4 Warning Signs Your Bookkeeping Systems Are Outdated
How is your bookkeeping system? If you’re like most owners or leaders, you assume everything is working just fine until you’re in the middle of a cash crunch, a lender asks for financials or it’s tax time.
Over 64% of small business owners do their own bookkeeping.
You put systems and processes in place that help you manage your books, but you don’t know when it’s time for an upgrade. There may be better ways of doing things, which is why we’ve outlined the four warning signs that your system may actually be outdated.
4 Signs You Need to Update Your Bookkeeping System
1. You’re Still Doing Everything Manually
Manual bookkeeping is what many small business owners start with while maintaining strict budget constraints. You might find yourself working with:
- Manual data entry
- Paper receipts
- Spreadsheets
Entering your data may seem therapeutic and help you understand where money is coming in and going out of your business. But human error is bound to happen as your entry needs increase over time.
You might be pressed for time and add an extra zero or omit one that skews your books.
When you do things manually, there are also adjacent issues that go overlooked:
- Time spent entering data manually costs you your most valuable resource
- Real-time visibility is lacking, which means you don’t have the information in front of you to make smarter decisions
Modern bookkeeping systems eliminate the need for manual entry, which is prone to errors. For example, you can connect to bank feeds and use integrations to pull in data. Automation, with the right setup and systems in place, reduces the amount of time spent on bookkeeping from 10 to 15 hours to minutes.
Of course, automation is just a tool, and you’ll want to add in human insights to make sure that the data is accurate.
Still doing things manually, on your own? Reach out to us to learn more about our bookkeeping services.
2. Your Books Are Always Behind
If your books are behind, it’s a financial problem waiting to happen. Many owners assume that if their books are slightly behind, it’s not a big problem. But what happens is that they forget to reconcile their accounts, so they do it weekly, monthly or even less frequently.
Real-time reconciliation is one of the biggest perks of automating your books because it ensures that you’re always decision-ready.
Delayed books also cause you to:
- Make poor decisions because you’re working off of old data
- Accounts are behind, causing you to miss important tax deadlines
Without current numbers, you risk making business decisions without solid data to back them up.
3. You Can’t Quickly Answer Basic Financial Questions
How fast can you pull up your profit and loss statement? If it takes more than a few minutes, it’s too long. Let me ask you something: what’s your current cash position? Don’t know? It’s a logistical problem that may be costing you money.
And the root cause of the problem is that your bookkeeping system isn’t serving your business anymore.
You need an upgrade to a bookkeeping platform that you still oversee but can help you:
- Gain financial clarity for your decision-making, growth and lending
- Provide you with your cash position or profit and loss in minutes
If you have the right systems in place, you can answer basic financial questions that push your business forward.
4. You Have No Clear Picture of Your Cash Flow
Cash flow is king in business. The majority of businesses go bankrupt because of a lack of cash flow, and it’s one of the most important things that owners need to monitor. You need to know what’s coming in and going out of the company.
And you also need to know what’s due soon.
Outdated systems, or doing everything manually as you did in the past, make owners feel like they’re out of touch with their finances. Tracking finances becomes tedious and challenging when you don’t have a clear picture of your cash flow.
So, what happens in the long-term?
You don’t know what your cash flow is, so there are problems with overspending, missed payments and your ability to plan for slow seasons.
Bookkeeping is one of the fundamental systems you need to run your business properly. If you’re running outdated systems, you’re either spending excess time on tasks that are easy to automate or you’re missing out on crucial data insights.
Schedule a consultation to learn how we can help you with your bookkeeping systems now!
