It makes sense that you want to keep an eye on your business and any potential problems by doing everything yourself. But, one reason why small businesses fail – or turn low profits- is often poor accounting.
Whether it’s bad numbers, or no numbers, bad bookkeeping is a recipe for disaster. Here are seven signs your business should invest in a bookkeeper.
- You’ve never kept a set of books before
- You think software is a substitute for experience
- Your bills get paid late
- You don’t invoice regularly
- Your records aren’t organized
- You don’t know how to categorize your expenses
- You never have time to grow your business
1. You’ve never kept a set of books before
When bootstrapping a business, it’s no surprise many entrepreneurs prefer to do things themselves. Sometimes it’s in their nature, but oftentimes it’s an attempt to save money. If you’ve never done bookkeeping before, this may not be the time to start. Learning a new skill while trying to successfully run a business can end up costing much more than it saves.
2. You think software is a substitute for experience
Bookkeeping programs like Xero or QuickBooks can be a double-edged sword. While they can make bookkeeping easier, they don’t make up for a complete lack of knowledge. If you rely on software alone, you may be making mistakes without even knowing it.
3. Your bills get paid late
Sometimes, you don’t have the cash to pay your bills and, other times, you just forget them. The late fees and interest may not seem like much once you’re used to them, but they can really add up to hurt your business. Regularly updated records and cash flow forecasts will help you keep current with all your payments.
4. You don’t invoice regularly
It’s difficult to stay on top of your bills when there isn’t any money flowing into your business and, to keep money flowing, you need to be regularly invoicing your clients. Without regularly invoicing clients,you’ll fall behind on your accounts receivable cycle and your business will quickly grind to a halt. Remember, cash flow is king.
5. Your records aren’t organized
Record-keeping is a vital part of bookkeeping. Without maintaining organized account records, you risk headaches and expensive ledger cleanup down the line. Organized records will also help you avoid missing deadlines for government remittances and penalties for incorrect – or incomplete – tax returns.
6. You don’t know how to categorize your expenses
Without any experience, you may incorrectly categorize expenses and miss out on tax credits and deductions your business is entitled to claim. Many times, this point alone more than pays for the expense of hiring a bookkeeper to handle a business’s financial affairs.
7. You never have time to grow your business
Even if bookkeeping comes easily to you, every hour you spend managing your records is an hour you could have spent developing your business. Outsourcing your bookkeeping can free up the time and brainpower you need to focus on what you do best – running your company.
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