SMEs and startup businesses have a tough environment initially. Their first year is highly crucial for making their business sustain. According to estimation, half of the new startups fail in their first year, however others secure their place in industry and become successful in 5 years of operation. Reasons for failure could vary from business to business. But a common significant problem appears in their bookkeeping and financial system.
SMEs and startups should be prepared to face financial and bookkeeping challenges in their start years. They have to learn new things, implement effective strategies, and most importantly get professional help. SMEs can be severely impacted by poor bookkeeping systems. As they find it difficult to analyze and interpret financial statements on their own. This is when they end up making mistakes. They can avoid this with the help of professional advisors. They help businesses make better-informed decisions and increase profitability.
Bookkeeping common mistakes
- Failure to get bank funds: If your company fails at getting bank funds then there are some major issues in your accounting system. The reason could be poorly maintained financial records which became the cause for not qualifying.
- Payroll delays: The first and foremost thing for any business is to pay their employees on time. But, in case your business is unable to cover staff payroll, then it is a sign that your accounting or sales team is doing things wrong. The reason could be a lack of professional skills in a team that they are unable maintain business records and generate business profits.
- Monthly financial closing: The accounting team has to prepare monthly and periodically monthly closing of books. However, the inability of accountants to do monthly financial closing leads to financial disaster. This mistake can cause huge costs to startup businesses.
- Poorly maintained records: This mistake is common in SMEs as they don’t understand the importance of maintaining their books of accounts until they reach a dead end. Successful businesses have accurate and up-to-date financial records which keep them on the top.
Solution:
SMEs and startup businesses need to counter these challenges timely and efficiently. Firstly they need to make their business functions technologically advanced. This can be done by working on cloud software, using advanced accounting tools which can minimize any errors. Secondly, they need to outsource an accounting team or professional with a high skill set. This can give them a great advantage and help run your business smoothly. Businesses should make sure to not repeat their mistakes and implement solid solutions timely.
