You are a business owner and you are juggling sales, marketing, hiring, managing payroll and employees. The chances are that you will be letting boring things like accounting stack up into a mess. Maybe you are waiting for the tax season to arrive. What happens if you don’t do your accounting?
There is a good change that you are likely to end up in a big mess and there might be a hefty price tag.
You will never have clear view of your business finances
If you put a full stop to accounting, your books will no longer show a clear picture of your company’s financial viability. Without accurate records, it can be difficult (or nearly impossible) to track cash flow projections and statements.
Without accurately measuring cash flow, you can obscure issues like overdue invoices, held inventory, or recurring variable expenses like shipping costs or salaries. A clear break up fixed and variable costs allows you to find out your break-even point.
Your cash flow shows when money is coming in and what bills need to be paid. If your business is failing to track cash flow and you’re struggling financially, having a paper trail can reveal the problem. But, without accounting there is no trail—just a stack of papers on a desk somewhere.
Financing options become limited
Let’s face it; no bank will lend you without proper financial statements. Without evidence of your financial history, securing loans, bringing on investors or partners, or selling your business will be an uphill grind.
Your invoicing cycle goes haywire
You could keep a mental note of who owes you what, but we’re all human—we all make mistakes. Are you sure you didn’t forget about the invoice for the client who always pays late? If you did, they’re not going to voluntarily remind you that they owe you money. The slower you are at organizing outstanding invoices, the longer your business will go without those funds.
Payroll problems start to rise
If a system of checks and balances isn’t in place, issues with payroll can happen. Without proper bookkeeping, you might be under-compensating (or overpaying) employees without knowing. Generating Form 16 for tax filing will be a huge problem. Moreover, this can cause tax problems for the employees as well.
Managing expenses becomes tricky
Having a shoebox of receipts might sound easy enough, but this is not going to save you money. Without proper bookkeeping, your business could suffer from slow leaks.
Accounting backlog drains your time and money
Tracking down a year’s worth of records on your own takes you away from running the day-to-day operations of your business—and catch up accounting can make a stressful time of the year even worse.
If there isn’t a system in place for monitoring your books, your accountant is going to need ample time to sort through the mess, and it will cost you money
You will get in tax trouble
Filing tax returns without books of accounts is near impossible. All tax filers declare that they are providing correct information in their returns. Therefore, providing incorrect or false details will lead to penalties.
So we have answered the question of “What happens if you don’t do your accounting?”. Get in touch today and save yourself a load of trouble.