Do you know any company owner or, more precisely, a hardware store that likes to keep accounting? Do you know someone who enjoys being between invoices, accounts, payroll, or tax returns? Possibly the answer to these questions is: NO. Despite this, it can be assured that poor accounting becomes the cause of many crises or major problems of companies, especially small and medium-sized (SMEs). An accounting system is how a company plans its operating budget and monitors its expenses and receivables or income. An accounting system can also manage payroll, taxes, and other company accounts such as employee insurance, health insurance, and other benefits. Accounting functions can be performed in-house or outsourced to an external accountant. If your accounting system is not managed correctly, it can lead your small business to financial disaster.
Initially, you must remember that its importance lies in that it helps to control the income and expenses of your company; through it, you will be up to date with your tax obligations, and likewise, it will guarantee your growth based on financial security. The accounting of your business can be damaged due to bad practices such as not being qualified to keep it and not hiring an expert, not owning strict control of your income and expenses, especially when these are cash outflows. Not to be orderly and much less constant with this exercise, not to be up to date with the payment of taxes, and not to use automated systems; not keeping financial documents or making rough or erroneous calculations. Below are some of the consequences that generate errors! Let’s check them out.
- Without keeping the accounts ordered, it is incredibly complex to analyze the financial status of your company. You will be almost blind regarding its “state of health,” and you could be close to bankruptcy by not knowing exactly what its difficulties or weaknesses are.
- You will be exposed to becoming a creditor of a fine or sanction, even if you believe that this will never happen to you. Once the tax authorities do so, investigations into your business will likely be more and more frequent and random.
- You will not be able to access some tax benefits such as savings, deductions, credit balances. And also, the possibility of presenting erroneous tax returns with the risk of sanction will be greater.
- You will lose control of your accounts due to the accumulation of errors, delays, or lack of care in your accounting, and by the time you want to rectify it, it will surely have been late.
- If you have employees, they too will suffer the effects of this bad practice. The collection of your payroll or your social security contributions could be affected. Payroll control is an introductory section.
- You will waste time and money trying to correct mistakes, be it a sanction, the denial of access to credit, among others. And finally, you will be forced to hire a professional, which was the most ideal from the beginning. So, suppose you want to avoid all these kinds of inconveniences. In that case, you must give the value and importance due to accounting to guarantee that your project follows the indicated path towards growth and development.
- If you do not have a proper accounting system, it can be challenging to determine whether financial fraud has occurred in your company. A dishonest employee using sloppy accounting practices can slowly embezzle your company’s money, leading to financial insolvency and bankruptcy. Knowing how to prepare and read balance sheets, cash flow statements, and other financial documents will help you prepare and protect your business. That’s why it’s essential to hire experts like NEXGEN ACCOUNTANTS, who will handle your accounting and taxation services with breathtaking professionalism.