<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=149004422485644&amp;ev=PageView&amp;noscript=1">

Signs That It May Be Time to Evaluate Your Books

29 Nov Signs That It May Be Time to Evaluate Your Books

Posted at 08:30h in

Bookkeeping & Accounting, Business Tips

by KYB Blog  •  0 Comments

time-to-clean-books.jpgWhether you’re working with a remote bookkeeper or have someone internally handling your accounting needs, it’s imperative that as a business owner you’re watching for red flags that could signify trouble ahead.

In this article, we’ve outlined seven signs to look for that might signal it’s time to evaluate your books, as well as possibly rethink who is managing them and if he/she is appropriate for your unique business needs.

Potential Signs That Your Books May Be Problematic

The following indicators are clear warning signs that you could be headed for accounting errors or compliance issues that could have a major impact on your business. The more of these that resonate with what you’re experiencing, then the more critical it is for you to evaluate your books.

Disclaimer: While this list is meant to provide a general understanding, it is not a comprehensive approach to evaluating your bookkeeping. If you’re curious to dive deeper, contact us here to talk to someone on our team in more detail.

1.  The System is Dysfunctional/There Is No System

Since you aren’t a bookkeeper, you may not think it’s important to have a formal way to track your cash and bills, or you may have a system that’s very casual. Either way, if you feel that the way you’ve been tracking your financials isn’t working, that’s  a problem. Make sure that you can answer fundamental questions based on your financial data, such as:

  • Is my business healthy?
  • Who owes us money, and how much? Is it being paid back? How long does it typically take to get paid?
  • Do we have enough cash to support operations?

2. You Are Behind on Payments

This isn’t referring to just one or two late payments, since mistakes do happen. What we’re talking about is a semi-regular occurrence of missed or late payments for any bill, including rent, office supplies, services and more. Understanding your cash flow helps you determine when you’re able to make payments, and keeping them paid on time.

3. You’re Missing Deadlines

There are reports that your business is required to generate and forms you should submit that can assist you in keeping track of deadlines. Most often, these deadlines relate to the various forms and notifications for taxes, which have recently changed in the U.S. Other deadlines may involve retirement plan changes and disability requests or payments. If your books aren’t in order, then it might be difficult, or even impossible, to generate these reports or locate the data to correctly fill out the proper forms.

4. You Can’t Find Payment Documentation or Other Paperwork

Everything from bank statements to outgoing invoices and receipts are necessary to keep your books in order. They’re the proof of your business activities; without them, it can be much more difficult to respond and talk to vendors, clients and lenders.

5. You’ve Filed Extensions for Taxes

In an ideal world, filing your taxes would be a breeze. That’s only a reality if your systems, processes and books are kept in order and consistently throughout the year. While this isn’t always the case, if you’re finding unexpectedly that your company is filing for extensions, then you’ll want to understand why. If it stems from a lack of organization, and / or not having the necessary documents to generate certain reports on time, then you might have an issue.

6. You’re Paying Fees

Paying fees is an inevitable cost of messy books, missed deadlines and late payments. For example, the cost of filing your taxes late without including the proper paperwork can be hefty. Vendors may also stack fees against you for late payments. While this can hurt your credibility as a business (and potentially your credit worthiness, depending on the scenario), the cost can also start to add up.

7. You Lack Visibility Into the Health of Your Business

It’s important that you, your shareholders and potential investors see how well (or poorly) your business is performing. The bookkeeping software you use, combined with the experience and expertise of your bookkeeper, should provide everything you need to make your business healthy and profitable. If you’re unable to get the reports necessary to regularly evaluate the health of your business, then you may want to consider exploring what’s causing that problem.

What Should You Do If There Is A Problem?

The good news is that, even if your bookkeeping isn’t currently in order, there are solutions available. You don’t have to be confused by financial statements you don’t understand, continue paying late fees on bills you can’t keep track of, or live in fear of compliance issues. Instead, we suggest starting with an exploration of your business management needs and how your current accounting technology, staff and processes are serving them. Here are a few initial questions to ask:

  • Is the best person in place to set your company up for future growth?
  • If your current bookkeeper left, would your company be in an uncomfortable situation?
  • Do you really trust that the person managing your books is trained, experienced, and  knowledgeable enough to make the best decisions for your company?
  • Is technology being used and are systems in place that make it easy to access numbers and data in a timely way?

Take to heart these signs that it may be time to clean up your books. Don’t wait for things to get worse before you decide to act; your business could be at risk.

If you have any questions about the warning signs mentioned above, or if you’re interested in getting help evaluating your books, contact us today.

Consultation #1

Topics: Bookkeeping & Accounting, Business Tips