Three Consequences of Poor Bookkeeping

Poor Bookkeeping
Poor Bookkeeping

Of all the challenges a business owner faces, one that causes huge problems is poor bookkeeping. The lack of attention to this area can have a far-reaching, negative impact on a company.

In this article, we detail some of the pitfalls and repercussions brought about by poor bookkeeping practices. (We encourage you to get professional help if bookkeeping is being poorly managed in our organization.)

Cash Flow Issues Abound

One of the most immediate effects of poor bookkeeping is cash flow problems. Some business owners focus on providing products or services to customers but neglect to send them a bill in a timely fashion.

This happens more frequently in businesses with just a handful of employees because there may not be someone dedicated to invoicing. Since many small businesses have employees juggling multiple roles, bookkeeping is often one that gets put off until later. If poor cash flow (e.g., invoicing infrequently) persists long enough, a company may be forced to go into debt to pay its bills or, worse, be unable to pay at all.

Expenses are not Tracked and Maintained

Whether a business has one or multiple employees with authority to make purchases, the corresponding expenses must be tracked promptly. The tracking process should ensure the purchased item was provided or the service was completed. Additionally, all supporting documentation must be maintained, and the expense be correctly entered and categorized in the company’s accounting system.

If all expenses are not entered in the system regularly, any financial reports prepared from the system will be incomplete. Also, determining profitability during the year will be a futile exercise.

Budget Accuracy is Impacted

When preparing a budget, companies frequently use recent financial data as a starting point. If proper bookkeeping has not been maintained, then any financial information rendered will not be as useful as it should.

This creates a cycle of having poor budgets, not meeting those budgets and then starting again the same way the next year. The cycle repeats itself unless the company addresses its bookkeeping issues. In short, an accurate budget begins with strong bookkeeping. If the system is kept current, it can output relevant numbers, making it possible to develop a relevant budget.

Morgan & Associates Offer Bookkeeping Assistance

If some of these (poor) bookkeeping practices sound familiar, you may need help from an expert. Here at Morgan & Associates, we’ve seen all sorts of bookkeeping – from great successes to big mishaps. (Nothing scares us!) We have the experience to get your bookkeeping back on track.

Fill out the form below to address your company’s bookkeeping needs. 


Related Posts