Maintaining proper financial records as a business may not be the simplest or most convenient task, but it’s absolutely necessary. Whether you’re a company comprised of one person or more than a hundred people, it is vital to keep accurate and detailed accounting. Failure to do so could result in many consequences, including some which can be very devastating. If you want to be a profitable organization with the potential for growth, accurate record-keeping will ultimately help you get there.

Tax Season

Likely the most significant consequence that can come from not keeping accurate records is the penalties that could be passed down by the local and federal government. Sources such as ADP Compliance Insights provide businesses with the opportunity to invest in financial management software to help them remain in compliance and avoid the risk of an audit. As a business owner, you’re required to account for every penny earned and spent within your organization. This includes debts, expenditures, profits, payroll, and more. Failing to stay in compliance with tax laws could cause your business to drown in back taxes and penalties.

Cash Flow

Do you know what’s coming in and what’s going out of your business on a day-to-day basis? The very basics of accounting and record-keeping help you keep track of your spending and profits. Failure to track your expenditures and profits leaves your business vulnerable careless purchasing decisions. Effective cash flow management provides a foundation for businesses to draw from when it comes to decisions on new investments, purchases, and anything else relating to the continued growth of your organization.

Expansion and Growth Potential

If you have any intentions of growing your business, having accurate financial records will help you determine how to get where you want to be. Expanding or growing a business requires a plan that is largely driven by data and capital. Having records on hand provides business owners the opportunity to review spending habits, assess trends, and draw feasible conclusions. Without efficient financial records, owners are forced to sporadically make decisions which could in turn cause the business and potential of all expansion to deteriorate.

Get Assistance

If your financial records are inefficient or nonexistent it is a good idea to consult with an accounting professional. Certified business accountants for instance are ideal for helping you get your records in order. From advising you on the best record management software and processes, to assessing your current financial status and providing a forecast, they can assist you in positioning your business for future success. Whether you outsource your accounting needs or consult on a regular basis, the services you’ll receive are certainly worth the investment.

So, not keeping good records could lead to IRS tax trouble, ineffective cash flow management, and the inability to properly grow and expand. There are certainly a lot of lessons to be learned as a business owner, but the consequences of poor record management should certainly encourage you to learn from the lesson sooner rather than later.