The Damaging Impact of Poor Bookkeeping on Business Performance


Bookkeeping is one of the oldest practices in business recording-keeping. The art of bookkeeping is simple and logical; you assign each transaction with a certain label and then find critical information about your business’s financial performance.

By dissecting assets, liabilities, equity, profits, etc., you can discover the accurate financial position of your business. Seeing as how vital a good bookkeeping operation is, having an improper bookkeeping operation can cause a big problem for record-keeping and accounting. Let’s find out the damaging impact of poor bookkeeping on a business’s performance.

Credit Issues:

Not having proper bookkeeping and records in place can have a big impact on the credit repayment of a business. Without a record of when and how much to pay back, you might find yourself in a tricky situation, as you might get confused into paying more than you should, and if you do not have any proof, you’ll have no option but to overpay. Avoiding such payments can lead to a poor credit score, which is also damaging to a business, especially if it’s in its early stages.

Revenue and Profit:

Healthy revenue growth and bottom line are why most businesses are formed into existence. But when you don’t have a proper bookkeeping record of it, it’s likely to be under-reported, and chances of fraud are high. Similarly, you can go on to overstate your profits, which goes against the concept of prudence and correct estimation in accounting.

Financial Books

Hidden Opportunities:

The biggest advantage of properly managed bookkeeping is that it gives you a very clear image of your business. You know all details and each transaction is easily detectable, which makes decision making and finding new opportunities easy. But this all goes to waste when bookkeeping is not done properly.

When most financial indicators are not correctly calculated and presented, you’re likely to miss out on opportunities. For example, the cash at hand could be underreported. This cash could’ve been used to reinvest into the business and result in higher sales later on, but the opportunity remained unexploited by the business. Similarly, yearly sales figures can also not be accurately compared. This makes comparing business performance very difficult and can lead to an inefficient business operation.

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