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Whether you are a solopreneur, small, medium or micro business owner, staying on top of your bookkeeping is important. Keeping track of the financial part of your business gives you the opportunity to grow your business and remain profitable.

Accounting is the language of business, so keeping it accurate and up to date will allow you to understand what is happening in your business.

Continue reading to find out more about the 5 effects of messy bookkeeping, and the reasons why you should avoid them in your business. Some of the reasons may surprise you.

5 EFFECTS OF MESSY BOOKKEEPING

1. FAILING TO PAY BILLS ON TIME

A bookkeeping system, even the simplest one, goes a long way in assisting you in paying your bills on time. These as payments such as loans, supplier invoices, utilities, rent, etc.

Failing to keep bills up to date is one of the main reasons why small businesses fold. 

2. UNABLE TO PLAN AHEAD

It is critical for any business owner to have short and long term plans in place. Think of it as budgeting.

Accurate bookkeeping gives you the insight into whether you need to reduce your expenses and if need be, downsize. Often, small businesses are not profitable as quickly as expected.

It's just a fact of life.

By keeping track of your finances, you’ll instantly know when it’s time for you to cut back.

3. TAX NON-COMPLIANCE

It was revealed through a report from the South African Revenue Services that the highest rate of tax non-compliance falls within the Small, Medium and Micro Entities (SMME’s) and sole traders.

So, there’s a high possibility that as a South African small business you will be subjected to an audit.

Were you aware that SARS can audit you at any time?

It’s so much better to invest the time or money to keep your bookkeeping in order. In the event you get audited, having everything in order makes the process go much more smoothly.

4. MISSING LEGITIMATE TAX DEDUCTIONS

As a small business owner, it benefits you to take advantage of every legitimate tax deduction you can.

All tax savings ploughed back into your business can be beneficial for growth.

When you neglect to keep proper track of your financial information, there’s a greater risk that you’ll miss certain deductions that you qualify for.

5. NOT ABLE TO SET REALISTIC GOALS

One of the best ways to ensure success in your small business is to set goals. 

Ask yourself questions like, "How am I doing?" and, "Can I really afford to expand?" 

This is quite difficult to answer when your bookkeeping is messy, but adequate bookkeeping helps to answer these questions and allows you to set realistic goals for the future.

BOOKKEEPING ASSISTANCE

Not everybody has a flair for numbers, but this is not a reason to freak out. There are numerous excellent accounting software choices which you can use to manage your own books.

QuickBooks Online subscribers grew by 33% during 2020. A clear indication that small business owners are serious about moving in the right direction to get their bookkeeping in order.

Need a QuickBooks Online clean-up and keep-up? Read more here.

Online accounting software versions make it even simpler. They include:

IN CONCLUSION

When you feel more comfortable focusing on your strengths to grow your business, you can decide to hire a bookkeeper. The money you pay for a bookkeeper will be worth the spend.

He or she will ensure that you receive professional assistance, ultimately contributing to the success of your business.

These 5 effects of messy bookkeeping are just a few reasons why bookkeeping is so important for every small business. Competition is tough, regardless of the industry.

It’s crucial to be on top of all the areas in your business, to ensure that you continue to grow a sustainable business.