when it comes to handling data entry and more.
Avoiding Bad Bookkeeping – Conclusion
As an owner of a small-scale business, there are numerous tasks to be done. To be honest, auditing can be the last thing on your mind especially if you have decided not to hire an accountant so that you can do the bookkeeping yourself. This can be an excellent chance to tell yourself that the work will be dealt with the next day or next week so on and so forth.
Not hiring an accountant can be good for the business’ expenses but if you are to do it yourself, it would be advisable to finish the task in time as procrastination will give you a hard time in the future. With that, we hope that you have learned a great deal on how to avoid ruining your business on the basis of bad bookkeeping practices.