Calculating the Real Costs of Sloppy Business Accounting

Running a business? If you have been in the game for quite some time you must have already realized how important accounting is for your business. Clearly recording your expenses, projected income and profits works wonders towards the growth of any business! Unfortunately, not every business owner takes their business’ accounting as seriously as they should. Highlighted below are the real costs of sloppy business accounting

Failure to Accurately Capture Your Business Assets

A business’ assets include money, office space, equipment, the technology used, and any property under it. To get the true value of your business, you need to accurately capture all these while generating a balance sheet - failure of which may lead you to overestimate or underestimate your business worth. This can be detrimental to financial decisions and calculations made based on the liabilities relative to your assets.

Duplicated Accounts

Among the repercussions of sloppy accounting is the possibility of duplicate accounts, such that expenses and vendors' information may appear in separate accounts but under the same name. You may also inadvertently duplicate customer or clients’ accounts. Such occurrences can cause undue stress when bookkeeping or handling issues such as payments, thus making your accountant invest their precious time on clean up rather than maintaining.

Legal Lawsuits

The law requires that businesses maintain accurate records of their financial dealings, and share this information with their shareholders, tax authorities, and regulators. Also, when filling out taxes, such information should be their bearing.

Shoddy business accounting may not only make you spend countless hours trying to catch up but also attract governmental investigations, penalties, fines, and lawsuits when your business receives an audit. Not many businesses weather this storm, and those that do face significant damages to their operations.

Embezzlement

Embezzlement and defrauding is no news, in the business world, as many owners continue to come up with ingenious ways to protect their businesses from unscrupulous employees. One sure way that works is by developing a proper accounting system. Without the right knowledge and skills of how to develop and balance financial documents, ill-intentioned employees will find it easy to siphon money from your business!

Poor Budget Planning and Allocation

The main purpose of most businesses is to realize profits. You may be making numerous sales, but if you fail to minutely track them through proper accounting, your business will be at a financial risk. This is especially true if your business runs on thin profits margins.

That aside, you also need to effectively plan for operational costs, bills, and employee paychecks. A slack in any of these may lead to product delivery stops, recurring services you don’t use, paying for more than you need, hidden fees for services, utilities turned off and employees de-motivation just to mention a few. If such problems keep recurring your business may not stay afloat for long.

Proper accounting helps maintain a systemic, accurate, and complete record of all the financial transactions carried out in your business. Above are some of the repercussions you will encounter if you do not do a good job at it. Lucky for you, accounting professionals such as Carolina Money Minders can help you stay at the top of the game when it comes to maintaining excellent account records.