Why businesses fail without good bookkeeping
Don’t drive your business blindly – ensure your business is viable.
Bookkeeping is the recording and classifying all the financial transactions in your business. It’s keeping track of what your business spends and what your business receives
Excellent bookkeeping is essential to any business and contributes to one of the top reason’s businesses fail. Yes, Cash is King but without good bookkeeping how can you possibly know how much cash is going in or out of your business? A cash forecast is a complete waste of time if the data you are putting into it is nonsense.
Stop blinding driving your business and take action now, ensure you have good financial records. Not only is this key to having a good business, it is also a legal requirement to maintain accurate records!
Still not convinced then keep reading:
Tax – will be a nightmare
It is a requirement of HMRC that you file a tax return each year, yet every year business owners across the UK are scrambling to get their paperwork together. Is this you?
If you do not keep accurate records it is likely that you will miss key business expenses and therefore pay MORE tax. Good records enables good tax planning.
The tax payment happens every year, so wouldn’t it be nice to know before the deadline how much you need to pay? Excellent bookkeeping will bring you one very important step close to this. You can even start to forecast what the payment might be and start to put aside an amount every month.
Imagine having all your financial information ready for tax time and instead of looking in your email inbox, various cloud accounts and folders in your office, it could be all in one central place (yes, I mean accounting software with invoices and bills stored in the software).
Peace of mind – Don’t let your health be impacted
Not knowing if your business is profitable, if you can afford to withdraw dividends and if all your hard work is paying off can play heavily on a business owner. They can feel like they have the weight of the world on their shoulders. Do you ever wonder if it is all worth it?
As a business owner you have so many things to organise, surely worry about bookkeeping is not top of your list?
Having your financial records organised will allow you to sleep peacefully at night, you will not have to feel anxious when it comes to year end. This will allow you to have the head space to work ON the business and focus on whats important to you.
So take back control – get on top of your bookkeeping.
Cash in your bank – don’t hit a cash crisis.
Organised financial records will enable you to understand the cash flowing in and out of your business. You will be able to see exactly what you spend on (is it worth it?) and where you earn money. With a clear picture of how you spend you can really begin to take control and grow your business.
Do you pay your suppliers on time? Could you have a better working relationship with those suppliers, maybe secure a discount if you paid earlier. If you pay your suppliers on time they may be more willing to help you with quick turnarounds on stock.
Have you been paying for services even after you have stopped using them? Maybe you have been doing this for month. Yes I have seen this, the business is completely unaware of the fact that they have been paying out thousands unnecessarily.
Do you receive payment from customers on time? By having accurate up-to-date records you will know who owes you money and how much. This will put you back in control and ensure the cash is sat in your bank and not theirs! You will understand who are the serial late payers. What can you do to get them to pay on time?
Cash is king and good bookkeeping ensures you can successfully track it.
Do not wait until the business is unable to pay for something critical, take action now!
A budget is a financial road map for your business, it helps you to plan for future expenses and understand when you can afford to invest in some of those larger purchases. When your accounts are correct it makes it easier to review your income and expenses. This in turn will make it easier to create a useful budget.
Organisation – reduce anxiety
Bookkeeping is the organisation of financial information which is very important if HMRC decide to select your business for an audit. It is much less stressful if you can simply show HMRC your cloud accounting software, with all your records nicely organised. This will give them confidence in the numbers you have filed.
It is not only HMRC who will be keen to see tidy accounts, if you are looking for investment or a loan, these stakeholders will also expect you to be able to present financial accounts, forecasts and budgets. All of which you need accurate data to be able to produce.
Business Analysis – make good decisions
Do you know which product or service is your highest performing or do you simply guess?
Excellent bookkeeping will enable you to analyse the business. You will be able to see which product/service is bringing in the most revenue, which is contributing to the overhead costs (such as rent) and which product/service is costing you money.
In order to make the best decisions possible, you need to have access to all available information. Bookkeeping provides this information.
With better information you can make better decisions.
Profit and Growth – in business to make a profit
Is your business profitable or not? The income statement is a key document for understanding if you are making a profit. Bookkeeping is important as it feeds the income statement. Without good bookkeeping it will be impossible to know how well (or not) you are doing.
By having accurate monthly accounts you will be able to track your income and expenses overtime. This will enable you to identify trends. Which month was your most profitable? Why was it more profitable? What did you do that month that was different to previous months?
By understanding the trends you can start to compound the positive actions and reduce the negative actions.
Investors – don’t let them run for the hills
If you are looking for investment then it is key to be able to quantify the value of your business, financial statements will do that. Investors will want confidence in their investment and the balance sheet, income statement and cash flow statement all present the value of your business.
The key to accurate and reliable financial statements is excellent bookkeeping.
If you were a potential investor, would you have more confidence in the business that had an organised system for financial records or the business that took a month give provide the information due to poor bookkeeping?
Fraud – don’t let fraudsters raid your bank
Keep accurate records will help to combat fraud, if someone hacked your business bank account, would you know? It is your responsibility to check transactions and report fraudulent activity.
It is a legal requirement as a director to ensure that accurate financial records are kept for the business. Failure to comply can result in a fine and disqualification as a director. You must be able to provide information on all money that was received and spent, debts the company owes, stock the company owns etc.
Do you believe me now?
As you can see, bookkeeping is the foundation to many other important aspects of your business. Make sure your foundations are right and you will have a better chance of having a study business.
If you need to implement a bookkeeping process, consider hiring a professional to help. Bookkeeping can be complicated, even classifying a single transaction can be unclear and this could be a costly mistake.
Consider trying the bookkeeping services Southbourne Accountancy offers. No longer would you have to worry yourself about your company’s books. Leave it to the experts! Contact us today and ask yourself: How will I use bookkeeping to benefit my business?