The Implications of Poor Bookkeeping

Published December 24, 2022
professional bookkeeping solutions for small medium enterprises

There’s a lot that can go wrong with a business’s everyday functions—especially with regard to bookkeeping. Most financial discrepancies occur because of the methods used by your company for accounting purposes. Some of these bad bookkeeping methods include:

  • Manual accounting
  • Skipping small transactions because they don’t seem too important
  • Procrastinating and delaying bookkeeping tasks
  • Not cross-checking bookkeeping records for accuracy
  • Ignoring cash flow issues
  • Hiring inexperienced accountants and bookkeepers
  • Delaying data entry

Here are some areas that get affected if your poor bookkeeping practices are not up to the mark:


An important aspect of bookkeeping is recording purchases when they take place. If you delay this or misreport these transactions, all your business’s purchase decisions will be affected. If you forget to record transactions related to inventory, you’ll end up understating the total value of your inventory in the books. This can lead to both inventory shortages and overspending. Misleading purchasing figures and the resultant lack of inventory affects your entire business. Not having enough inventory means not being able to meet demands and being behind in terms of sales and organizational goals. This is not a situation that a small business owner can afford in the early stages of the business.

One thing that affects purchase-related bookkeeping is manual accounting. Manual data entry greatly increases the chances of errors and misreporting. If your company purchases inventory from multiple vendors, the entire process can get really stressful and confusing for the bookkeeping staff. When heaps of spreadsheets pile up, and data becomes difficult to sort out, errors become common.

Pro tip: Use accounting software instead!


Did you know the final income you report to the Internal Revenue System for taxation purposes has to be 100% accurate? If you overstate or understate the income figure, you can face heavy penalties. In order to comply with the IRS’s tax requirements, your bookkeeping needs to be as accurate as it can. This can result in issues with not just the IRS but also local and state-level tax agencies. Heavy fines not only disrupt your cash flows but can also greatly tarnish the company’s reputation. If you’ve had issues with tax filing in the past on misreporting grounds, it won’t be perceived too well by audit firms.

Cash Flow

The way you handle your cash flows is very important. Companies that ignore their cash flow issues often find themselves in a financial crunch at the time of monthly payroll. You can’t skip paying your employees simply because there is no money in the bank account. Let’s see why this problem arises. Almost every office activity requires cash. Whether you need office supplies or have to pay the bills, cash transactions take place every day. If these aren’t well-communicated to accountants and aren’t tracked on a timely basis, it can become very hard for the company to keep up with cash flow requirements.

The key to avoiding such issues is encouraging healthy communication with your accountant. Always sit down at the end of every fiscal period to discuss and go over the books. Cross-check all cash-flow-related transactions multiple times to make sure there are no discrepancies.

Poor Business Decisions

Accounting data serves a lot more purposes than just record-keeping. Companies use bookkeeping data to forecast future sales, make budgets, and make important managerial decisions. If you’re understating the utility expense, top-tier management will never realize the need to control those expenses. This will affect the business in the long run. If you’re struggling to keep up with the market competition, bookkeeping mistakes should be on the least of your priority list. Failing to fix them could mean the difference between whether your company survives or not in the long run.

gotomyerp helps you streamline your bookkeeping process. We offer reliable QuickBooks hosting services. The cloud-based accounting software helps you record transactions as they occur, group costs, and track expenses—all electronically. This not only positively impacts the decision-making process but also ensures the accuracy of tax fillings. We also provide relevant customer support and the right consultation needed to implement software. For further details about our services or to take a look at the different versions of QuickBooks that we offer, contact us.