It’s still surprising to see how many entrepreneurs view accounting as an afterthought or a nuisance when, in reality, it should be one of the most important aspects of a business. It is estimated that over 80% of businesses fail because of insufficient cash flow or mismanagement. Having your accounting down could help your organization reach profitability in many ways. Let’s take a look at a few ways in which bad accounting could end up ruining your business.
You’re Opening Yourself Up to Compliance Issues
Whether it’s deadlines or new regulations based on your industry or your number of employees, not working with a professional and competent accountant means that you are opening yourself up to all sorts of trouble with the IRS.
You might not know that you will have different obligations if you decide to hire an employee, or you may not be aware of some obscure rule change. It is the job of an accountant to know about all of these and help you stay on top of new regulations. You’ll also be able to prepare better for changes. We would suggest you team up with a reputable CPA business accounting firm like Brown, Smith, Wallace. These firms will have the resources in-house to deal with any industry and its particularities and will allow you to get and stay ready for any event.
You’re Leaving Money on the Table
Your business may also be leaving tons of money on the table and not be aware of any benefits that you may have access to. You could find out that you’re eligible for certain tax credits and these are often issued to businesses in tough sectors or a tough situation. This could be all that it takes to keep your business above the ground. A good accountant will know about all of these programs and will be able to help you not only find them, but complete the application process as well.
Harder Access to Capital
Not having your books in order also means that accessing capital will be more difficult. When you work with an accountant, they can help you with things like forecasting, which will make you more credible when asking for capital from a bank or an investor. Investors will be impressed by the fact that you have all of your numbers down, and that you can give them a clear informed view of things like cash flow and profitability forecasts. Valuating your company will also be simpler when your books are nice and organized.
Bad Decisions
At the end of the day, how can you make good decisions if you don’t even know your business’s true financial health? Those who don’t may end up hiring at the wrong time or making important purchases when their cash flow doesn’t allow for it. These are all things you’ll be able to avoid by working with a professional.
These are all ways in which bad accounting could be disastrous to a business. So, if you’re a new business owner and were still on the fence about working with a professional firm, we strongly suggest you do it immediately.