The Importance of Proper Bookkeeping for Startup Business Owners
- Joel M Collins
- Jul 3, 2019
- 2 min read
Updated: Jul 13, 2019
82% of businesses fail due to cash flow problems. While some might believe that this statistic is self-explanatory, I postulate that the reason for most cash flow issues within small businesses stem from poor record keeping. It would not make sense that business owners would so poorly plan for both short term and long term operations. Most entrepreneurs have pretty good common sense. If a proper system of accounting had been in place, it is likely that a majority of the 82% of companies would still be in business. Or, at the very least, they would have failed for a different and unrelated reason. It is very sad to watch companies and organizations fail; it is even more disappointing to understand just how preventable the circumstances were that led to their downfall.
So what is the antidote to this common problem? First, it's not as obvious as you might think. The simple answer would be hire an accountant; however, do not be so foolish as to trust just anyone with the finances of your business. Properly probe and investigate the education and experience of the person (or company) you choose to hire. Of the 82% of businesses that fail, I suspect that many of them had accounting specialists within their company or even accounting firms helping them. Nevertheless, those businesses are no more. When you're hiring an accountant or accounting firm, thoroughly investigate them. You cannot ask too many questions.
If you are a do-it-yourself individual, don't fret. There is a way that you can properly educate yourself in the art of accounting. Consider the possibility that the DIY method might not be for you. This will take a great deal of time to learn. So, if you are unwilling to spend the amount of hours necessary in order to master bookkeeping, consider hiring it out sooner rather than later.
There are countless YouTube videos about the subject of accounting, aimed directly for non-accountants. There are a bevy of webinars hosted by a variety of different companies, all of which are directed toward attaining a better understanding of accounting. There is no shortage of free material to aid you in your journey toward an understanding of accounting principles.
Chose a sensible accounting system. There are many to chose from nowadays, including but not limited to:
QuickBooks Self-Employed (especially if you are an independent contractor as it will dramatically help you calculate Self-Employment Tax)
Warning: don't forget about tax when studying accounting. This is the portion of accounting in which I highly recommend hiring a specialist. You absolutely don't want to mess this up. Or worse, be unaware that you messed something up! The IRS is harsh and unforgiving. Leave this to the professionals who have made a career out of understanding the US Tax Code and keeping companies in compliance with IRS requirements.
