Do you know that in 2018 alone there were 1.26 million accountants and auditors and 1.53 million bookkeeping services, accounting and auditing clerks employed in the U.S? Surprisingly, it is the state of CA that employed the most accountant and auditor in 2018.
It presents a picture that shows the need for maintaining the accounts properly. However, it is known to us that the costs of Accountants and CPAs are much higher than of the Bookkeepers.
However, just because of not hiring the bookkeeper at the right time, often small business also needs to hire Accountants in the later time. Several other problems may occur also in case of not hiring a bookkeeper on time.
In the next few paragraphs, you will be able to know the sequences which may occur in case you do not have proper bookkeeping or how can bookkeeping help your business.
The finance will be left obscured
Without proper bookkeeping services, it is difficult to get a comprehensive picture of the financial viability of your company. In the absence of the proper records, tracking the cash flow projections and statements is next to impossible.
Now when you cannot measure the cash flow accurately, you will face the difficulties with invoices overdue, held inventory, or recurring variable expenses like shipping costs or hourly wages. Without a clear understanding, reaching the breakeven will be difficult.
Can cause costly mistakes
As you are getting obscure ideas about your financial situation, it may lead to the next level that is to do costly mistakes.
It is obvious, as you are running out of the exact amount of inflow and expenditure, so making the mistakes are going to be very common.
Overestimation of the profits can also lead you to audit and fines. Wrong categorizing assets (such as, long-term assets that depreciate over time) and expenses can lead to your paying more in taxes than you need to.
Increase the chance of being audited
As mentioned, when you are doing mistakes it will result in increasing the tax payment. An improper or late filing of return can lead you to some vulnerable situation.
In case the IRS found wrong exemptions, expenses, or deductions, they can take the initiative of doing an audit.
Now imagine that during the audit if you cannot produce the all-important documents as you didn’t record it in bookkeeping book, then what will be the consequences. Remember that any matter of irregularities will be found during the audit, it may turn into serious consequences like penalties.
Limits your Financing options
Imagine your situation after being penalized by the IRS. In case of even in the need of a loan will you be able to get it?
Messy bookkeeping and accounting services can lead your options closing. Especially, if you are a small business owner, such bad bookkeeping his can lead to bigger problems.
In order to get loans, you must make sure that you have accurate, up-to-date financial records. Bookkeeping for small business is very essential. Do not let a bad or not having any bookkeeping to ruin your prospect of getting loads.
Minimizes the Tax Deduction
What do you do to claim the deductions? You need to file the documents to claim it. However, in most of the cases, where there are no bookkeepers, the chance of getting the important things to be misplaced become high.
In case you will not have the valid documents with you, you will not be able to claim the deduction for them either.
Even if you hire an accountant, it is not possible for him either to spot the deduction in the absence of the booked documents.
Therefore, you have seen that in case of not having proper bookkeeping services, the range of problems that you can face.
Are you facing any other challenges due to not having bookkeeping? Do not be worried about being penalized by IRS