Most of us have had a bash at DIY jobs around the house rather than paying for the qualified plumber or electrician that we really need. Of course, some of us really are handy and capable of getting the job done, but most of us, let’s face it, are simply trying to avoid the perceived cost of engaging a skilled tradesperson.
We’re not pointing fingers – we’ve all done it. We all know the pain of realising how much more it cost to fix our dodgy DIY, than it would have if we’d invested in hiring a professional in the first place.
Well it’s the same with bookkeeping. We completely understand the temptation for small business owners to do their books themselves, but just like dodgy DIY can lead to leaks and blackouts in your home, botched bookkeeping can lead to serious problems within your business. Problems that inevitably cost you dearly in the long run.
Here are 3 serious bookkeeping mistakes to consider and avoid.
Don’t cover up structural problems!
Accurate bookkeeping is the foundation of reliable financial reporting; it is essential for assessing and maintaining the financial health of your business. Just like ignoring structural issues in your home will leave you on shaky ground, neglecting your bookkeeping (or doing it badly) means your business is built on inaccurate, incomplete and unreliable information, leaving it susceptible to collapse.
Don’t paint over easy fixes!
Glossing over seemingly unimportant details when attending to your own bookkeeping is equally dangerous. Simple errors like categorisingitems incorrectly, can result in profits being mis-stated and important decisions being made based on inaccurate figures with disastrous results.
Just like painting over the cracks and looking for the easy fixes when decorating your house, taking short cuts with DIY bookkeeping can lead to problems further down the track. It might seem a timesaver and cheaper at the time but inevitably these mistakes will rear their ugly heads and come to bite you on the proverbial.
Don’t devalue your business!
We’ve all gone to open houses and spotted the DIY shortcuts which downgraded the value of the property, haven’t we?
Poor bookkeeping hurts the value of a business. Having incomplete or inaccurate figures can result in you struggling with cash flow, paying your debts late, increasing interest charges, losing good credit ratings and being offered less-favourable payment terms with vendors and suppliers.
How can you make an informed decision about expansion opportunities or hiring additional staff if you don’t know what your true financial position is?
These problems have a knock-on effect to your supply chain and we all know that even small delays in your ability to deliver your goods and services can cause long-term damage to your customer relationships, leading them to look for alternative options to satisfy their needs.
The right way:
Accurate financial information lets you see how your departments, products, distribution channels and overall business are performing on a regular basis. Budgets, balance sheets, cash flow forecasts and profit-and-loss statements all help identify opportunities and challenges, so you can address any problems in a timely fashion. Without accurate bookkeeping, you lose the ability to run your business with maximum efficiency and risk reducing its value.
Did you know that 65% of small businesses blame their failure on bad financial management? Crucial to good financial management is having access to accurate financial information.Simply put, poor bookkeeping leads to bad business decisions. Forminga strong relationship with a quality bookkeeper can make the difference between your business’ success and failure.
If you would like to take the stress out of your bookkeeping, call BASic Bookkeepers on 1300 852 575 for a free consultation today. We’d love to help.
When you need to know… your financial position
