Small Business Bookkeeping Challenges
Managing a growing business requires an entrepreneur to focus on developing and refining several areas of the company at the same time. The need to win new business, manage existing customer relationships, train new employees and refine the production and delivery process are essential to the success of a company. However, time and energy also need to be given to human resources, marketing, risk management, compliance and even accounting/bookkeeping. The need for more time to review and manage each of these functions can not be overstated. One area where many small business owners struggle to maintain their attention is with monthly bookkeeping. In the early growth stages of the business, it’s easier to dedicate time to the various record keeping and reporting tasks. However, as demands for their time grows, it’s easy to allow this essential task to slip down the priority list to do “another day”. This can result in several problems that act as warning signs to larger issues that can arise if not addressed. To help clients, prospects and others understand the warnings signs and how to address them, Hanson & Co. has provided a summary of key “signals” below.
Bookkeeping Warning Signals
Inconsistent Invoicing – Cash flow is the lifeblood of any business. For this reason, it’s imperative to ensure invoices are calculated, produced and sent to customers on a regular basis (or according to agree upon terms). The longer the company waits to send out invoices, the longer they wait to receive payment. It also limits a company’s ability to leverage its cash flow to invest in people, processes and systems that can fuel expansion and growth. If your company is consistently struggling to produce invoices it may be a warning sign.
Unreconciled Bank Statements – Reconciling bank statements is an important practice and helps the company uncover any errors in financial data and reporting. It allows the company to review their records against bank records to ensure all transactions were properly documented in addition to identifying discrepancies should they appear. When bank statements are not regularly reconciled it not only exposes the company to inaccurate books but allows expenses to go unreviewed for extended periods.
Inaccurate Revenue – An essential measure of the vitality of a company is its ability to generate revenue. A common warning sign that there are issues with a company’s bookkeeping process is when the reporting of revenue is consistently inaccurate. When revenues, investments, rentals and other income are improperly reported not only does it make it difficult to understand how well the company is performing, but also makes it very difficult to make good long-term decisions for the business.
Outdated Reports – In order to make educated decisions about the business it’s essential to have access to up-to-date reports. How can you know if the business is profitable or not without the latest financial data? Financial reports need to be current to provide accurate insights on the economic condition of the company, cost drivers, profit centers and other important information. Without updated reports, management is at risk of making bad decisions which may have negative financial consequences in the future.
As a company grows it’s important to change processes and procedures to match need and demand. While it’s often more thrilling to focus on other areas of the business, a robust accounting and bookkeeping process is essential to your business’ long-term success. If your company is experiencing these or other accounting issues, Hanson & Co. can help. For additional information please call us at 303-388-1010 or click here to contact us. We look forward to speaking with you soon.