Even the best business idea in the world or the best product of its kind needs a good accounting strategy in place in order to be successful.

Here are some reasons why businesses fail when they don’t make enough time for crunching the numbers and balancing the books.

  1. They don’t keep proper accounting records. As a business, you are legally required to retain financial documents for 6 years. If you don’t, you can be fined by HMRC. With proper procedures in place, you should be using your accounting records as a tool to help you manage the business, not just something you have to keep for the taxman.
  2. They don’t monitor cash flow. Running out of cash is one of the quickest ways to go out of business. Setting up and following simple procedures will help you monitor and keep track of what money is owed to the business & of what the business owes.
  3. They don’t understand how profits work. It is important to take into account all costs that will affect you’re pricing when working out your business profit margins. If you’ve only looked at the gross profit margin, you’ll find your business making a lot less than expected.
  4. They waste money. Many businesses overspend on non essential items, wasting precious financial resources. Making use of management reports will monitor your spending & will help with decisions like cost cutting.
  5. They don’t seek professional help. While professional fees for bookkeepers, accountants, business consultants or tax advisers may seem high, the money they can save your business in the long run should make the initial outlay worthwhile. Every company can benefit from professional assistance with their business accounts, and those that think they’ll save money by doing it themselves may find it costs them dear.

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