Why is Good Bookkeeping so Difficult (and Important)?

TMA Accounting has been helping small businesses with their bookkeeping for nearly 25 years. While a lot can happen in 25 years, we appreciate our special role in helping our small business clients succeed. We’ve worked with hundreds of small businesses and have seen just how hard keeping accurate books is.

Let’s look at why good bookkeeping is so important for your business and why it’s so hard without help. 

What Small Business Owners Struggle With

Based on our experience, we know small business owners struggle with bookkeeping. They know some of the basics pretty well but don’t possess the skill set required to properly bookkeep. For example, they know that most payments to a landlord should go into the “Rent Expense” account.

However, they may not know that there are specific tax rules, forms, and deadlines for reporting those payments to the IRS. And if you ask a typical business owner to create and use a bookkeeping process to accurately track the balance of a business loan over time or to determine the amounts of monthly profits, they won’t get it right. 

Why Business Owners Struggle with Bookkeeping

It’s easy for us to talk about how people struggle with bookkeeping. At the same time, we understand why bookkeeping is such a challenging aspect of owning and operating a business.

Bad bookkeeping usually happens for one of these three reasons:

1. Business owners have their priorities straight. Serious business owners know they must focus on maintaining and growing their businesses to provide for their families and employees. Spending a lot of time on bookkeeping is almost never a high priority on a business owner’s to-do list, and for the most part, shouldn’t be. There are many other things day-to-day that require the full attention of the business owner.
2. Bookkeeping isn’t easy. Bookkeeping isn't rocket science, but it’s prone to errors by people. There are pitfalls to be avoided and common situations that can leave a business’ books in shambles. This can often lead to big problems with taxes, cash flow, and/or decision-making. Bookkeeping requires a specific skill set that many people don’t have as they don’t have the experience, proper training, or the time to record transactions. This leads right to the third reason why bad bookkeeping can happen.
3. Failure to make adequate investments in process and people. Business owners often assume that anyone who is trustworthy can do their bookkeeping. This could not be more wrong. The person doing the bookkeeping needs to have know-how and supervision. That know-how, or skill set, should come from education and good, practical experience. We’ve lost count of how many times a business owner entrusted their bookkeeping to a neighbor or cousin and regretted it later when the frustrating (and expensive) results became apparent. While having a trustworthy person on your staff is great, leave the bookkeeping to the experts.

While many small businesses struggle with the three reasons above, there are a few parts of bookkeeping that businesses can do well without experience or expertise. For example, most businesses do just fine with making and recording bank deposits, invoicing customers, and paying bills.

The challenges arise from not having a fundamental understanding of how those items should be recorded. As those challenges compound over time, they tend to lead to bigger problems.

Why Good Bookkeeping is So Important

Bookkeeping is important so you can keep accurate financial data for your business. It can help you keep track of how much you are spending and what you are spending on. Organized books also help with tracking where you stand on profitability and your business’s taxes.

We encourage business owners to think of bookkeeping as information management. Essentially, it’s a constant flow of information that can be easily managed in a proactive way with inexpensive tools (e.g., QuickBooks Online).

In the long run, committing to and investing in a sound bookkeeping process will be more cost-effective than suffering the results of bad bookkeeping done months late and with spotty fundamentals.

Working with small businesses’ bookkeeping, taxes, and payroll is our only business. We’ve developed the expertise and processes that help small businesses get bookkeeping done right the first time and for an affordable price with minimal headaches. 

Set up a conversation with us today and see if we’re the right fit for your business.

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