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Many new small businesses keep their financial records in “the glorified checkbook” system: they write down the money that comes in, the amount paid out, and if anything is left in the checking account at the end of the month, great, a profit!
They make due even though a more detailed accounting system would benefit them rationalizing the decision not to change with “if it ain’t broke, don’t fix it”.
Well, one small business that finally started using an online accounting software discovered his administrative assistant had been charging personal items on the company credit card—over $15,000 worth this year, alone. Before then, all all the person had ever looked at was the monthly balance on the card and signed the check to cover it.
The old check book system lacks the checks and balances necessary to ensure that a small business is not over-charged by vendors, underpaid by clients, or in the worst case, the victim of financial fraud. What’s more, it doesn’t give the financial information needed to make successful decisions about where to direct resources to grow a business, or maximize profits. In fact, inadequate accounting is a leading cause of the high failure rate amoung small businesses. Good bookkeeping isn’t rocket science—and once in place, it’s actually easier than patchwork “systems”.
