You may think of bookkeeping as a quarterly, or even annual, headache related to filing your business activity statement (BAS). But the reality is that bad bookkeeping can impact your business constantly in a wide variety of ways. Consider the ten listed items below as being some of the most common ways bad bookkeeping costs your business money:
- Missed income: failing to keep accurate transaction records can lead to invoices being sent out late – or not at all! It is a fact that the longer a bill remains unpaid, the greater the chance it will end as a bad debt, so sending invoices weeks or even months after the fact will have an impact on your bottom line and your cash flow.
- Late payment penalties: the flip side of poor accounts receivable management is poor accounts payable management. This can also cost you money in late fees and fines, depending on the policies and generosity of your creditors. Even if no penalty is involved, it can create a strained relationship if your suppliers are constantly chasing you for money.
- Missed Expenses: without good records, there is a fair chance that some of your deductible expenses will be missed at tax time. With a tight economy, small businesses need to take advantage of every possible cost reduction avenue.
- Missed GST records: With GST accounting for 10% of transactions, failure to track – or in some cases charge – GST can have a substantial impact on your business.
- Audit issues: without adequate supporting evidence, an audit of your business’ income and expenses could become a concern that could result in penalties if claims are unproven.
- Not Separating Personal from Business Accounts: This can make life difficult during an audit. Don’t like the word difficult? How about stressful? Or unpleasant? Regardless of what is makes your life, it is much easier to prove and reconcile accounts when the ins and outs of the businesses cash are running through their own unique accounts.
- Additional wage costs: failing to monitor staff timesheets could result in additional wage costs. These may be unintentional, but if staff become aware of a lack of oversight, the potential for fraud becomes a clear concern.
- Payroll problems: poor records has the potential to also impact the timeliness of payroll processing, with poor systems causing delays that will impact on staff livelihoods and morale in the workplace. A workforce that is always wondering when the next paycheque will arrive is unlikely to be highly motivated.
- Lost inventory: poor stock control can lead to lost tax deduction opportunities in the best case, and widespread employee and/or customer theft in the worst case. Without tracking your stock, money could be literally practically walking out your door on a daily basis.
- Additional accounting costs: the less work you do on your books, the more your accountant will have to do – which will lead to additional hourly fees reducing your profits.
As you can see, bad bookkeeping will have an ongoing impact on your business – isn’t it worth spending a little time on your books each week to keep everything in order?
By Jennifer Lowe