All companies are in the business of managing their finances and, therefore, proper bookkeeping is critical to the management of any business. Incomplete or poor bookkeeping practices lead to mismanaged services, payment problems, and lost profits. The investment one makes towards proper bookkeeping pays for itself many times over through the healthy life of the company.
Bad bookkeeping leads to mismanagement of a company’s finances. This mismanagement typically translates to late payments, bounced checks, or other ruinous practices. Late or missing payments means loss of vendors, suppliers, and contractors. These losses can delay products or services which usually means loss of a customer. As you can see, poor bookkeeping can ruin a business quickly.
Inaccurate bookkeeping can also result in missed opportunities. For example, a misunderstanding of available funds may prevent or delay business expansion or partnerships. Likewise, if inadequate bookkeeping leads to late bill payment, then credit problems will arise. Small and midsize businesses often need loans to survive and credit problems can sink a young business quickly.
All companies should review their current bookkeeping practices on a regular basis to confirm that they are operating in the most effective and efficient manner possible. When evaluating bookkeeping practices, keep in mind some common problems. These include inefficient practices; a lack of documented processes; a consolidation of practices/information with only a single person; and improper integration of technological solutions.
Inefficiencies include adding a transaction to wrong classes or time-periods. These inefficiencies are commonly the result of processes that are not properly defined or documented. Additionally, if only a single person is responsible for all work, there is a tendency to develop idiosyncratic approaches that cannot be shared or scaled. Finally, modern accounting technology has opened up a wealth of possibilities regarding systems integration, data synchronization, and powerful reporting. However, with these new systems comes the need to have staff who have properly managed all aspects of the bookkeeping landscape.
Many small companies are run with just a few employees. In these situations, managing the company’s financial operations may best be handled with an outsourced bookkeeping service. These services can assess where you are and what processes or tools are required to get the company’s financial situation into proper shape.
Outside accounting service providers provide companies with the expertise needed to get and keep the company’s financial information accurate which, in turns, allows the business to know what it needs to do to remain successful. In addition to meeting payment and vendor demands, proper bookkeeping efforts lead to the production of the detailed reporting and financial insights that allow the company’s managers to make critical decisions regarding growth and other opportunities.
An investment in proper bookkeeping practices and technology provide a foundation for any business to operate better. This is not an arena to cut corners as any financial mismanagement can be ruinous to a company. Take the time to know your processes and talk with outside bookkeeping service providers to determine what best next steps are needed to allow a business to thrive.