Small Business Bookkeeping: Signs You May Have a Problem

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It is often tough for small businesses to stay afloat, especially newer ones. While there are many things that can lead to the downfall of a small business, more often than not, failure and struggle is the result of strategic and financial missteps. For example, bookkeeping challenges can adversely affect small businesses. If there is a lack of visibility in upcoming cash flow or if financial statements are consistently late, then it can be difficult for small business owners to manage their finances properly.


If you suspect you are having bookkeeping problems, there are some warning signs to look out for that will indicate if your business is in trouble. Look for these red flags that follow:


UNSUCCESSFULLY APPLYING FOR BANK FUNDING. If you are unable to secure bank funding for your business, it’s important to know why. The reason for the denials may be simple as an overlook or something that requires more time and effort to resolve. In such cases, simply defining the missing parameters may result in approved funding. The worst-case scenario would be that your business is in such poor shape financially that you don't qualify for funding at all. Business Accounting Solutions can provide your business with a capital needs assessment to help you raise capital.


ACCOUNTING REVEALS YOU CAN'T COVER PAYROLL. Paying your employees first should always be a priority. If accounting reveals that you can't cover payroll, especially if this comes as a surprise, someone somewhere has dropped the ball and has been doing so for a while. Business & Accounting Solutions is a certified ProAdvisor for QuickBooks and offers online consultation. Learn more about our Bookkeeping services.


OUT OF COMPLIANCE WITH LOAN COVENANTS. Loans come with stipulations. If your company borrows money and violates the covenants of that loan, then you could get into trouble with the lender. There are three types of loan covenants.


  1. Affirmative covenants require you to do certain things such as carry insurance or submit financial statements.
  2. Negative covenants preclude you from doing certain things without approval, such as selling assets or taking on additional debt.
  3. Financial covenants require you to maintain certain performance or liquidity ratios.


Violating covenants will have consequences, which may include the lender calling in the loan or seizing assets posted as collateral. Business Accounting Solutions can find Finance Strategy Solutions for your business.


A LACK OF CLEAR, REPEATABLE MONTHLY CLOSING PROCESSES. A disorganized closing process can easily lead to bookkeeping practices that result in overlooked details, which can lead to errors piling up. Unreconciled accounts, missed expenses, mistakes in payroll, and other such errors are more difficult to correct over time. Make sure a process is put in place for closing so everything is accounted for in a consistent manner. Business Accounting Solutions can resolve your company’s Cash Flow issues.


MONTHLY FINANCIALS NOT COMPLETED TIMELY. Bookkeepers should update books in a timely, regular fashion. You need that data to be current and available to enable you to make good business decisions. This information is crucial in making decisions regarding staffing, inventory, or equipment replacements. Business Accounting Solutions can resolve System Design issues.


TOO MANY EXCUSES AND NOT ENOUGH DELIVERABLES. If you are getting more excuses than results from your bookkeeping operations, it is time to make a change. Business Accounting Solutions provides Financial Consulting services.


If you would like a professional's help in addressing bookkeeping issues for your small business, consider Business & Accounting Solutions. We offer many services, including bookkeeping, cash flow, finance consulting and more. Contact us or call at (503) 710-6213. Know someone in need of CFO services? Consider out referral program.