It takes courage to start out as an entrepreneur. Start-up companies require a leader who has vision and sector knowledge, and they require excellent business models from inception to ensure they are following the right path to success. 73% of start-ups fail because their original business model was overly optimistic about sales forecasting, and then due to inadequate bookkeeping which was not restructured correctly.
There are several reasons that entrepreneurs need to take their bookkeeping seriously.
Entrepreneurs are often abundant with creative vision, which means many of them fail to take the small print seriously. The main reasons entrepreneurs experience difficulty during tax time is failing to keep receipts, not recognising significant tax breaks, planning retrospectively and not documenting revenue throughout the year accurately.
If an entrepreneur or start-up business does not have precise bookkeeping records, it is impossible for them to file an accurate tax return. A tax return that is filed incorrectly often results in penalties, meaning that the business will face unnecessary and avoidable financial issues.
Excellent bookkeeping records show what is being spent, and what is being earned. The ability to analyse where costs can be cut is an imperative aspect of the success of any start-up business. Bookkeeping records should always include payroll, debits, credits, standing cash balance, loans, credits and any expenses that have occurred over the year.
An entrepreneur’s business plan will typically include forecasts. As time wears on, it’s important that a small business owner can match revenues with their original forecasts accurately, so they are able to shift expectations if need be. If financial goals are not being recognised, then it is easy for a company to overspend and overborrow, which can result in future financial disability.
Many entrepreneurs simply do not have the time or the knowledge to focus on maintaining accurate bookkeeping records. It is more cost effective in the long run for an entrepreneur to outsource their bookkeeping service to a savvy bookkeeping and accounting service who understand the business needs and will keep accurate records, ensuring a company’s finances are kept on track.