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The Negative Effects of Poor Bookkeeping

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Identify the consequences of bad bookkeeping to avoid making them when you update your accounting books.

Your accounting books hold important financial data that can make or break your small business. One wrong entry can cascade into many mistakes that distort your financial situation. You may also incur penalties because of errors in your books. Bookkeeping requires stringent attention to detail.

Here are some of the consequences of bad bookkeeping.

Poor Decision Making

Small business owners need to make assumptions for future planning. The basis of these assumptions relies on solid financial data and information from their accounting books. Mistakes in bookkeeping distort important data used for decision-making.

You may think it is feasible to expand to a new location because of the data you have. However, the error-filled books misled you into making a decision that your small business is unprepared for. This may lead to higher costs you can’t recover. You then see your sales numbers drop which results in reduced revenue. That’s why it’s important to have error-free accounting books.

Problems with Cash Flow

Companies’ aim is to always have positive cash flow because it keeps their businesses in operation and allows them to settle payments on time. One of the consequences of bad bookkeeping is that it may lead to cash flow problems because of erroneous data input. Mistaking a debit for a credit or vice-versa results in miscalculated balance sheets and missing money. Problems with your cash flow may lead to late payments that may incur penalties and extra fees, delays in releasing salary for your employees, and a lack of money to purchase inventory.

Penalties and Fines

Mistakes in accounting books may delay the filing of taxes or if you do file them the collection office may identify inconsistencies. This leads to penalties and fines, or a possible audit of your small business. These have a negative effect not just on cash flow, but also the reputation of your growing company.

Leave bookkeeping to an experienced bookkeeper. We at Robookkeeper can provide you with reliable virtual bookkeeping services. Avoid handing bookkeeping tasks to inexperienced employees because they might overlook details and some transactions. They might also be inconsistent in updating books and reviewing them for errors. Manual calculations are also inefficient and may lead to mistakes. Let Robookkeeper do your bookkeeping so that you can focus on growing your small business.

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