It might not seem like it, but your venture’s financial data and the management of your internal bookkeeping operations will, in the long term, represent the elements that will make or break your organization’s long-term development. Bookkeeping is not as glamorous as a product’s R&D, nor is it as straightforward as the training of internal employees. However, in the last couple of years, bookkeeping management has transformed into a core business pillar for the vast majority of Texas-based SMEs.
Realistically, if you want to compete with industry giants and improve the ROI of your services, you will need to at least consider local bookkeeping services. Bookkeeping is not admin work. It’s the process of understanding your venture’s financial commitments, knowing where your money is going, and minimizing the risk of audits from the IRS or the local comptroller. Without clear bookkeeping procedures in place, it will be pretty much impossible to know where your money is coming from, to understand the sources of financial black holes that affect your venture’s profitability, and to gain an accurate record of your exact cash flow.
In fact, more than 95% of all business failures have, at their core, issues with financial management. Bookkeeping can be a way to identify errors in your past ledgers, gain financial reports that can later be utilized by your CPA to dictate your organization’s monetary direction, and perhaps even more importantly, it is the only realistic way to avoid issues with the Internal Revenue Service, which might put a damper on your firm’s expansion ambitions.
What Are the Repercussions of Bookkeeping Mistakes?
Let’s say you try to save up on ongoing costs, and you decide not to collaborate with bookkeepers. Well, talking from personal experience, I can tell you this can be one of the fastest ways to lead your company to bankruptcy. In the business world, it doesn’t really matter if your bookkeeping errors were intentional or not. One miscalculation in your tax records or ledger data could be enough to prompt a full investigation from the IRS, which might then discover errors that were previously hidden by the complexity of your ongoing transactional data.
Did you make an error in your calculations, and you underreported your taxable revenue? Well, guess what. The IRS can fine you with 20% of the underpaid tax. On top of that, you can even accumulate interest on the financial penalty applicable to your venture. How would it be to underreport $10,000 and to be hit with a fine upwards of $2,000? Sure, it’s not the end of the world, but the industrial landscape in Houston is competitive, and likely, in order to compete with established market players, you’ve been forced to invest heavily in the quality of your products and services.
This is a great thing for consumers, of course. But it’s something that will likely make you vulnerable to modifications in your available funds. Late filing penalties could result in a 25% fine on the tax you owe, while specifically for Texas, if you are late with your franchise tax submissions, you can be penalized with more than 5% of what you owe.
Why Not Do It Yourself?
It’s not really the best of an idea if we are being honest. Sure, it’s possible to handle financial recordkeeping internally, without the help of hired bookkeepers. But it will probably be something that will have a huge impact on your ongoing productivity. You are only one person, and you can’t concentrate on both your venture’s core tasks and the financial management of your business’s ongoing transactional data.
Can you handle financial recordkeeping without utilizing outsourced local bookkeeping services in Houston? Yes. But it’s likely that you are not currently up-to-date with the financial framework applicable to Houston-based companies, and, therefore, you might make a couple of mistakes that, in the end, will negate any potential savings of not going with specialized Houston bookkeepers.
Bookkeeping is more than just recording numbers or fixing past mistakes in ledger data. It’s understanding which one of your expenses is deductible, applying reconciliation principles with your collaborating banks, and ensuring that your documentation is always ready for surprise visits from the authorities. Quite straightforward, isn’t it? But each internally-implemented bookkeeping operation has the increased risk of leading to financial penalties for errors that slipped through the cracks.
Follow Our Example
It’s really easy to let the mirage of financial savings cloud your judgment and, therefore, to miss irregularities in financial recordkeeping that would’ve otherwise been spotted by a specialist providing local bookkeeping services. One of my close friends, for example, runs a local cafeteria, here, in River Oaks, and according to his previous, internal bookkeeping data, he made around $18,000 in revenue per month, while having expenses that totaled $14,000. On paper, he should’ve made around $4,000 profit. But the numbers didn’t add up with reality, and he suspected either foul play or significant mistakes on his part.
So, what did he do? He tried some local bookkeeping services in Houston, which, sure enough, quickly found some discrepancies in his internal data. Yes, his monthly revenue was correctly calculated. But he didn’t keep track of food waste costs, his old supplier overcharged him on some ingredients, and he was using an external data storage solution that was expensive and unsuitable for his business operations.
The Houston bookkeepers he hired managed to cut his unnecessary expenses by more than 15%, and thus, at the end of the month, his revenue expanded to $19,500 while his expenses went down to $15,000. Why such a big difference? Well, like the majority of US SMEs, my buddy tried to handle bookkeeping alone. It was a calculated risk, sure, but boy, he was bad at math. In his case, the services of the financial recordkeeping specialist he chose to collaborate with pretty much paid for themselves. And the same will probably happen with your company as well.
