3 Consequences of Neglecting Your Bookkeeping

Bookkeeping, the task that we all love to hate. It's like going to the dentist, you know you have to do it but it's just so darn tedious and time-consuming.

But let's be real, just like going to the dentist, neglecting your bookkeeping can lead to some major problems down the road.

And trust me, you don't want to have to explain to your employees why they're not getting paid or to the government why you haven't filed your taxes on time.

so, without further a-do, here are three consequences of not keeping up with your bookkeeping.

1. You’ll make poor decisions

So, why is bookkeeping so important? Well, think of it this way: imagine you're trying to navigate a dark forest at night with only a dim flashlight to guide you.

Now, imagine you're trying to navigate that same forest with a spotlight, a map, and a compass.

Which scenario would you rather be in? The same concept applies to your business, without proper bookkeeping you're stumbling around in the dark, making decisions based on guesses and assumptions.

But with a solid bookkeeping system in place, you have a clear view of your financial situation and can make informed decisions that will lead to the success of your business.

But what happens if you're like most business owners and just can't bring yourself to tackle the task of bookkeeping? Well, there are a few consequences to consider. For one, you'll make poor decisions. Without a clear understanding of your finances, it's hard to know when to spend money and when to hold back. This can lead to costly mistakes, like hiring employees before you can afford to pay them. And let's be real, no one wants to be that business owner who has to let employees go because they didn't keep track of their finances.

2. You’ll make financial mistakes

When you neglect your bookkeeping, it's easy to miss important payments and deadlines.

For example, you may forget to pay your bills on time, resulting in late fees and penalties. You may also forget to pay your employees on time, which can lead to frustration and mistrust among your staff. Furthermore, if you don't keep track of your bookkeeping, you may miss out on opportunities to take advantage of early payment discounts, or you may be paying more than you need to for goods and services.

Additionally, not keeping track of your bookkeeping can also erode the trust of your employees, contractors and lenders.

When you can't be trusted to pay your bills on time, your employees may worry about their paycheques and benefits, contractors may be hesitant to work with you again and lenders may be less likely to extend credit to your business in the future. This can lead to a host of additional problems, such as recruitment difficulties, high turnover and lack of access to credit, which can all have a major impact on the growth and success of your business.

TL;DR, neglecting your bookkeeping can lead to a variety of financial mistakes that can cost you money and affect the trust of your employees, contractors and lenders. it's important to stay on top of your bookkeeping to avoid these mistakes and to ensure that your business is running smoothly.

3. You’ll lose money

When you don't keep track of your books, it's difficult to know which clients or customers are paying on time and which are not. This can result in lost revenue as you may miss out on interest charges for late payments. Additionally, if you don't have a clear view of your financial situation, it can be easy to overlook unpaid invoices or miss out on follow-up collection efforts. This can lead to a significant amount of lost revenue over time.

Another way that not keeping track of your books can result in lost money is by paying for services or products that you no longer use or need. For example, you may have subscribed to a software or service that you no longer use but continue to pay for it because you haven't reconciled your books. This can lead to wasted expenses that can add up over time and negatively impact your bottom line.

In addition to lost revenue, not keeping track of your books can also lead to lost opportunities. For example, you may miss out on new business opportunities because you don't have the financial information necessary to make a proposal, or you may miss out on discounts or other incentives because you didn't know they were available.

TL;DR, not keeping track of your books is like throwing money out the window, as it can result in lost revenue, wasted expenses and missed opportunities. It's crucial to stay on top of your bookkeeping to avoid these losses and to ensure that your business is running as efficiently and effectively as possible.

Final thoughts

To wrap this up, bookkeeping may not be the most enjoyable task, but it's an essential aspect of running a business. It's the backbone of your financial operations, and without it, you'll be flying blind when it comes to making important decisions about your business.

Proper bookkeeping allows you to have a clear and accurate view of your financial situation, including your income, expenses, and cash flow, which is crucial for making informed decisions about your business. It also helps ensure that you are following all legal and regulatory requirements, such as taxes, and helps you identify areas where you can cut costs or increase revenue.

The good news is that you have options when it comes to bookkeeping, you can either do it yourself or hire a bookkeeper. If you're comfortable with numbers and have the time and energy to devote to bookkeeping, you might consider doing it yourself. However, if you're not comfortable with numbers or don't have the time, you should consider hiring a professional bookkeeper who can take care of it for you.

In any case, whether you choose to do it yourself or hire a bookkeeper, just remember that it's better to face the music and do your bookkeeping than to be singing the blues because you neglected it. Ignoring your bookkeeping can lead to a host of problems that can negatively impact your business and its ability to grow and succeed. It's better to spend the time and energy on bookkeeping now so that you can focus on growing your business and achieving success in the future.