You just have started an entrepreneurship. You have to manage your finances and this is on your to-do list, just like other important tasks for running a business. You have to focus on inventory, manage bookkeeping work, and so many other tasks that are lying in front of you. A bundle of tasks is ahead and each one is equally important for your business growth. In the meanwhile, you are making purchases, doing sales, going into debt to finance your growing business, etc. In this hustle, you have not made it a priority to clear your financial data first. You have applied for more loans or you are trying to sell foreign investors on your business to make more purchases for the increased demand for your products. But all of these business functions require a clarity in your financial statements and bookkeeping records.
Delayed entries in business bookkeeping registers pave a way to frauds by employees. Additionally, a correct interpretation of your accounting statements cannot be made. Your funding in your business will sink and you will always be in a need of more funding unless you clean and update the financial records of your business.
A business ready-to-audit attracts investors. You can apply for debt to finance your business growth. You have a clear picture of what the financial status of your business is as well as what decisions are needed for its growth.
ACCOUNTING PROBLEMS THAT CAN SINK YOUR FUNDING
You do not use an accounting software
Manual work is always the hardest and is at risk of errors. A small accounting error can lead to big losses in the business. An accounting software according to your business size is as important as funding your business. Small business owners can also get a specific software to meet their needs.
Working on a spreadsheet is not like working in an accounting software. Be sure to research and find the appropriate accounting software to make your business bookkeeping run smoothly.
Financials are incorrect
Incorrect financials is a threatening accounting problem in your business. If your finances are incorrect, it may sink your funding round in your business.
Any error in financial statements leads to big losses. Business bookkeeping and other business operations will be a mess if you do not keep your financial data up to date. Your accounting statements must be clear and transparent. Income and expense statements must be clear and related to cash flow and balance sheets. Delayed data entry is a big risk for frauds and thefts.
There are projections in revenue but there is no financial data
You cannot have a clear picture of how much revenue your business has generated unless you know the expenses and purchases you have made. Your sales are increased but is that according to the profitability of your business? Investors want to get a clear and transparent presentation of your financial data to invest their money. A business loan cannot be achieved from banks unless a clear, transparent financial record of your company is present.
Financials are not produced monthly
In a small business, it is often thought that it is appropriate to produce finances on a quarterly or bi-annually basis. However, monthly financials show investors that you are closely monitoring your business.
If you do not produce monthly financial statements, it can lead to a negative balance if expenses are made, but no income statement is updated. Invoices that need to be paid by the company may go unnoticed and it can put a bad reputation on a company. It can end terms with the suppliers. Business growth is halted or significantly reduced.
Your personal and business accounts are all mixed up
Business owners often mix their personal finances with business expenses. Keeping these two finances separate is of utmost importance. If these two finances (personal and business) are not segregated then it cannot be known what was intended for business and what was used personally. The amount of profit that was generated out of your invested capital cannot be estimated correctly.
Your funding is going to sink if you do not keep a separate business account.
A small business owner is enthusiastic about growing their business at a rapid rate. In the start, small business owners fund their business without keeping their financial data up-to-date and tend not to focus on accounting problems while running a business. Such accounting problems can sink your funding round.
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