More than half of business owners find bookkeeping and accounting tedious. This is according to a survey result published by Entrepreneur. In addition, finance management is often introduced late in a startup's internal systems.
But the tediousness of crunching numbers is only half the picture. There are other reasons why small business owners push bookkeeping and accounting out of their usual routine.
Let Unloop help you explore some of these reasons and their effects on your small business. Plus, we'll also introduce a practical solution you can use to help you transfer accounting and bookkeeping tasks to better hands.
Why Small Businesses Don't Do Bookkeeping and Accounting
While some small business owners feel the drain of doing accounting and bookkeeping, others have different reasons. Any small business owner not doing formal bookkeeping may have several of the following reasons.
They Think They Don’t Need It
Startup business owners a few months into their venture think they don't need bookkeeping. That's understandable. Their business has little to no revenue, so there's nothing to count. Besides, a small business can survive without proper bookkeeping.
This way of thinking can be common with new businesses where the owners are more focused on other business endeavors to generate revenue as soon as possible.
They Don’t Know How to Do It
Bookkeeping and accounting can be technical. Behind every number jotted down on a journal or a ledger has to lie sound accounting logic. Unfortunately, that can take years of study, which business owners often don't have time to do.
Additionally, many people have no prior knowledge of bookkeeping and accounting principles to carry it out. As a result, they sweep the task under the rug and vow to have it done sometime in the distant future.
They Are Comfortable With Their Methods
Some business owners develop their own way of accounting for their business's numbers. It can be as simple as writing the transactions down in a notebook or creating a spreadsheet file. If this goes on for some time, they can get comfortable with how they do things because it's the only way they know how to do them. Additionally, these numbers may make sense to them (and only them).
They Lack the Budget for Professional Services
A lot of sellers are intimidated to hire professional accounting services for their small business. The whole idea seems out of reach and expensive. In addition, many perceive the fee to not be proportional to the professional services their small business needs.
They Just Don’t Like Doing It
Some small business owners don't like bookkeeping and accounting. The thought of running through each line in a bank statement and a bookkeeping journal is a burden to some. They'd rather be out there doing the work.
It's perfectly okay for you to feel this way. But then, sooner or later, when you’ve grown your business enough, the accounting facet of your business will tap you on the shoulder. By that time, you’ll have to scramble to do it yourself or hire an accounting professional to catch up on your bookkeeping.
What Happens When Small Business Owners Don’t Do Bookkeeping
Ideally, a bookkeeping and accounting system must be in place from the beginning of the business. That's because when a small business grows, it can be difficult to catch up on bookkeeping and accounting if these are introduced late.
Below are some things that can happen when small business owners don't handle their finances well.
They will be unable to plan for growth: Lack of numbers means a lack of objective financial data to make business decisions.
They will miss payments - The absence of proper bookkeeping and accounting will make it difficult to record and track short-term liabilities, which can result in missed payment due dates.
Causes inaccurate payroll - Without formal bookkeeping, employees' salaries may not be accurately recorded, resulting in a wrong payroll amount and low employee morale.
They will not comply with taxes - It's challenging to determine the exact sales and income tax amount without a standard bookkeeping method, as this helps generate the necessary financial statements needed for tax returns.
Solution: Outsourcing Bookkeeping and Accounting Services for Small Businesses
Getting online accounting services is a practical way of introducing bookkeeping and accounting to your business without paying a fortune.
An accounting service provider can offer the following small business solutions.
Online Bookkeeping Services
Most accounting and bookkeeping professionals are experts in the use of QuickBooks Online—the most popular accounting software for small businesses. With this software, they can accurately record your monthly expenses and produce monthly financial statements.
A dedicated team of bookkeepers will work with you to ensure each transaction is recorded accurately for financial reporting.
As a result of accurate bookkeeping, financial reports can be submitted and used as a forecasting tool. Accounting professionals can use different reports to project your potential income, expenses, and business performance in the months ahead based on the data generated by QuickBooks Online.
This service helps you plan how to grow your small business in the next few months or even years!
Accounts Payable Management
You incur short-term debt whenever you purchase a product or service on credit. This is called accounts payable, governed by invoices and receipts issued to you by the vendor.
Accounts payable have terms and payment due dates that need to be met. So it can be hard to track when something is due if an accounting and bookkeeping system isn't in place.
Accounting and bookkeeping pros can manage accounts payable to ensure your bills and credit purchases are paid on time.
Giving your employees incorrect salary amounts can affect their morale. But if there are accounting experts who are checking the accuracy of each timesheet, small business owners and their employees are assured of correct salary payouts.
Payroll services are part of an accounting professional's skill sets and are offered by an accounting service provider such as Unloop.
As soon as a small business makes a sale, it must pay sales tax. Additionally, once it's earning decent profit, it will have to pay income tax. Because of this, business owners will need to work with bookkeepers and accountants for tax planning.
Online bookkeeping services such as Unloop can collaborate with business owners for tax planning. For example, if you're an ecommerce business with a store on Amazon, we can help you set up sales tax collection and identify the correct tax amount to remit.
Additionally, we can help you prepare your taxes. We can generate the needed financial statements for income tax filing. Don't have an accountant? Not a problem. We can assist you in filing taxes and forward the necessary financial documents to our network of accountants to ensure that you stay compliant every tax season.
Save Yourself the Work With Small Business Accounting Services
It is understandable for small business owners to focus on other things. In fact, it makes sense for them to go heavy on profit-generating tasks. Apart from not the reasons mentioned above, they also don’t know what accounting services do small businesses need in the first place.Accounting always takes a backseat in the early stages. Luckily, it doesn't have to stay that way. With accounting and bookkeeping companies like Unloop, small business owners can take the necessary and early steps toward setting up an accounting system at a fair price. So book call with us, or check out our ecommerce services now.