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What happens when you don’t do your bookkeeping?

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We all know that dealing with bookkeeping and recordkeeping can be a boring process for those who don’t like numbers, and it tends to pile up into an intimidating mess right up until tax season starts.

But what would happen if we simply… didn’t do our bookkeeping?

It certainly sounds blissful, so let's take a little bit of indulgence in a scenario where we didn’t do anything with our bookkeeping. How bad can it be?

What happens when you don’t do your bookkeeping

The company finances

Okay, so we have taken the action of no longer doing our bookkeeping and we have no clear picture of what the company's financial viability is. It does not feel comfortable though, does it?

After all, without accurate records, we are now flying blind on our cash flow projections and statements. Without the ability to accurately measure the cash flow, we now have the prospect of overdue invoices, held inventory and recurring variable expenses like shipping costs and hourly wages. Without a clear understanding of the fixed and variable costs, we don’t even know what the break-even point is!

Cash flow shows when money is coming in and what bills need to be paid. In failing to track the cash flow you are struggling financially, and you do not have a paper trail to reveal where the problem is. There is no trail available without bookkeeping being done.

Lesser options

You need quick access to money, but the problem is that your books are not up-to-date - which means your options are pretty slim.

Maybe you could go to your bank for a loan. The only problem being is that will probably turn you away because you do not have any current detailed financial records. In all fairness, even you would probably not loan a large amount of money to a company that is blind to their costs, inventory or how much profit they have made recently. 

That pretty much rules out this financial olive branch if you have no evidence of your financial history, and that includes bringing in investors, partners and even selling your company too. 

Things are not looking good so far, and internally they are about to get worse.

Internal problems

You no doubt have been making mental notes of who owes you what, but are you sure you didn’t forget about something such as that invoice to a client who always pays late? We are guessing they won’t be quick to remind you that they owe you money.

Without your system of checks and balances, how are you even going to approach payroll for your staff? You might not know who you may be under-compensating or overpaying without records to dictate who is owed what.

So far it does not sound like a good idea to continue doing away with your bookkeeping, but you can still not do it by outsourcing to bookkeeping services to handle it for you. This way you are assured that the smooth financial operations of your company are running smoothly without you having to remember everything.

If you don't want to handle your books, bookkeeping services are a vital component of ensuring you are on the right path.

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