Bad Things Can Happen If You Don’t Keep Your Bookkeeping Current
If you’re running your business and don’t have a bookkeeper or aren’t doing the books yourself, you might wind up in trouble. Some business owners live off their checkbooks or business credit cards, paying bills, purchasing, and collecting cash without keeping a record of the transactions.
Throwing receipts into a bin and planning to catch up on the books later is no way to go. Your books should be kept current on no less than a weekly basis. If you don’t keep current with the bookkeeping, you might suffer some of these negative consequences:
Running a company means you’ll have federal and state income taxes, self-employment or employment taxes, and possibly sales and use taxes. Income tax filings are on a monthly, quarterly, or annual basis depending on your revenue and payroll taxes are due more often. Miss a deadline and you can expect fines and penalties.
Turned down for financing
To get a business loan or line of credit, you must be able to demonstrate your company’s stability. For a small business, that means providing the lender with your income tax returns, financial statements, and records to prove your monthly revenue, expenses, and net income. Without these critical statements, approval isn’t likely.
Mistakes happen in business, and they’re easier to fix the sooner you notice them. You might have underbilled a client, or they might have underpaid. Your bank might have double charged you or not credited a deposit properly. If you’re not current on your books and bank reconciliations, it might be too late when you notice to fix the mistakes.
Without accurate and current financial information, you won’t know how well your business is doing, what areas are most profitable, and to best plan. Monthly reporting of results helps keep you on track. If you let your bookkeeping pile up, you won’t know if you’re operating at a profit and how you could be doing better.