The 9 bookkeeping issues we want you to address in 2022-23
Not
everyone is aware of what is wrong in business. The first time an organization
tries to manage finance on its own, it faces hundreds of challenges, and these rollercoaster
rides continue until you find a suitable financial partner.
Running a business means always being on top of your cash flow. It is where bookkeeping plays a vital role in helping you make wise business decisions. The best bookkeeping practices include knowing how you track finances and transactions on a daily, weekly, monthly, and quarterly cycle. It provides the most efficient and effective way of keeping track of money coming into your company and money going out of your company.
Small
business owners spend more time focusing on business deals, marketing, and
managing customer relationships than they do on their finances. The problem,
however, is that by failing to prioritize bookkeeping and accounting, they
missed opportunities that could have benefited other business processes.
As a Bookkeeping
services provider in Australia, we have
come across many small, medium, and large-sized businesses with a constant
struggle to resolve discrepancies and inaccuracies in accounts. It's all due to
the neglected accounting
and bookkeeping services necessary
for their business.
Our
previous blogs also outlined many ways to address major financial issues
related to managing finance and accounting in your business. Here in this blog,
we address the most specific and common bookkeeping challenges organizations
face, recommend solutions, and help you find the right bookkeeper that fits
your needs.
The
following are the primary bookkeeping challenges in detail,
1. Maintaining accurate financial records
The first
thing professional accountants or bookkeepers do is
maintain your books and record transactions. It may involve the implementation
of automation of the daily tasks or outsourcing bookkeeping functions to dependable
bookkeeping professionals.
The
process of bookkeeping involves organizing, tracking, and recording financial
transactions, such as income and expenses. This provides crucial information
about the business. So, you get timely financial reports, make wise decisions,
or build business strategies. Also, accurate bookkeeping improves the quality
of this data, so it stands strong with obligatory compliance and regulatory
authorities for a secure and smooth business run.
2.
Less or no basic accounting knowledge
Even if
you have a great business running for your initial years, and do not think of
anyone better qualified than you to handle your financial hurdles. Still,
without a practical understanding of business finances, you will face
complications in keeping complete, accurate, and valuable records.
As a
result, accounting
and bookkeeping will appear
overwhelmed with inaccurate records and encroachments. There have already been
many businesses that have failed miserably to organize money properly.
Understandably, managing finances and other business services is not something
they manage on their own. So, it is best to hire a professional or outsource
the functions to a professional company.
3. Poor management of cash flow:
Having a
positive cash flow is an integral part of a company. Thus, knowing what is
flowing out and why it is essential to control a positive cash flow is
something most businesses lack, which may be due to the overwhelming financial
challenges, fierce competition, or just mishandling of the books. However, a
negative cash flow can hurt the overall business finances. Simply, when the
incoming cash flow is insufficient to meet the basic needs, it eventually
results in exhausted spending, investing, and other control operations.
But
professional bookkeepers help you stay on top of your cash flows by focusing on
recurring expenses and transactions. As a result, one can identify and track
unused equipment, potential issues, and lease options instead of buying them
with heavy capital, thus balancing out the cash-in-hand situation.
According
to many surveys, poor cash flow management contributed to the failure of 80% of
small businesses.
4. Inaccurate and untimely reporting
Companies
that manage a broader customer base and conduct substantial financial
transactions on a daily basis. They may need to generate monthly reports to
show investors and shareholders that all company processes are monitored
closely and regularly.
However,
in most cases, small businesses do not show any interest in this crucial
business process of acting on accurate reports. When the income statement is
not updated, negative balances may manifest when expenses are incurred, which
hurts the company's reputation when invoices to be paid are neglected.
Hence, the
solution is to maintain monthly records of the business and its finances,
either by yourself or by hiring professionals to do it for you. It is advised
to create financial reports on a quarterly or annual basis.
5.
Delayed Payables
Another
major bookkeeping problem that small businesses face daily is managing their
payables. At times, managing these challenges without a good bookkeeper on
board can be a daunting task, not just for the larger enterprises but also for
SMEs, who have to deal with all kinds of shortfalls in payable work.
Small
business owners do not intentionally delay their payables. They merely have a
system in place for tracking and paying bills. And aside from that, more
significant problems may arise due to delayed payables. But as a start-up, you
would not want to establish a reputation for not paying or being late with
payments. So, to receive what’s owed to you by your customers, you will need to
ensure you are paying what you want to your vendors as well and paying your
bills on time is just as critical as collecting invoices.
6.
Delayed Receivables
Managing
receivables is a critical business accounting process to maintain positive cash
flow in the organization. Most small business owners easily fall for fake
promises supported by a dull invoicing and follow-up system. Getting paid late
or not getting paid at all can lead to your firm's downfall.
Many of
you may or may not come up with such issues. But not getting paid for a long
time for the work you have invested money and effort into can easily hamper the
organization's stability and reputation among other customers and your
employees.
To avoid
getting into this cycle. It is necessary to track your receivables and
establish effective invoicing habits. You can even hire bookkeeping firms for automated billing and follow-ups with the best
offers. They not only manage your accounts but also consult on future business
decisions.
7.
Tax preparation and planning
Whenever
tax season arrives, a lot of us tend to become quite confused. When planning a
tax return, it can be exhausting to keep track of each step of the process and
development, causing us to run into tax problems. So many factors need to be
considered, so many points need to be reviewed, and so much information needs
to be collected.
As a
result, most small business owners find tax preparation and planning a
complicated process and fail to pay their taxes on time. There are many ways
that a skilled bookkeeper can help you with your finances, such as managing
missed quarterly estimates, under withholding, missing out on necessary
deductions and improper tax filing.
The best
tax planning strategy aims to put you in the best financial position possible
and avoid such compliance issues. Thus, finding someone who can professionally
manage your books and guide you through the taxation process should be a
priority for your business.
An
effective tax planning strategy focuses on:
- Reducing
your tax-liable income,
- Increase
your deductions.
- Leverage
the lower tax rates for benefits
8.
Tracking the Expenses
A lack of
cash is the most commonly cited issue small businesses face, and not keeping
track of expenses has been the most crucial reason for this. We must know that
tracking business expenses is a lot more painful without the right tools and
the right accounting partner. Such issues require an efficient expense tracking
process that can streamline your business's bookkeeping while eliminating
errors and simplifying daily tasks of accurately keeping track of paper
receipts and digital invoices, managing reimbursements, and tracking recurring
expenses.
When you
keep a closer eye on your expenses, tax time will be a lot simpler, as you will
be able to avail of the potential deductions and claim expenses as write-offs.
It also helps you identify your business’s current financial state, avoid
unnecessary expenses, and predict what costs you have coming up.
How
a bookkeeping firm can help you with expense management
- Digitize
all your receipts, invoices, and expense sheets.
- Use
expense management software to categorize and keep your expenses all in
one place.
- Have a
dedicated business bank account for expenditures.
- Organize
and review your business expenses on a monthly, quarterly, and annual
basis.
9.
Fraud Prevention
Small
businesses find it hard to manage all aspects of their accounting departments
on their own. However, when they do, they miss out on efficient handling of
business accounting and bookkeeping. Overlooking these crucial processes also
undermines the overall financial stability, which contributes to recurrent
irregularities, discrepancies, internal fraud, and everything that causes you
to fall flat on your face in the market.
Bookkeepers
for small businesses can help you establish a reliable system of managing your
finances and follow a consistency and transparency pattern in your accounting
department. Also, having someone managing the books, like a controller, sets up
a checks and balances system, runs internal audits regularly, and ensures
everything is secure and with appropriate accountability.
Some
of the most common fraud cases include:
- Payroll
schemes
- Cash
larceny
- Inventory
theft
- Expense
reimbursement schemes
- Checks
tampering
By
choosing the right bookkeeper for your small business, you will be able to
solve any bookkeeping challenges, find facts and accuracy in daily business
transactions, make well-informed decisions, as well as prevent discrepancies
and potential fraud. In some cases, outsourcing a business’s bookkeeping needs
also helps companies to focus on other activities of their business while
improving the efficiency of their accounting department.
For
the best bookkeeping services in Melbourne
Since
2002, Mizael Partners has continued to provide bookkeeping
services for businesses. We specialize in
ensuring all financial records accurately reflect the position of an individual
or organization.
Mizael
Partners can provide the best small business bookkeeping for your business. Our bookkeepers in Melbourne can
help you maintain detailed and accurate records of the financial ins and outs
of your business, including your current and projected financial standing.
Contact us
To speak
to one of our accredited accountants/bookkeepers, please call us at +61
(0) 466 228 000.
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